McDonald’s May Tweak Dollar Menu

Fast food giant McDonald’s admitted to problems with franchisees over a platform that’s behind much of its turnaround, and the chain could be aiming to tweak its dollar menu until it’s profitable, Advertising Age reported.

In a second-quarter earnings call with analysts this past week, President and COO Ralph Alvarez said increased commodity costs, declining margins and franchisee profitability could push the change to the dollar menu.

The chain’s dollar-menu items currently account for about 14% of total U.S. sales.

"From a promotional point of view, we’ve got to be much more careful on balancing driving traffic while maintaining margins," Alvarez said. The chain intends to continue offering inexpensive options, he said, "but what sits on that menu will look different than now because it has to be profitable."

McDonald’s previously confirmed that it’s testing double cheeseburgers for more than $1, though the earnings call was the first time the company made a commitment to "evolve" the menu. The fast food chain has faced increasing pressure from usually docile franchisees, some of them accusing the company of driving traffic at the expense of their margins. There has also been some pushback about new-product giveaways.

"They’re concerned and rightly so," Alvarez said. "We’re seeing commodity cost increases that we haven’t seen in a lot of years."

The chain relied heavily on dollar-menu advertising earlier this year. Those items currently account for about 14% of total U.S. sales. But in recent months, McDonald’s has focused on higher-priced items, such as the Big Mac and Southern Style chicken sandwich and Southern Style chicken breakfast biscuit.

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