CHICAGO - McDonald's Corp. said it might consider lowering the price of its Arch Deluxe hamburger, which the fast-food chain introduced a year ago to what analysts have called an unenthusiastic customer response.
McDonald's Corp. said that while no decisions have been made yet, it is looking at possibly lowering the price of the hamburger, which it sells for over $2.00 in the United States.
"The issue with the Arch Deluxe is whether the sandwich is priced appropriately in our restaurants," Richard Starmann, senior vice president of McDonald's, said Wednesday in a telephone interview. "It's not a taste issue. ... We're looking hard at the price."
McDonald's introduced the Arch Deluxe hamburger in May 1996 with fanfare that included the Radio City Rockettes dancing with corporate clown mascot Ronald McDonald, positioning it as a more adult hamburger.
Touting the Arch Deluxe as the largest product launch in its history, McDonald's said then that the hamburger had the potential of pulling in $1 billion in sales in its first year.
But analysts said they would not be surprised if McDonald's changed or replaced the Arch Deluxe, which they said has failed to increase customer traffic.
"Slow sales, which are primarily due to a price/value relationship imbalance ... will likely cause a repositioning of the product or a discontinuation, which is the likely case," Lehman Brothers analyst Mitchell Speiser, who attended a McDonald's meeting with analysts, said in a report.
"... Management suggested that the Arch Deluxe line, particularly the Arch Deluxe hamburger, is under review," he added.
The Arch Deluxe faces stiff competition from fast-food rival Burger King, which usually sells its Whopper hamburger for 99 cents.
Asked if McDonald's could replace or change the Arch Dexlue, Starmann replied, "We're looking at the product part. No decision has been made. Time will tell. That's about as much as I can say about it. We're taking a look at it."
A franchisee source, however, said McDonald's franchises would resist lowering the price of the Arch Deluxe hamburger because it would hurt their profit margins. One possibility, the source suggested, is a wider roll-out of the 99-cent "Big 'n Tasty hamburger," now being test-marketed on the West Coast.
The Big 'n Tasty hamburger has been reformulated to more closely replicate the Whopper, the source said.
McDonald's Starmann added that the fast-food chain is also reviewing the pricing of its Fish Filet Deluxe sandwich. The other two "Deluxe" sandwiches launched last September include the Crispy Chicken Deluxe, which he called "a home run" with its popularity among consumers. The Grilled Chicken Deluxe is doing fine, he said, adding, "it provides a nice alternative for people."
"The Arch Deluxe hamburger does all right if they put a lot of advertising behind it," a second McDonald's franchisee source said. He added that the Arch Deluxe cannot compare with the success of McDonald's Quarter Pounder with Cheese hamburger, which has been featured in some recent promotions.
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