Plenty of rumors have been flying around the past few days speculating that McDonald’s has already come up with a solution to gain back some of the value edge it’s lost in recent quarters — a $5 value meal. The Wall Street Journal, citing internal emails, reported Wednesday that such a meal would appear this summer (beginning June 25) for four weeks and will feature either a McChicken or McDouble, alongside small fries, a small drink, and a four-piece chicken McNugget order.
In a statement emailed to Nation’s Restaurant News, McDonald’s didn’t show so many cards, only noting: “We know how much it means to our customers when McDonald’s offers meaningful value and communicates it through national advertising. That’s been true since our very beginning and never more important than it is today.”
The company also shared a statement from John Palmaccio, McDonald’s Owner/Operator and Operators National Advertising (OPNAD) Fund Chair, noting that “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. This is the power and promise of the Golden Arches.”
There is no doubt plenty of nuance in those two statements, but what we do know is that the company is urgently putting a playbook into place to win back some of the consumers it has lost in the past two quarters, particularly lower-income consumers, with whom the company over-indexes. During McDonald’s Q1 call in April, CEO Chris Kempczinski said, “The construct we see as our successful playbook is good entry level offers, meal deals, and offering value specific to breakfast.”
In this environment, in which quick-service inflation has been relentlessly stubborn, and pushed even higher in California following the state’s minimum wage hikes, $5 could very well be considered a “good entry level offer.”
That said, should this promotion make its way to national menus as expected, it will have plenty of competition. Restaurant brands big and small have been ramping up their value promotions to win back softening traffic across the industry. That includes McDonald’s biggest QSR competitors Burger King, which has invested millions to drive awareness of its $5 Duos, $5 Your Way meals, and $2.99 wraps, and Wendy’s, which is also adding more marketing weight behind its Biggie Bundles platform. Even casual dining concepts, like Chili’s and Applebee’s, are stepping up their value games and attacking high QSR prices in the process.
Of course, any such promotions, especially when input costs remain high, risk eroding franchisee profitability and franchisee alignment. However, the Wall Street Journal reports that Coca-Cola, McDonald’s beverage supplier, is helping to subsidize some of the costs associated with the $5 deal, to the tune of $4.6 million.
Time will tell if this deal helps McDonald’s gain back its “relative superiority on affordability,” as Kempczinski calls it. But this $5 bundle won’t likely be the only page in the company’s playbook as consumers become more value conscious.
“Everybody’s fighting for fewer consumers or consumers visiting less frequently. We are making sure our system is positioned with strength and capability,” CFO Ian Borden said. “There is no reason we shouldn’t have most compelling affordability to consumers.”
Contact Alicia Kelso at [email protected]