Has McDonald's Menu Gotten Too Expensive?

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Has McDonald's Menu Gotten Too Expensive?McDonald's (MCD) may have let its menu prices inch too high.

The world's largest restaurant chain delivered bad news to investors on Thursday. For the first time since 2003 the burger-flipping giant suffered a monthly decline in comparable-store sales. Worldwide comps dipped 1.8% for the month of October. At home, U.S. same-store sales slipped 2.2% compared to October of last year.

Has anyone checked the Hamburglar's pockets, because somebody seems to be stealing Mickey D's money!

Premium Problems

October is typically a good month for McDonald's. It's the time of year when it teams up with Hasbro (HAS) for its annual Monopoly promotion. Patrons flock to its stores for the peel-off game where select menu items come with board game properties. Rare matched sets win big prizes, but many diners still get lucky since one out of every four pieces results in smaller prizes, such as food items that get redeemed during subsequent visits. This October, however, the Monopoly promotion wasn't enough to prevent sales from slipping.

So could it be that folks have simply just tired of the chain continuing to roll out premium products that run against its core value message?

Going upscale paid off several years ago when premium chicken and fancier salads attracted customers willing to pay more for higher quality eats. Then came the McCafe rollout. Barista-style coffee beverages were introduced two years ago, and fruit smoothies hit the menu last year.

Don't Diss the Dollar Menu

It's been hard for the Golden Arches to find the next premium category. Recent additions to the menu include its somewhat uninspiring chicken bites and CBO sandwiches topped with cheddar, bacon, and sauteed onions.

Adding premium items was part of the chain's barbell pricing strategy. It would offer high-end items including its Chicken Selects and fancy salads on one end, while wooing value-minded diners with its Dollar Menu items.

However, the chain may have gotten a bit greedy. The Extra Value Menu -- with items costing more than a buck -- took priority over the dollar-priced items.

On Thursday, addressing its first monthly dip in comps in nearly a decade, McDonald's recommitted to focusing on the Dollar Menu.

What We'll Shell Out For

It's true that many quick-service chains are doing well at higher price points. Panera Bread (PNRA) and Chipotle Mexican Grill (CMG) continue to post strong store-level metrics. However, even the high-end offerings at McDonald's don't match the perceived quality of Panera's baked goods and sandwiches or Chipotle's natural burritos.

McDonald's has to realize that it didn't become the world's largest eatery operator because of its premium offerings. It's been busy during the recession because it literally gives customers more bang for their buck.

A stronger focus on the Dollar Menu should help.

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 and Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of Panera Bread, Chipotle Mexican Grill, and Hasbro. Motley Fool newsletter services have recommended creating a bull call spread position in McDonald's ticker.






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396 Comments

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Levan Chikovani

Hello,

I'm a Mcdonalds costumer many years, i live in Georgia Tbilisi... I have to tell about price of coca cola in Mcdonalds here, In every Hypermarkets or minimarkets 2 litres of coca cola costs 2.2 lari and in Mcdonalds 0.5 litres of coca cola costs 3.05 lari!!! why? more then 4 times more? where in the world does 400% value should be on coca cola in Mcdonalds? i am writing this to the stuff because i doesn't wan't to judge but if in near future nothing would be done i will judje this company!

Regards

Levan

March 16 2014 at 11:49 AM Report abuse rate up rate down Reply
Mary Joviak

They change they way their machines make coffee. I use to love their Lotte's now they taste like water and milk...back to Starbucks!!!

November 12 2012 at 11:20 AM Report abuse rate up rate down Reply
Jay

As more beef came to market because of the drought and prices dropped Mcd did not capitalize by lowering prices and drawing more people in the door. Poor marketing = poor results....they just kept the money

November 11 2012 at 9:33 AM Report abuse rate up rate down Reply
Marylou

Yes, they want 6.00 for a hamburger.

November 10 2012 at 3:09 PM Report abuse rate up rate down Reply
dembaitnswitch

I couldn't tell you, I won't eat that sh**

November 10 2012 at 11:36 AM Report abuse rate up rate down Reply
octanehi5

For the type of not so healthy food they serve, When you compare it to Diner food, Mc's is very expencive.Its all about the money.I remember being a kid and going to Mickey Ds, Hambergs were $ .15 Frys the same. You could get Two cheese burgs frys and a milk shake under a dollar, and they made money.

November 10 2012 at 8:43 AM Report abuse rate up rate down Reply
Bob

McDonald's has been in the sights of the liberal food police for some time now.
They dictate what ingredients to use, demand healthier items, then they complain
about the price!

November 10 2012 at 8:29 AM Report abuse rate up rate down Reply
saccothew

roompa boompa, loopyy he he he, I have the perfect puzzle for ye , what do you get when you charge 7.50, for fries a drink and a big mac with cheese, charging a fortune is a rip off and a shame, you know exactly whose to blame, the corporate greedy ones (lets boycott and refuse to buy) roompa boompa he he he, Mcdonalds can kiss my buttt he he

November 10 2012 at 8:22 AM Report abuse rate up rate down Reply
leogirl007

Yep, getting a little too greedy. it's like 7 bucks for a value meal now. what?????? just for 2 people getting an extra value meal, its like 15 bucks. and for what you get, nope, not worth it. and usually the service is blah. i'd rather spend my dollars at chic-fil-a or panera.

November 10 2012 at 8:17 AM Report abuse rate up rate down Reply
rphillipsalx

Greed is good. Supersize those fries.

November 10 2012 at 8:15 AM Report abuse rate up rate down Reply