Create a Submenu of the first item by highlighting the parent menu in the Tree View (i.e. select Menu One) then click the Create Submenu button. Name the item Sub Menu One.

The Create Submenu button will make a new menu item one level down in the menu hierarchy from the menu item you currently have selected.

You will notice that a disclosure triangle has been created next to the menu item with a submenu.

You can click the triangles up or down to hide/show the Submenu items.