McDonald's debuts its new discount menu Thursday with an up-selling approach that the chain hopes will make profits as easy as 1-2-3 -- dollars, that that is.
The chain that ditched its popular Dollar Menu six years ago is bringing it back with a list of items not only priced at $1, but $2 and $3 as well. With tiered pricing, McDonald's is able to put more food and drinks on the list. At the same time, the new menu holds out the prospect that customers might gravitate up to some of the more profitable, higher-priced choices beyond the just-a-buck deals.
While a basic, single-patty cheeseburger and a sausage burrito are still $1, customers can also pick up a 2-piece Buttermilk Crispy Tenders and some small McCafé beverages for $2. Splurgers can try a Sausage McMuffin with Egg or Classic Chicken Sandwich for $3.
Happy Meals for kids, not previously included on a national discount menu, will cost $3.
"As a result of it being one price point, it was fairly limited in terms of what you could put on it....Having done that for 10 years, it ran out of gas," McDonald's U.S. president Chris Kempczinski said in late November. "We've always known customers love the idea of value at McDonald's. That's never changed. What's evolved is they want more choice."
He added that the company lost out on an estimated half a billion transactions over the last four years.
Some on Wall Street think this is the right move for the Oak Park, Ill.-based burger chain. On Tuesday, the brokerage Instinet announced that McDonald's is its top U.S. restaurant stock pick for 2018, citing the new Dollar Menu as one of the reasons.
"We believe McDonald's will be a net gainer through all this, even as rivals respond," analyst Mark Kalinowski wrote in a research note.
He projects that sales at McDonald's locations open at least a year -- an industry measure that takes a chain's unit growth into account -- will grow as much as 3.5%.
Other fast-food chains also offer super-cheap food to suck in customers. They include Wendy's Right Price, Right Size Menu and Burger King's Value Menu. In December, Taco Bell announced it planned to add more than 20 items to its $1 value menu in 2018 and on New Year's Day, Subway reintroduced its $5 Footlong.
The original McDonald's Dollar Menu was discontinued in 2012. Since then, the chain introduced other discounted menu options, like the Extra Value Menu, the Dollar Menu Plus More and the McPick 2.
McDonald's stock closed at $173.22, up $1.10 or 0.64%, on Tuesday.