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    Fast Food Leaders Double Down on the Dollar Menu

  • The value wars are about to heat up in a major way.

    Taco Bell
    Taco Bell plans to add up to 20 new dollar-menu items in 2018.

    Over the last several years, the menu at McDonald’s has undergone something of an identity crisis.

    McDonald’s tested the waters of value combos with the “McPick 2” menu, introduced the Big Mac’s relatives, Mac Jr. and the Grand Mac, and mixed in old favorites like the McRib with new items like Buttermilk Chicken Tenders, which were temporarily removed from the menu after unexpectedly high demand following their release. 

    Underlying these changes was a dedication to healthier foods, a noble notion, albeit one that directly opposed the shouts coming from some of the McDonald’s faithful.

    Their concern: What happened to the dollar menu?

    The king of fast food responded to that void with the announcement of a returning dollar menu, featuring three tiers of value items priced at one, two, and three dollars each.

    A dollar gets items like the Sausage Burrito or McChicken, another buck gets a Bacon McDouble or a Sausage McGriddle, and $3 items include the Triple Cheeseburger, a Happy Meal, and the new Classic Chicken Sandwich.

    The flip-flop wasn’t lost on Taco Bell, No. 6 on QSR’s Top 50 behind top-ranked McDonald’s. The two industry leaders regularly wage war for millennial eaters, and while McDonald’s ditched their dollar menu in 2012, Taco Bell doubled down on their dollar fare.

    In 2014, the Mexican fast food chain’s dollar menu featured 11 items for 100 cents, a number that has grown beyond 20. Following the McDonald’s news, Taco Bell announced its intent to expand by another 20 items, including the new $1 Stacker, in 2018.

    The diverging strategies of these two key players represent a response to an expanded playing field in quick-serve and fast-casual dining. While the Golden Arches’ move toward quality was aimed at beating “better burger” competitors like Shake Shack and Five Guys, Taco Bell stuck to their guns and Gorditas.

    Taco Bell invested in limited time value items and new menu options like the Naked Egg Taco and Doritos Locos Taco, affirming its dedication to a dollar menu that upholds the promise of its name. 

    If McDonald’s most recent actions are any indication, there’s some value to the Taco Bell strategy. While fast-casual burger chains are still a threat to McDonald’s business, the burger chain’s new dollar menu suggests a decision to wage that war based on price, not quality, at least as far as the value menu extends.

    Despite differing decisions on the dollar menu, investors have remained pleased with both brands over the last year. McDonald’s shares are up about $50 on the year, while YUM! Brand stocks have climbed about 20 points since this point last year. As both brands continue to fight for consumers’ single dollars, those bottom lines are sure to move over the next year.

    If not the bottom line, fast food fans should keep their eyes on the value menu. With competitors KFC, Wendy’s, and Hardee’s sure to examine their own value menus—composed of single, double, and triple dollar items, plus value meal boxes—the next best deal could be right around the corner.