McDonald's (MCD) franchisees have spoken. They're fine with the world's largest restaurant chain beefing up its Dollar Menu, but they're not cool with Mickey D's breaking the buck with lower-priced offerings.
The Golden Arches will add two new items to the Dollar Menu in the coming weeks: The Grilled Onion Cheddar Burger, a smaller version of its limited-time CBO premium burger -- without the bacon -- will begin selling in late December. A snack size portion of its Fish McBites -- the fast food giant's spin on popcorn chicken using fish -- will be added to the Dollar Menu shortly after that.
McDonald's also wanted its franchisees to back $0.69 hamburgers and $0.89 cheeseburgers, but the local advertising co-ops didn't approve the promotion, fearing that it would be too cheap for operators to deliver reasonable profit margins.
Ronald McDonald Isn't Laughing
McDonald's made it through the stateside recession and Europe's sovereign debt crisis without missing a beat. Now, when the economy is showing signs of life, customers are moving on.
The 34,000-unit chain experienced a 1.8 percent dip in global same-store sales in October, with a deeper 2.2 percent hit at its domestic locations. This may not seem like such a big deal, but it is for McDonald's.
You have to go all the way back to 2003 to find the last time that the company failed to grow its store-level sales over the same month during the prior year.
The consensus is that the company strayed too far away from the value message that made it popular. Adding fancy McCafe beverages and artisan salads may have helped push the average receipt higher, but the deal seekers who make up the chain's core customer base stopped coming.
For better or worse, McDonald's is ready to appeal to the country's frugal side again.
Grimace Be Gone
McDonald's can't afford to ignore the trend, even if its negative streak consists of just a single month at the moment.
The competition is ready to pounce at any sign of weakness. Burger King Worldwide (BKW) recently went public again, and Wendy's (WEN) has unloaded many of its distracting concepts in order to focus on its namesake burger chain.
Customers want more bang for their buck, and McDonald's is ready to let them have it.
Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of McDonald's. Motley Fool newsletter services have recommended buying shares of McDonald's and creating a bull call spread position in McDonald's.
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