Financing

McDonald's will start selling a $5 value meal next month

Franchisees gave their OK to the national value promotion, potentially setting the stage for a summertime price war as inflation-weary customers turn away from restaurants.
McDonald's
McDonald's will kick off a bundled deal next month. | Photo courtesy of McDonald's.

McDonald’s is set to start offering a $5 bundled meal promotion this summer as it looks to offset declines in traffic as consumers frustrated with inflation dine out less frequently.

The meal, which will feature either a McChicken or a McDouble along with a small fries, small drink and a four-piece Chicken McNugget, will run as a four-week national promotion starting late next month.

The Wall Street Journal, citing internal emails, said the deal would start June 25.

“Great value and affordability have always been a hallmark of McDonald’s brand, and all three legs of the stool are coming together to deliver that at a time when our customers really need it,” John Palmacio, a McDonald’s owner and chair of the Operators National Advertising Fund (OPNAD), said in a statement. “This is the power and promise of the Golden Arches.”

In the process, McDonald’s could intensify a fast-food price war this summer as a growing number of restaurant chains seek to regain favor with consumers.

But that could frustrate operators, particularly in high-cost markets, where margins have been squeezed following three-plus years of inflation. Wage rates in California, insurance premiums in several markets and beef costs all over the place continue to put pressure on wages.

McDonald’s is hardly the only chain offering a bundled deal at $5. Wendy’s prices several meals at $5 with its “Biggie Bag” promotion, such as a Crispy Chicken Sandwich, four-piece nuggets, small fries and a drink. Jack in the Box offers two Jumbo Jack burgers at $5. But Jack in the Box is also preparing other value offers as its own sales have struggled, company executives said Wednesday.

But other chains, such as Potbelly, have been focused more on value of late amid weak traffic.

McDonald’s watched traffic to its restaurants turn negative in 2023. In an earnings call earlier this year, executives signaled a shift in priority, with CEO Chris Kempczinski noting that “eating at home has become much more affordable.”

Indeed, prices at grocers fell 0.2% last month and are rising at a much lower rate than are fast-food restaurants. Limited-service restaurant prices increased 0.4% last month, a 60 basis point difference in just one month.

McDonald’s intensified that shift last month. Executives argued that the company needs a better national value offer to get customers back in the door. “Everybody is fighting for fewer customers,” CFO Ian Borden said. “We have to make sure we have that street fighting mentality.”

Franchisees set menu prices, based on help from a consultant and based on local market conditions. The company does have a national value offer, 123 Dollar Menu, but inflation has hit that, too, with almost no items priced less than $2 anywhere in the country.

McDonald’s does offer local discounts, run through local cooperatives, and deals on its mobile app. But the company has argued that a national offer backed with national marketing will be more effective.

“We know how much it means to our customers when McDonald’s offers meaningful value and communicates it through national advertising,” McDonald’s USA said in a statement. “That’s been true since our very beginning and never more important than it is today.”  

The company’s initial offer of a $5 meal deal in the U.S., however, did not get past OPNAD, amid concerns about franchisee profitability.

McDonald’s then returned with a different proposal, one that featured incentives from Coca-Cola, the company’s beverage provider. That assuaged many operators’ concerns about profitability. The proposal also has carve-outs for higher-priced markets, enabling them to run the promotion at a higher price.

The National Owners Association, an independent group of McDonald’s operators, praised Coca-Cola for providing the financial assistance. NOA believes the current strategy demonstrates an unwavering commitment by McDonald’s franchisees and our incredible supplier Coca-Cola to address the immediate financial challenges our consumers are facing by offering this phenomenal value to our guests,” the group said in a statement to Restaurant Business over the weekend.

But the group also said it felt McDonald’s should step up financially, too.

Still, there are other value offers being tested, meaning that this likely won’t be the last national value offer the company rolls out this year.

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