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What Does the Demise of the Dollar Menu Mean for Franchisees?

What Does the Demise of the Dollar Menu Mean for Franchisees?
Image credit: REUTERS

In a move likely to garner mixed reviews from franchisees, McDonald’s famous Dollar Menu is to be replaced by the pricier Dollar Menu & More.

The Dollar Menu & More will still have items $1 or less, but will have a second tier featuring sandwiches between $1 and $2. A third tier will provide items reaching the $5 mark. The new menu will launch on November 4, a spokesperson told Advertising Age.

In the past, McDonald’s franchisees have spoken out against the steeply discounted prices at McDonald’s, especially on the Dollar Menu. One dollar items often leave operators lacking items that turn a significant profit, according to a report released in April.

In 2008, in response to franchisee protests on profitability, McDonald’s revamped its double cheeseburger into the McDouble, a burger with only one slice of cheese and two patties. However, franchisees have continued to struggle to turn a profit on low-margin items – including the McDouble. Some franchisees have increased the cost of the burger and other high-cost options out of Dollar Menu range. 

Related: Do Angry McDonald's Franchisees Have A Leg to Stand On? 

“Anything that is a low priced offering is meant to get people in the store,” says franchise ownership adviser Joel Libava. By widening the range of low price items to up to $5, franchisees have more flexibility in how to market value items.

Some franchisees may resent the ongoing shifts to corporate strategy. Last year, McDonald’s tried out the Extra Value Menu. The offering did not meet sales expectations.

Libava, however, thinks that franchisees will only profit from the change. “My advice to any franchisee that may be negative is to look at the bottom line at the end of the month,” he says.

The news comes just as McDonald's reported better-than-expected third-quarter profit but revenue that came in just shy of analysts' estimates. The company said it expects sales at established restaurants around the globe to be "relatively flat" in October and sees continued margin weakness in the fourth quarter.

Related: An Investigative Report on Franchise Profits

Kate Taylor is a staff writer for Entrepreneur.com.

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