What’s big in Israel? Apparently the burgers — at least the price tag is big by American standards for McDonald’s (NYSE:MCD) “Big America” themed burgers.
McDonald’s is selling the “Big New York” and “Big Texas” burgers for $9.25. And that’s just the cost of the burger alone according to MCD pricing.
YNetNews.com, the English language sister to Israel’s top news site, reports that McDonald’s created the burgers specifically for its Israeli customers in order to compete with boutique hamburger restaurants there.
The upscale move is not what is turning heads. McDonald’s has been adding more premium offerings to its menu — in part to boost profit margins to offset super-cheap Dollar Menu items. And its massive Starbucks Corp. (NASDAQ:SBUX) inspired renovation plans are aimed at capturing more high-end customers and making restaurants in the U.S. more inviting.
In Israel, McDonald’s is using a .55 pound patty made of prime rib and rib steak to lure high-end customers. Other than that, there’s nothing particularly special about the burgers. The Big New York, a 639-calorie burger, is topped with lettuce, tomato, pickles, onion and Royal Sauce. The 698-calorie Big Texas burger is topped with barbeque sauce, lettuce, tomato, pickles and fried onions. Obviously neither Big America burger will have cheese or bacon because those toppings would not be Kosher. Customers who want a side of fries and need something to wash the burgers down with, will have to pay extra for the combo, which rings up for $14.66.
The capital improvements may account for the much of the new burgers’ costs. McDonald’s spent two years preparing the burgers, investing $2 million in grills for its restaurants and developing a production line for the new type of meat.
Given the rising cost of food and beef prices in particular throughout the world, it’s unlikely that McDonalds will bring the premium burgers to the U.S. even if the sandwiches become a big hit in Israel. But on the positive side, McDonalds investors won’t have to worry about other popular American fast food chains undercutting McDonald’s sales by copying the concept. Wendy’s Arby’s Group Inc. (NYSE:WEN) and now-private Burger King Co. franchises have left the Israeli market.
If you’re McDonald’s, you really don’t have that many untapped markets left. MCD stock shareholders should at least be happy the company is trying to expand in one of the few places it doesn’t have market dominance yet.
As of this writing, Cynthia Wilson did not own a position in any of the stocks named here.