DOW JONES NEWSWIRES
McDonald's Corp. (MCD) is setting a course to add a dollar menu for breakfast starting in January, according to a document obtained by Dow Jones Newswires, as it looks to head off a slowdown in morning sales.
The fast-food chain's national advertising fund has "overwhelmingly approved" backing the dollar breakfast menu with a nationwide campaign during the first six months of 2010, according to the document. The matter will be put to a vote of regional advertising groups, but it comes with the blessing of the national council and a sense of urgency "to ensure that breakfast continues to be a strong contributor to our overall sales, guest count and profit growth," the document said.
Danya Proud, a McDonald's spokeswoman, said the chain wouldn't comment on information obtained from unauthorized sources. "Matters concerning the future of our business and internal discussions are confidential and proprietary to the McDonald's system," she said.
McDonald's has been testing the dollar menu at breakfast in several markets, offering items like sausage McMuffins, breakfast burritos and hash browns for a buck.
High unemployment, which in the U.S. stands at 10.2%, hits breakfast sales particularly hard as fewer workers commute and stop in for breakfast. Some of the fast-food industry's most frequent visitors - teenagers and men between the ages of 18 and 35 - have an even higher rate of joblessness.
That has hurt McDonald's sales, and the chain on Monday is expected to report flat to slightly-negative same-store-sales for October in the U.S., a slowdown from recent months. Worldwide results should be positive overall, helped by stronger sales in other regions.
McDonald's national advertising fund also approved backing the chain's standard dollar menu during the first half of next year, as well as the launch of the Mac Snack Wrap, a wrap version of its popular Big Mac sandwich, starting in January.
Priced at $1.49, the Snack Wrap represents another strong value push by the chain starting next year, escalating a value war in the fast-food industry. Burger King Holdings Inc. (BKC) is selling its double cheeseburger for $1 for at least the next several months, while Wendy's, of Wendy's/Arby's Inc. (WEN), is planning to introduce a new value offering in early 2010.
Heavy discounting is hurting overall sales at fast-food chains, but profits are benefiting from lower commodity costs and favorable foreign-exchange rates.
McDonald's shares, after outperforming in 2008, have fallen slightly this year, closing Friday at $61.72, while the broader markets have rallied.
-By Paul Ziobro, Dow Jones Newswires; (212) 416 2194; paul.ziobro@dowjones.com