Say Goodbye to the $1 Double Cheeseburger

Aug. 4, 2008— -- For fast-food customers, the best deals in these difficult economic times may be those meals and snacks priced right around $1. Under the golden arches, for instance, eight items, including a double cheeseburger, make up the dollar menu.

"The dollar menu's a huge thing when I've got six kids," said Maria Kovacevich, a McDonald's customer in Chicago. "So, I can come in and, for $25 or $30, everyone can get a sandwich, drink, fries."

While consumers have seen the prices of milk and meat products rise in the supermarket aisles for months, fast-food chains have stood against wider trends. But McDonald's today said that higher wholesale prices are forcing the fast-food chain to change its menu, meaning customers may soon get less for a buck.

"That dollar is the real question," said Harry Balzer, restaurant industry analyst at the NPD Group. "How long will you be able to offer the same product for just a dollar?"

Consider a cheeseburger. Since 2006, the price of bread has risen 24 percent, beef 4.4 percent, cheese 6.6 percent, and condiments, from ketchup to mustard to pickles, 3 percent. Rising food prices add a dime to the wholesale cost of every cheeseburger.

For McDonald's, the biggest change surrounds the star of its dollar menu, the double cheeseburger. Some franchises are now selling it with one slice of cheese instead of two. Others are raising the price by as much as 19 cents, taking it off the dollar menu altogether.

"The life of the double cheeseburger remains to be seen," Jeffery Bernstein, Lehman Brothers analyst, said. "They'll still sell it, but you might not be seeing it for a dollar for much longer."

For McDonald's, the dollar deals drive traffic, accounting for 14 percent of sales.

"We've seen an uptake in a number of restaurants that are enjoying a lot of success because of their value offerings," Balzer said. "Right now, consumers are clearly looking for a deal, and those that are offering one that is new and noticeable are winning."

The dollar deals were designed to attract customers who also spent on more profitable items, such as espresso drinks, but now customers are splurging less.

"It's just not profitable traffic," Bernstein said. "Perhaps people are ordering too much off the dollar menu."

In changing its popular dollar menu, McDonald's risks driving away its most budget-conscious customers.

"I don't think I'd come here as much if it wasn't for the dollar menu," said Keisha Harrold, another Chicago McDonald's customer.

But other fast-food chains are expected to follow suit, leaving consumers fewer options to find more for less.