Dollar Menu Fails: Fast Food Giant Declines In Sales
Apr 20, 2013 12:47 PM EDT | By Jason Pollak
Although McDonald's still posted an increase in profits for its' first quarter sales, about $1.27 billion, the fast food giant failed to increase sales with their Dollar Menu.
The company said profits fell 1 percent in Dollar Menu sales for their first quarter and they expect those profits to decrease further in April.
This came as shocking news in the fast food world, as this "marked the first quarterly decline in a decade in sales at restaurants open at least 13 months," according to The Huffington Post.
Other retailers such as Burger King and Wendy's have stepped up their marketing approach recently, so McDonald's responded by advertising their value choices and great deals. However, it has proven hard to maintain a loyal customer base with their cheap alternatives.
Some analysts disagree with McDonalds' approach and say this will eventually eat into their profit margin, but executives at the company remain steadfast in their value menu, especially in this economic environment.
"That battle for market share has become so critical for the long-term health of business, we're willing to sacrifice that margin," McDonald's CFO Peter Bensen said.
However, some independent owners of McDonald's stores aren't too ecstatic about the declining sales.
According to a survey conducted by Janney Capital Markets, who polled 25 U.S. owners who operate 180 McDonald's restaurants, the franchises aren't living up their historic standard. Many owners complained about too many discounts and high circulation of coupons.
Although the Dollar Menu isn't living up to expectations, even with an added advertising push starting last year, other retailers are following suit in offering low prices. Burger King is dropping their Junior Whopper price to $1.29 and Wendy's revamped their value menu as well.
McDonald's currently operates in 34,000 locations globally with about 14,000 in the U.S.
Shares fell $1.99 on Friday to $99.92.
Why are fast-food chains offering merchs now?