The dollar menu is dead
The once illustrious fast-food staple has lost its luster as menu prices increase and chains turn toward new types of deals to win over budget shoppers.
The beginning of the end was 2013, when McDonald's killed its famous Dollar Menu. While the economics of the menu didn't make sense, as the chain was losing money by selling certain items for $1, the loss of the menu damaged McDonald's. Traffic dropped, with executives admitting in 2017 that they needed to come up with a new value strategy.
In late 2017, there seemed to be hope for a dollar menu renaissance. McDonald's introduced the $1 $2 $3 — a three-tiered value menu that was reminiscent of the Dollar Menu's former glory. More significantly, Taco Bell made a major push to highlight its Dollar Cravings Menu, a menu in which everything actually cost a dollar.
One year later, the dollar menu's rebirth seems to have actually been the nail in the coffin.
Hollis Johnson/Business Insider
McDonald's $1 $2 $3 menu did not become the silver bullet that some had thought it could be. Franchisees said the menu didn't live up to the hype. One day in March, the company's shares fell 4.8%, marking the worst dollar decline in history, following a RBC Capital Markets note that said the menu had failed to resonate with customers.
The chain has struggled to use the $1 $2 $3 menu to drive traffic, which is typically the point of value menus. Neil Saunders, the managing director of GlobalData Retail, wrote in a note in October that McDonald's "has focused too strongly on the Dollar Menu."
"This does drive some traffic, but the message is both tired and drives people to trade down rather than to explore higher-priced options," Saunders continued.
Now, it seems even McDonald's is reevaluating. In November, the chain launched the $6 Classic Meal Deal, a bundled deal that includes one entrée, a small fry, a drink or sweet tea of any size, and an apple pie or seasonal pie.
Taco Bell's Dollar Cravings Menu has been less controversial than the $1 $2 $3 Menu. However, the chain's conclusion seems similar to McDonald's: It's time to turn away from the dollar menu and double down on bundled deals.
On Thursday, Taco Bell announced it is swapping out its Dollar Cravings Menu menu for its new, unified Cravings Value Menu. The Cravings Value Menu will includes both $1 menu items, such as the $1 Grande Burrito, as well as $5 Cravings Boxes.
Chains that aren't known for their dollar menus have been similarly turning to bundled deals as a way to win over budget shoppers. Earlier in December, Burger King launched its $6 King Box, which includes a choice of entrée, a small fries, a small drink, and two chocolate chip cookies. Wendy's expanded its four-for-$4 bundle deal earlier this year.
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