Taco Bell makes a major menu change

People talk about the McDonald's Dollar Menu like a long-lost love or a dearly departed pet. The much-lamented offering was exactly what it sounds like — a selection of items that consumers could buy for $1 each. 

That was an impressive deal even back in 2013 when the chain discontinued it. The problem, at least for McDonald's (MCD) - Get Free Report franchise owners, is that customers used the Dollar Menu instead of ordering from the more expensive regular menu.

Basically, customers realized that they could purchase a few items for $1 each and cobble together a meal. The chain had launched the discount offer hoping that people would add the low-margin $1 items to their pricier (and higher margin) combo meals.

Related: Taco Bell's menu embraces a new take on a comfort food classic

That didn't happen, so the chain replaced the Dollar Menu with the more confusing, and less popular, "$1 $2 $3 Dollar Menu." That offering, includes a selection of McDonald's items at the $1, $2, and $3 price points, but in many cases, the only $1 items are small drinks.

Still, the $1 $2 $3 Dollar Menu does offer lower prices on some menu items and it remains a popular option for customers. Now, Yum Brands' (YUM) - Get Free Report Taco Bell has revamped its own value menu in a way that's a lot like McDonald's offering.

Taco Bell adding $3 or less Cravings Value Menu

Taco Bell faces the same challenge McDonald's does. It wants to offer value but does not want its customers to solely order low-priced items. To try to balance that the chain is revamping its value menu and giving it a new name.

"Following a successful test at select locations last fall, Taco Bell today announced the nationwide launch of their new $3 or Less Cravings Value Menu starting January 11, 2024," Fast Food Post reported.

The new menu replaces the long-running "Cravings Value Menu," which offered items at $1, $2, and $3 price points. Taco Bell has not yet shared pricing for its new menu which will include 10 items for $3 or less.

Items offered will include the Cheesy Double Beef Burrito, the Double Stacked Taco, the Spicy Potato Soft Taco, the Cheesy Roll Up, the Cheesy Bean and Rice Burrito, the 3-Cheese Chicken Flatbread Melt, the Chicken Enchilada Burrito, Loaded Beef Nachos, the Stacker, and Cheesy Fiesta Potatoes.

Taco Bell wants to compete in value and premium

While Taco Bell competes with McDonald's and the other burger chains in the value space, it also wants to compete with Chipotle Mexican Grill for higher-end customers. Yum Brands CEO David Gibbs talked about the chain's value efforts during its third-quarter earnings call.

"Of course, Taco Bell U.S. is in a class of its own in the domestic QSR category as a culturally iconic brand and clear leader in value perception with the most crave-worthy food in the industry. Taco Bell has unmatched menu flexibility, exceptional pricing power, industry-leading unit economics, and world-class franchise partners," he shared.

Taco Bell has also seen customers spend more money — 40% more — when they're members of the company's loyalty program. That's something the chain hopes to develop further in 2024.

"Taco Bell will enhance its loyalty program and provide easier access across channels to earn and redeem points. Additionally, members will enjoy more exclusive experiences, including more digital innovation, early access to new products, and loyalty-enabled and experiences. Eventually, the team will integrate its loyalty program with digital menu boards to create an even more personalized experience," Gibbs added.