News leaked this week that McDonald’s will deepen the discount on its most popular bundled meals, after reaching an agreement with the chain’s franchisees. The company will also offer national price points on discounted meals labeled Extra Value Meals starting in September with an $8 Big Mac meal.
Operators already provide a discount when customers buy a bundle of an entrée, fries and a drink. McDonald’s will simply be standardizing that discount at about 15%.
The fast-food giant in the process will be doing something that’s rarely done in the industry, actually lowering prices. Franchisees, who set prices, on average discount bundled meals by 10.4%, according to a Restaurant Business analysis of Price Pulse data from Technomic, a sister company.
As such, shifting to a 15% discount would cut prices by about 460 basis points, or an average of 52 cents. What’s more, many of its core menu items will have average combo meal prices below $10, a key psychological barrier for many consumers.
But it will also catch the company up with its competitors’ discounts.
We also analyzed the bundled meal prices for nine different items from McDonald’s three biggest fast-food burger competitors, Wendy’s, Burger King and Jack in the Box. Those companies’ discounts averaged 15.6%, or deeper than McDonald’s current and potential future discounts.
Jack in the Box is a particularly aggressive discounter, at least when it comes to its bundled meals.
We looked at three meals, the Jumbo Jack, 10-piece chicken nuggets and the Bacon Ultimate Cheeseburger. Each of those items were discounted at least 15.4% off the price of the items in the bundles if they were bought individually. The nuggets had the highest discount of anything we analyzed, at 19.1%.
Burger King discounts its offerings between 11.1% and 16.4%. Wendy’s discounts range from 12.5% for the Baconator to 16.5% for the Classic Chicken Sandwich.
Brands typically give discounts to customers if they buy combo meals as an incentive, which is a way to provide value to consumers. But they’ve been less of a focus of chains’ marketing in recent years.
Marketing by Chili’s and other casual-dining chains over the past year have brought the prices of those combo meals to the forefront. McDonald’s combo meal pricing changes promise to make it louder. The chain is already getting considerable publicity about its changes, and that’s without the company saying anything about it.
McDonald’s will be pricing a Big Mac Extra Value Meal combo at $8 as a limited-time offer in September. That will provide a major marketing boost to the chain’s price-lowering effort. It will look a lot cheaper when compared with the Whopper ($10.09 on average) or the Jumbo Jack ($10.40), even though both those sandwiches come with more beef (four ounces apiece compared with 3.2 ounces).
Comparing chains’ respective prices is difficult, because many of the burgers are different sizes and include different ingredients. Burger King and Wendy’s, for instance, each feature a lot of bacon-centric burgers (the Bacon King and the Baconator, respectively). That can drive up the cost to produce those sandwiches and therefore their prices.
McDonald’s core prices, for the most part, are lower, in general, than their counterparts. And a 15% discount, coupled with McDonald’s marketing, could make it seem even cheaper to consumers.
Two items are relatively comparable: McDonald’s Quarter Pounder with Cheese Deluxe and 10-piece chicken nuggets.
McDonald’s 10-piece Chicken McNuggets meal currently averages $9.65, which is slightly more expensive than Wendy’s 10-piece chicken nuggets bundled meal, but lower than that from Jack in the Box.
Under the bundled meal plan, however, McDonald’s 10-piece meal would be $9.04, 53 cents cheaper than Wendy’s and 88 cents cheaper than Jack in the Box.
The Quarter Pounder with Cheese Deluxe, meanwhile, averages $10.12, slightly higher than the Burger King Whopper but 28 cents lower than the Jumbo Jack (though, to be fair, Jack in the Box has a lot of locations in not-all-that-cheap California).
McDonald’s 15% mandate will take its price down to $9.83 on average, or 26 cents cheaper than the Whopper.
Exactly how consumers make their dining decisions remains to be seen. A consumer might not compare a Whopper to a Quarter Pounder, but rather a Big Mac.
But let’s put it this way: McDonald’s is about to unleash a major marketing push telling the U.S. consumer that it is lowering everyday prices.