McDonald’s details value menu, firing shot in price war

The fast-food price war is about to get even more intense.

McDonald’s Corp., the world’s largest restaurant chain, unveiled its new valuepriced menu on Monday, aiming to keep its lead in an industry that’s increasingly racing for the bottom. The lineup, set to go live on Jan. 4, includes items such as chicken tenders, Happy Meals, sodas, triple cheeseburgers and the Egg McMuffin.

With visits to U.S. fastfood restaurants seen remaining flat next year, the major chains are jockeying for position and announcing discounts to keep diners’ attention. Taco Bell, the Mexican-themed chain owned by Yum Brands, is responding with what it calls its “biggest value push in company history.”

The new offering at McDonald’s, which will run alongside the regular menu at restaurants, is a balancing act for the Golden Arches. If items are priced too high, customers feel like they’re getting ripped off and head to competitors. But if the prices are too low, McDonald’s own franchisees will do the grousing.

That was the case with the company’s Dollar Menu, which was phased out in 2013. McDonald’s operators thought it weighed too heavily on profit margins, but the menu was popular with customers. And its absence was felt. The demise of the Dollar Menu was seen as a contributor to a sales slump that lasted two years.

This time around, McDonald’s thinks it has a formula that can keep franchisees happy. More than 90 percent of restaurant owners have signed up to participate in the program, according to Chris Kempczinski, who runs the company’s U.S operations.

“You have to make sure it’s something we can sustain,” he said in an interview.

Andy Barish, an analyst at Jefferies, upgraded the stock to “buy” on Tuesday and raised his price target to $200, in part because the new value menu will help the chain continue to gain customers.

Shares rose $2.34, or 1.4 percent, to $172.99 on Tuesday. Shares are up more than 40 percent this year.

McDonald’s announced in October that it was planning the menu, though it didn’t give details until Monday. The idea is to shore up a comeback built on the success of all-day breakfast and more targeted discounts like McPick 2 for $5.