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McDonald’s Takes Aim With a Puny Price on Its Big Mac

From Reuters

McDonald’s Corp. has turned up the heat in the fast-food business.

If franchisees go along with the plan, the world’s largest restaurant chain will launch its biggest nationwide promotion ever, featuring 55-cent sandwiches, down from about $1.95 for a Big Mac, according to franchisee sources Wednesday.

The plan is a bold step to lure customers into McDonald’s restaurants in the face of intense competition in the nation’s $100-billion fast-food business, analysts said.

McDonald’s, which has more than 20,000 units worldwide and more than 12,000 in the United States, declined to give specifics about its plan. Spokesman Jack Daly said the Oak Brook, Ill.-based company hopes to launch a “national value-price promotion.”

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Pointing to a current promotion on Chicken McNugget sandwiches, which analysts said has helped McDonald’s build sales this month, Daly said, “It’s in that same spirit.”

Charles Gonzales, a McDonald’s franchisee with two stores in the San Francisco Bay Area, said the nationwide promotion would feature a different sandwich for 55 cents each month when a customer buys French fries and a drink at the regular price.

The promotion, he added, is expected to start with the Big Mac hamburger, which is usually priced between $1.90 and $1.99, and will include breakfast sandwiches as well, he said.

But the promotion, to be presented to franchisees today, could spark a nationwide price war among fast-food restaurants, analysts said. That prospect worried investors, who drove fast-food stocks sharply lower Wednesday.

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McDonald’s stock dropped $2.375 to $44.875 and Wendy’s International slid $1.50 to $20.75, both on the New York Stock Exchange.

Also, American depositary receipts of Britain’s Grand Metropolitan, which owns Burger King, fell $1 to $30.625, and Foodmaker Inc., the San Diego-based parent of the Jack in the Box chain, plunged $1.875 to $9.75. CKE Restaurants, owner of the Carl’s Jr. chain, tumbled $4.375 to $19.875. All trade on the NYSE.

However, Burger King said it had no plans to change its prices. Wendy’s executives also said they won’t cut prices because of McDonald’s plan.

Dean Witter analyst David Adelman said it remained to be seen if the McDonald’s plan will bring in more customers. “We have much more jaded consumers today,” he said, noting that price cuts were not “new news.”


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