Higher prices on the Menu at McDonald's?

A consulting firm that advises McDonald's franchisees is recommending steeper increases this year than it has in the past, according to documents from a presentation to restaurant owners in February.

Price hikes have been a key driver of sales growth for the chain, and bigger boosts would bring some relief to franchisees squeezed by higher food costs and expenses associated with McDonald's push into specialty coffees. But raising prices during a recession could send cost-conscious customers running to rivals.

To keep store traffic high during the downturn, Oak Brook-based McDonald's Corp. has emphasized its Dollar Menu and rolled out a series of low-price promotions. It collects royalties based on total sales volume from franchisees, who bear the brunt of profit pressures from rising expenses and promotional pricing.

"Raising prices is a way to offset any tension with franchisees facing higher costs and lower profits,"says David Bishop, a food consultant at Barrington-based Balvor LLC. "This way they can offer value on the Dollar Menu and still help franchisees make a profit."