Fast food price wars coming? The McRib, what’s in it?

By Mike “Mish” Shedlock

McDonald’s Corp said on Monday it would introduce new menus with $1, $2 and $3 items in early January.

McDonald’s dropped its popular “Dollar Menu” in 2013 after franchisees groused that selling items like a double cheeseburger for $1 cut into profits. The replacement “Dollar Menu & More” had higher prices, but failed to draw more customers despite heavy marketing.

The new dollar menus, set to debut on Jan. 4, include any size soft drinks and cheeseburgers for $1, small McCafe drinks and bacon McDoubles for $2 and Happy Meals and triple cheeseburgers for $3, McDonald’s said.

Elsewhere, Taco Bell regularly rotates the roughly 20 items on its $1 value menu. Subway, which made a huge splash a few years ago with its “$5 foot-long” special, is now offering a variety of six-inch sandwiches for $2.99 each.

Dunkin’ Donuts also is brewing up more value offers after franchisees warmed to the idea of using deals in their fight to win breakfast.

The strategy is not without risks, said Goldin, who noted that rising food and labor costs could squeeze franchisees who bear the brunt of such cost increases.

“They are really stuck in a value trap,” Goldin said. “There is going to be tremendous pressure to raise prices.”

Where’s the Value?

“All of the value menus are designed to protect franchisee margins”, the McDonald’s said.

If the “value” meals preserve profits, where is the value?

Any size soft drink for $1 is no value. The markups are enormous, as are the calories unless someone orders a diet drink.

Consider the McRib? Do you know what’s in it? Here’s a hint: “‘Restructured Meat’ from Pig Heart, Tongue, Stomach.”

Click on the link for more details. Yum, indeed.

Enter the Fed

Meanwhile, rest assured the Fed does not want the consumer to get any value either.

The Fed will not be happy with non-value, value menus, whether there is any value or not (and there isn’t).

 

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Article appeared at his blog.

 

 

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