McDonald’s Corp.’s Dollar Menu is primed for inflation.
The burger chain is testing a new version, dubbed Dollar Menu and More, that includes items selling for as much as $5. The new lineup is being tested in five markets in the U.S.
One test includes $1, $2 and $5 fare; another has $1, $1.79 and $4.99 items.
“It just sounds like they’ll be raising prices,” said Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. The industry’s “definition of value has moved up from the Dollar Menu to $1.50 or $2.”
McDonald’s earnings have trailed analysts’ estimates for the past two quarters amid competition from rivals introducing new food. The chain also is facing a franchisee revolt.
One point of tension is the increasingly difficult economics of the Dollar Menu, according to a document obtained by Bloomberg News recapping an April franchisee meeting.
Restaurants including McDonald’s have faced higher beef prices after a drought last year made it more expensive for farmers to feed cattle. “You can’t sell a burger for $1 anymore ... the cost of beef has gone up so much,” Saleh said.