McDonald's (MCD) is out with its much-anticipated value menu.
On Tuesday, the Golden Arches rolled out its $5 meal deal, which includes the choice of a McDouble burger or McChicken sandwich, in addition to a four-piece chicken McNuggets, small fries, and a small soft drink.
McDonald’s USA president Joe Erlinger said in a press release that the team is "focused" on affordable options as the company looks to bring customers back in the door. This comes after a rough first quarter, where US same-store sales were up 2.5%, slightly off the 2.55% expected, along with misses on revenue growth and same-store sales across all of the company's segments and earnings.
Franchisees hope that this deal, which will run for a limited time, will get consumers to visit McDonald's restaurants more. However, they also expect to take a hit on margins.
“Value promotions never increase margins — never,” one McDonald’s franchisee, who wished to remain anonymous, 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 said the value offering is the hook to get consumers back in the door. But, he added, it’s important that the restaurant encourages customers to order premium or additional items to “really help maximize the profitability.”
Why now? McDonald's wants consumers to stop thinking the fast food chain is too expensive and show that it has the right offering for 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 other items. The average prices of the two burgers have risen roughly 20% since 2019.
McDonald's is not alone; other chains are jumping in on the value craze too.
In early April, KFC (YUM) introduced a $4.99 meal that offers 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 [email protected].
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