McDonald’s offers $5 meals on menus as Golden Arches tries to win back customers

June 25, 2024

McDonald’s offers meals on menus as Golden Arches tries to win back customers

McDonald’s (MCD) is launching its highly anticipated economy menu.

On Tuesday, Golden Arches introduced its $5 meal deal, which includes the choice of a McDouble burger or a McChicken sandwich, along with four 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 into stores. This comes after a difficult first quarter in which U.S. sales rose 2.5%, just below the 2.55% expected, along with setbacks in top-line growth and revenue across all of the company’s businesses, as well as profit.

McDonald's $5 meal deal (Courtesy of McDonald's/Graphic by Yahoo Finance) — McDonald’s $5 meal deal (McDonald’s/Graphic by Yahoo Finance)

Franchisees hope that this limited-time deal will encourage customers to visit McDonald’s restaurants more often, but they also expect margins to drop.

“Value promotions never increase margins – ever,” a McDonald’s franchisee who asked not to be identified told Yahoo Finance. “They increase customer traffic. Hopefully the increase in customer traffic will offset the decreased margins.”

TD Cowen analyst Andrew Charles said the low-cost offering was the lure to lure customers back into the restaurant, but added that it was important that the restaurant encouraged customers to order premium or add-on dishes to “really maximize profitability.”

Why now? McDonald’s wants consumers to stop thinking the fast food chain is too expensive and instead show them that it has the right offer at the right price.

Following accusations of raising prices, Erlinger published a blog to share the cost increases for the Big Mac and Quarter Pounder, among others. The average prices of the two burgers have increased by about 20% since 2019.

McDonald’s is not alone; other chains are also jumping on the low-cost airline bandwagon.

In early April, KFC (YUM) introduced a $4.99 meal that includes two pieces of chicken, a side of mashed potatoes and gravy, and a bun. 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.