McDonald’s (MCD) is out with its long-awaited value menu.
On Tuesday, the Golden Arches introduced their $5 meal deal, which includes the choice of a McDouble burger or a McChicken sandwich, in addition to a four-piece Chicken McNuggets, small fries and a small soda.
McDonald’s U.S. President Joe Erlinger said in a news release that the team is “focused” on affordable options as the company looks to bring customers back in the door. This comes after a difficult first quarter, in which U.S. same-store sales rose 2.5%, slightly less than the expected 2.55%, along with missed sales and same-store sales growth across all segments and gains from the company.
Franchisees hope this limited-term deal will lead to consumers visiting McDonald’s restaurants more often. However, they also expect a hit to margins.
“Value promotions never increase margins – ever,” a McDonald’s franchisee, who wished to remain anonymous, told Yahoo Finance. “They ensure an increase in the number of guests. Hopefully the increase in guest numbers will compensate for the slimmed-down margins.”
TD Cowen analyst Andrew Charles said the value offering is the hook to get consumers back in the door. But, he added, it’s important that the restaurant encourage customers to order premium or additional items to “really maximize profitability.”
Why now? McDonald’s wants consumers to stop thinking that the fast food chain is too expensive and show that they have the right offer at the right price.
Following accusations that it has raised prices, Erlinger posted a blog to share the cost increases of the Big Mac and Quarter Pounder, among others. The average prices of the two burgers have increased by about 20% since 2019.
McDonald’s isn’t alone; other chains are also jumping on the value craze.
In early April, KFC (YUM) introduced a $4.99 meal with two pieces of chicken, a side of mashed potatoes and gravy, and a biscuit. In late May, Burger King (QSR) brought back its $5 Your Way Meal, which includes the choice of a Chicken Jr., Whopper Jr. or Bacon Cheeseburger, fries, nuggets and a drink.
Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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