McDonald’s, Taco Bell Heat Up Fast Food War

Sizzling news from the burger world this week.

McDonald’s Corp. said Thursday that it will cut prices on nine basic menu items at its Southern California restaurants, a strategy similar to one begun recently by rival Taco Bell.

The announcement comes on the heels of news that reigning Mexican fast-food king Taco Bell has agreed to buy a Michigan burger chain for an undisclosed amount. Analysts are speculating that the move could signal parent company Pepsico Inc.’s entry into the burger wars.

McDonald’s, facing competition from rivals and a recession, will discount such items as its new breakfast burrito (59 cents) and Happy Meals ($1.99)--while leaving unchanged the prices of its Big Mac and Quarter Pounder standards.

“These are difficult economic times, and the reintroduction of our basic menu items through our value menu enables us to reinforce this quality and value with our customer,” said Yvette Franco, McDonald’s regional marketing manager.

McDonald’s said the price cuts, which go into effect Dec. 28, will trim 5 to 20 cents off the cost of some items. The items will be priced from 59 cents to $1.29. But because 75% of McDonald’s restaurants are independently owned, prices may vary from location to location.

In late October, Irvine-based Taco Bell said it had grouped certain menu items into three categories, priced at 59 cents, 79 cents and 99 cents.

“They’re (McDonald’s) responding to Taco Bell’s pricing strategy,” said Janet Lowder, president of Restaurant Management Group, a San Pedro consulting firm.

But Franco said McDonald’s is responding more to the economic situation than to competitors. She said each of McDonald’s different regions will decide independently whether to implement the discount program. The Oak Brook, Ill.-based company’s Denver region has already begun the program.