How chains compete in the price war in 2024

Earlier this year, McDonald’s CEO Chris Kempczinski said the fast-food giant needed a nationwide value proposition because it was losing low-income customers.

The company had been successful in winning customers in other regions of the world by introducing value-priced menus. In June, it introduced a $5 menu in the US that included small French fries, four Chicken McNuggets, a small drink and the choice of a McDouble or McChicken sandwich.

It’s unclear whether the offer, which is likely to be short-term, will actually help the chain generate sustained customer growth, sales and profitability. After speaking with operators, analyst firm BTIG found that the $5 menu offer generated slightly positive sales and attracted some lower-income diners. But it didn’t generate measurable additional customer growth, said Peter Saleh, BTIG’s managing director and restaurant analyst, in a July report.

“We believe this new deal is an investment in McDonald’s value perception. The goal is to divert media coverage from the brand’s excessive pricing and refocus on a (higher) value offering,” said Saleh.

Operators in about 55 regions across the U.S. said they plan to extend the low-cost meals into August and September. Franchisees have had to adjust the offer as customers doubled the discount by offering 20% ​​off digital orders.

“The consensus was pretty much that this deal is a bridge to a longer-term national offer that is being tested and is planned for early September,” Saleh said. “That suggests to us that the price war and deep discounts will continue through the summer and probably the rest of the year.”

McDonald’s isn’t the only fast-food chain that’s betting big on value-added fare. A long list of fast-food chains have added value-added fare in recent months, including Carl’s Jr., Burger King, Sonic, Del Taco, Jack in the Box and Taco Bell. While second-quarter results will show how and to what extent these menu items have begun to impact sales, some chains have seen slight increases in customers. However, it’s unclear whether these increases will be long-term or have a significant impact on profits.

Look at how chains compete in the price war.