Fast food giant McDonald’s Corp MCD is one of the largest restaurant chains in the world by the number of units and annual revenue. The company’s franchise model and focus on strong location selections have helped the company dominate the space for many years. The launch of new products and a menu promotion in 2002 may have helped boost the company’s revenue and stock price.
What Happened: McDonald’s has utilized the launch of new food items and strategic pricing as key drivers of its growth. Analysts recently highlighted the strong same-store sales growth of McDonald’s in the third quarter.
One menu promotion launched in 2002 has been a staple at restaurants in some form and could be part of the reason for the restaurant’s success.
McDonald’s began experimenting with pricing promotions for its menu in 1991. After several tests, McDonald’s decided on a dollar menu with select items offered at a price point of $1.
On Nov. 27, 2002, McDonald’s launched its first national value meal with the introduction of the “Dollar Menu.”
Items such as the double cheeseburger, grilled flatbread sandwich and a chicken nugget meal were among the first items featured on the dollar menu.
Franchisees liked the increased sales, but didn’t love the lower profit margins on some of the bestselling items the restaurant offered. Store owners were able to alter the prices of items, with some stores changing the price of the double cheeseburger to $1.39 at the time.
McDonald’s has revamped its menu prices and promotional menu items over the years, but some form of the dollar menu has typically remained available in restaurants. After a five-year hiatus, the company added a dollar menu back in 2017 featuring soft drinks, cheeseburgers, McChicken sandwiches and sausage burritos for $1 and several items at $2 and $3 price points.
Having a value menu section has helped the company boost its sales over the year, which has also turned the restaurant stock into a strong performer.
Related Link: McDonald's Plans Reorganization, CEO Says Layoffs Are Coming: What Investors Need To Know
Investing $1,000 in MCD Stock: Investors who recognized the potential impact of the launch of the dollar menu nationally on McDonald’s sales could have bought stock in the company.
McDonald’s shares traded at a high of $18.64 on Nov. 27, 2002. A $1,000 investment in the stock could have bought 53.65 shares.
The 53.65 shares would be worth $14,220.47 today based on a price of $265.06 for McDonald’s stock at the time of writing.
This represents a hypothetical gain of 1,322.0% over the last 20 years, not including dividends. The investment would have returned an average annual gain of 66.1%.
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