McDonald's Corp Swings to Profit But Dollar Menu Hurting Operators

McDonald's is benefiting from diminishing consumer spending while the same value menu items that are attracting consumers are beginning to hurt operators. Consumers brought McDonald's back to profitability in the second quarter by spending on breakfast biscuits, chicken sandwiches and drinks despite the tough economy in the U.S. The quick service restaurant chain reported net income of $1.19 Billion compared to a $711.7 million loss last year.

The chains restaurateurs are being squeezed with ever escalating operating costs. According to the Associated Press, McDonald's expects beef costs to rise between 8 percent and 9 percent in the U.S. and Europe and chicken costs to jump between 5 percent and 6 percent in the U.S. and between 7 percent and 8 percent in Europe.

That means that the world's largest franchise chain will need to increase its $1 value menu items.

"The way the dollar menu looks today won't be the way it's going to look next year," said McDonald's President and Chief Operating Officer Ralph Alvarez on a conference call with investors. "In this current environment, we've got to make sure we're pricing smart, not just pricing low."

When it works, the video is via Wall Street Journal $$]