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McDonald's rolls out successor to Dollar Menu as price war rages

Stock Image / Flickr

McDonald's is preparing to up the ante in the fast-food price wars.

The world's largest restaurant chain, facing heavy competition in the U.S., will launch a new value-priced menu nationally next year. The lineup will offer items for $1, $2 and $3, the company said on Tuesday.

The rollout will provide a long-awaited replacement to the Dollar Menu, which was popular with customers but less so with McDonald's franchisees. The company has experimented with various discounts -- including McPick 2 for $5, which let customers choose two items -- in a bid to find something that wasn't too hard on the profit margins of restaurant operators.

Almost 100 percent of franchisees have signed up to participate in the new value program, McDonald's said. The stakes are high to get the formula right. Wendy's and Burger King, McDonald's closest competitors, have heavily promoted their discounted menus. And many U.S. consumers have retained a thrifty attitude in the years since the last recession.

But McDonald's is adding the new menu from a position of strength. It has seen U.S. restaurant traffic grow for two consecutive quarters, following years of declines. With the new value lineup, the company is trying to lock in those gains, said Michael Halen, an analyst at Bloomberg Intelligence.

"You have to have some everyday value because a decent portion of that business is very price-sensitive," he said.

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