McDonalds (MCD) is out with its highly anticipated value menu.
On Tuesday, the Golden Arches launched 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 U.S. 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 hard first quarterwhere U.S. same-store sales grew 2.5%, slightly below the 2.55% expected, as well as missing revenue and same-store sales growth across all segments and earnings. ‘business.
Franchisees hope that this agreement, which will be in effect for a limited time, will encourage consumers to visit McDonald’s restaurants more. However, they also expect their margins to be affected.
“Value promotions never increase margins, ever,” one McDonald’s franchisee, who wished to remain anonymous, told Yahoo Finance. “They determine the number of guests. Hopefully, the increase in customers will compensate for the decrease in margins.
Andrew Charles, an analyst at TD Cowen, said offering value is the way to bring 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 profitability.”
Why now? McDonald’s wants consumers to stop thinking the fast food chain is too expensive and show that it has the right deal at the right price.
Following accusations that she raised prices, Erlinger published a blog to share cost increases for the Big Mac and Quarter Pounder, among others. The average prices of both burgers have increased by around 20% since 2019.
McDonald’s is not alone; other chains are also getting in on the value craze.
At the beginning of April, KFC (YUM) introduced a $4.99 meal that included two pieces of chicken, a side of mashed potatoes and gravy, and a biscuit. At the end of May, Burger King (QSR) has brought back its $5 Your Way Meal, which includes your 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 him at bdipalma@yahoofinance.com.
Click here for the latest stock news and in-depth analysis, including the events that move stocks.
Read the latest financial and business news from Yahoo Finance
