UPDATE 1-McDonald's to expand breakfast Dollar Menu in 2010

Thu Dec 10, 2009 6:21pm EST

Related Topics

 * U.S. breakfast Dollar Menu debuts nationwide in January
 * Move comes as jobless rate hurts breakfast sales
 * McDonald's shares up 0.7 pct
 (Adds analyst comments, background, updates share activity)
 By Lisa Baertlein
 LOS ANGELES, Dec 10 (Reuters) - McDonald's Corp (MCD.N)
will debut a breakfast Dollar Menu across the United States in
January, as it fights to sustain traffic and galvanize sales
hit by cut-throat competition and a 10 percent jobless rate.
 U.S. sales at established McDonald's restaurants fell for
the second month in a row in November and executives had been
signaling that it would take the breakfast Dollar Menu national
as high unemployment means fewer morning commuters swing by for
food or coffee.
 The world's largest hamburger chain, which dominates the
U.S. fast-food morning meal category and is still outperforming
its peers -- has offered breakfast items for $1 each at
restaurants in Chicago and other markets for several months.
 Many investors have worried what impact unemployment would
have on McDonald's high-margin breakfast business which
accounts for around 25 percent of U.S. sales, and Chief
Executive Jim Skinner said in October that the high jobless
rate had "some impact" on morning sales.
 "It's defensive ... They're trying to hold on to what
traffic they do have," Oppenheimer restaurant analyst Matthew
DiFrisco said of the new breakfast Dollar Menu.
 When the U.S. recession officially started in December
2007, there were 7.5 million people unemployed. By November
this year, that number had more than doubled to 15.4 million,
according to the Bureau of Labor Statistics.
 As diners have less and less money to spend in restaurants,
discounting has become rampant.
 Falling prices for meat, cheese and other key menu
ingredients have made it easier for restaurant chains to
protect profits, but the race to offer the best deals is
beginning to take a bite out of margins at many chains.
 McDonald's new nationwide breakfast Dollar Menu will be
backed by national advertising and include a sausage McMuffin,
a sausage biscuit, a sausage burrito, a small 12-ounce coffee
and hash browns.
 Burger King BKC.N already has a breakfast value menu and
Yum Brands Inc's (YUM.N) Taco Bell, which offers value menu
items priced as low as 79 cents, is expanding its U.S.
breakfast test.
 McDonald's also said the national launch of the Mac Snack
Wrap -- a new spin on its popular Big Mac hamburger with a
suggested price of $1.49 -- is scheduled for next month.
 Executives recently said the Mac Snack Wrap was
"particularly popular" with diners seeking a smaller-sized meal
 Sales at U.S. McDonald's restaurants open at least 13
months fell 0.6 percent in November, after a 0.1 percent dip in
 McDonald's shares closed up 45 cents at $61.05 on the New
York Stock Exchange.
 (Reporting by Lisa Baertlein; Editing by Richard Chang and
Matthew Lewis)

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