McDonald's is getting cheaper -- and that should terrify Burger King and Wendy's

Cheaper McDonald's Menu Means Bad Economic News
Cheaper McDonald's Menu Means Bad Economic News

The fast-food chain on Monday launched the "McPick 2," a limited-time deal that will let customers select two of the following items for $2: a McDouble, a McChicken, small fries, and mozzarella sticks.

The promotion returns sandwiches to the $1 price point of the Dollar Menu.

McDonald's reformulated the Dollar Menu two years ago by axing the $1 price ceiling and turning it into the "Dollar Menu and More" with items that cost up to $5.

The shift upset some customers.

"Some of the challenges we've had in the US have been somewhat self-inflicted," McDonald's CEO Steve Easterbrook said during a conference call in July. "We moved away from the Dollar Menu and didn't replace it with significant-enough value in the eyes of consumers."

Around the same time, Burger King and Wendy's started offering more promotions, and both chains saw a corresponding uptick in sales.

Now McDonald's is back in the game in a big way, and Burger King and Wendy's will be pressured to offer more deals to compete.

Burger King is fighting back with a 10-nugget deal for $1.49. It's also offering coupons for other items through its mobile app.

Wendy's, meanwhile, is offering a "4 for $4" meal that includes a junior bacon cheeseburger, four chicken nuggets, small fries, and a drink — all priced at $4.

The rush of promotions indicates that despite lower gas prices and signs of an improving economy, customers are still demanding deep discounts from fast-food chains.

The "McPick" 2 is the start of a broader effort by McDonald's to realign around what it calls a "value platform," which essentially means the company is planning to offer more promotions.

McDonald's says about one-quarter of its customers are motivated by value meals.

The promotions are meant to increase traffic among those customers. But steep discounts can also end up hurting profits.

At the end of the day, the winner of the battle between the three biggest fast-food burger chains will be the customers.

More from Business Insider:
The beer industry is going through 4 seismic changes that are impacting how America drinks
This increasingly popular retail strategy has one huge problem
McDonald's is fixing the biggest flaw on its menu