The Dollar Menu at your favorite fast food place may seem like a great idea, but across
America, those super cheap menus are disappearing.
Just why is that?
It turns out it's actually a complicated combination of a lot of reasons, and some are very surprising.
In 2013, McDonald's announced that it was going to completely get rid of its Dollar
Menu.
At the heart of the problem was money.
The land of the golden arches first released its Dollar Menu in 2003.
In the ensuing years, continued competition between fast food chains kept prices low as
everyone scrambled for their piece of the pie, but a decade after launch, those Dollar
Menu prices became problematic.
Over the years, the cost of ingredients has been steadily on the rise, but the Dollar
Menu stayed the same low, low price and that's a huge problem.
Just look at the cost of buying beef.
According to the Official Data Foundation, the price of uncooked beef was 69 percent
higher in 2013 than it was in 2002.
Unsurprisingly, the profit margin on cheaply priced menu items just isn't wide enough to
weather that sort of increase.
In 2009, the ketchup hit the fan when Burger King franchisees banded together to protest
corporate's long-term 99-cent double cheeseburger promotion.
The reason for the outrage was pretty simple: each one of those double cheeseburgers cost
about $1.10 to make.
Franchisees originally rejected corporate's push to sell the super-cheap burgers, and
the conflict eventually led to a lawsuit on behalf of the franchisees.
Burger King said it had a right to force franchisees to participate in promotions, while franchisees
said it wasn't right to force them to sell a product at a loss.
Some stores had already closed in the past because low-priced items dug too far into
their profits.
Franchisees were fighting to keep that from happening again.
In 2011, the two sides settled.
In exchange for dropping the lawsuit, franchisees were given more control over pricing, promotions,
and ultimately, the Value Menu.
No one can possibly expect any restaurant to sell their product at a loss, especially
when they're paying royalties to their parent company on every burger sold.
Fast food restaurants are caught in an existential dilemma.
On one hand, they need to be affordable enough to appeal to a customer base that's looking
for a super-cheap meal.
But on the other hand, that same super-cheap meal isn't going over well with an entire
demographic.
According to the BBC, people under the age of 40 aren't just shying away from dollar
menu prices, but most fast food in general.
They're willing to spend more money on their lunches, so long as they're getting sustainable,
high-end ingredients.
"The reality is millennials cleary don't value McDonald’s products the way that the early
generations do, and they don’t have the same relationship with the brand that previous
generations have had."
Overwhelmingly, millennials have said that for them to eat at fast food joints, the food
needs to be high quality and nutritious, and not contain any artificial ingredients.
That's pretty hard to achieve on a $1 item without losing a lot of money.
Better ingredients tend to cost more money, after all.
People don't just want fresher ingredients, they also want healthier ingredients, and
fast food chains have been responding.
In 2016, McDonald's was looking at not just the cost of doing business with these new
demands, but the cost that was going to get passed on to customers.
Items like salads, wraps, and whole grains, which are all more expensive than traditional
fast food options, debuted on the menu with prices much higher than $1.
And that, in turn, leads to a balancing act.
Adding more healthy menu items means reevaluating an entire menu, because you can't just keep
adding things to a menu without dropping others.
One of the key components of any restaurant is a menu that's a manageable size so as to
avoid waste and customer confusion.
So with healthy, high-end stuff arriving, the cheap stuff that's just not making money
gets cut.
It wasn't until 2017 that McDonald's officially announced that it was coming out with a replacement
for the Dollar Menu.
By early 2018, budget-minded customers were going to once again have some bargain choices,
with menu items priced at one, two, and three dollars.
This seems like a win-win, as chains could still offer a few menu items at low price
points, without going so low that they end up losing out.
But by the end of 2018, it became clear that the tiered menu hadn't been nearly as successful
as McDonald's had hoped.
Analysts say that not only is the chain too focused on its Dollar Menu offerings, but
that the tiered system encourages the most budget-minded customers to opt for the lowest
costing foods instead of the higher-priced options.
"I'm a failure!
I'm a failure!
I'm a failure!"
There are two types of customers: the ones you have, and the ones you're trying to get.
So it's important for restaurant chains to ask if value menus lure customers away from
other chains.
In 2018, the market research firm NPD Group ran a study to determine whether or not new
customers were attracted to a certain place by their dollar menu offerings.
The short answer is: No.
The study did find that while an overwhelming majority of customers who bought something
off the value menu purchased it as an add-on to a regular menu item, there was no increase
in the numbers of new customers linked to value menu promotions.
While it might seem logical that people would be more inclined to try a new place with minimal
financial risk, the numbers just don't reflect that.
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