Burger King plans $1 ‘value menu’ to boost U.S. sales
DES MOINES, Iowa – Burger King Corp. plans to introduce a limited “value menu” featuring items costing $1, to stimulate traffic and better compete with its fast-food rivals.Its domestic franchisees are to vote by Wednesday on whether to endorse the strategy. Interviews with several indicated that approval is likely.”How can we not have $1 items when you look at our two primary competitors?” asked one Midwest franchisee, who said he intends to vote for the menu’s national rollout, scheduled for February.McDonald’s Corp. now advertises a “Dollar Menu” while Wendy’s International Inc. offers a “Value Choices” lineup of items priced between 99 cents and $1.29.Burger King’s $1 fare would include a Whopper Jr. hamburger, a four-piece serving of Chicken Tenders, a side salad, small French fries or onion rings, a small soft drink and an apple pie.Individual franchisees would have other optional items they could sell at that price, among them a “Rodeo cheeseburger.”Burger King spokeswoman Edna Johnson told Dow Jones Newswires she wouldn’t deny the rollout plans, but declined to elaborate.But, she said, “We’re confident that our direction in this area reflects a highly collaborative approach with our franchisees that will maximize profit and traffic.”Adding a “value menu” to its 7,500 U.S. restaurants would allow Burger King to advertise it nationally.The menu has undergone extensive testing over the past 18 months, including in the Los Angeles and Minneapolis markets. Franchisees said the $1 offerings helped boost customer traffic in those cities.Test result documents viewed by Dow Jones said the Whopper Jr. “proved to be a strong value proposition” and that, on average, customers bought three “value menu” items per visit.Charging $1 rather than 99 cents for items could increase the average restaurant’s annual profits by $1,500, one document noted.Burger King’s timing seems propitious. Not only would such a menu appeal to those squeezed by higher heating and gasoline bills, but it also could boost restaurant traffic and profit during a sometimes slower sales season.Once inside the restaurants, customers are considered likely to “trade up” and purchase more expensive food.The last time Burger King tried a “value menu,” two years ago, it stumbled. While traffic increased, many customers bought only the cheapest items. Also, Burger King lacked several of the premium-priced fare it now features.”We just took stuff we had and lowered the price to $1 rather than build items with different gross profit margins,” said San Antonio multistore franchisee Robes St. Juste, who calls the proposed menu addition “a great idea.”In fact, he and other franchisees in Texas have been promoting the $1 lineup for several weeks. “It’s worked for me,” St. Juste said.Burger King is owned by investors that include Texas Pacific Group, Goldman Sachs Capital Partners and Bain Capital.