McDonald’s Introduces $5 Value Meal to Attract Customers Back
On Tuesday, McDonald’s (MCD) unveiled its much-anticipated $5 meal deal, which includes a choice between a McDouble burger or McChicken sandwich, along with a four-piece chicken McNuggets, small fries, and a small soft drink.
Joe Erlinger, President of McDonald’s USA, stated in a press release that the company is “focused” on offering affordable options to draw customers back. This initiative follows a challenging first quarter where US same-store sales increased by 2.5%, slightly below the expected 2.55%, along with misses in revenue growth, same-store sales across all segments, and earnings.
Franchisees are hopeful that this limited-time deal will increase customer visits to McDonald’s. However, they also anticipate a negative impact on profit margins.
“Value promotions never increase margins — never,” one anonymous McDonald’s franchisee told Yahoo Finance. “They do drive guest counts. Hopefully, the increase in guest counts will offset the slimmed-down margins.”
TD Cowen analyst Andrew Charles noted that the value offering is designed to attract consumers, but emphasized the importance of encouraging customers to purchase premium or additional items to maximize profitability.
McDonald’s aims to dispel the perception that it is too expensive and demonstrate that it offers the right value for the right price. Erlinger recently addressed price increase accusations in a blog post, revealing that the average prices of the Big Mac and Quarter Pounder have risen by roughly 20% since 2019.
Other fast-food chains are also introducing value deals. In early April, KFC (YUM) launched a $4.99 meal including two pieces of chicken, mashed potatoes and gravy, and a biscuit. In late May, Burger King (QSR) reintroduced its $5 Your Way Meal, offering a choice of a Chicken Jr., Whopper Jr., or Bacon Cheeseburger, along with fries, nuggets, and a drink.
