McDonald’s (MCD) Corp.’s US chief says the company is ready for a fight.
And in order to win, the burger chain is pulling out one of the most potent weapons in its arsenal: The value meal. It’s all part of a bid to lure back penny-pinching customers who have cut back on fast food after flocking to the Golden Arches in recent years.
On June 25, McDonald’s will kick off a marketing campaign and a new $5 meal deal, raising the stakes as US restaurants vie to lure back inflation-weary diners.
“We’re committed to winning the value war,” Joe Erlinger, president of McDonald’s US.
Burger King’s US president pledged to roll out its $5 value meal “before they do,” alluding to McDonald’s in a memo to franchisees. Wendy’s (WEN) Co. pushed out a $3 breakfast offer and took to social media to mock its competitors for copying its ideas. Even Starbucks (SBUX), known for its pricey Frappuccinos and lattes, said it would offer a $6 breakfast sandwich and coffee combo.
When asked about his adversaries, Erlinger smiled and said he isn’t fixated on the competition.
As the largest restaurant chain in the US by sales, he said McDonald’s size and marketing muscle gives the $130 billion company an edge over smaller rivals and the ability to reduce any hit to franchisee profits. “Think about our scale,” he said, noting that the incremental cost of adding fries and a drink to a sandwich was minimal. The $5 deal includes a McDouble or McChicken sandwich, small fries, four-piece chicken nuggets and a small soft drink.
Franchisees, who operate the majority of McDonald’s stores, don’t all agree with that calculus. Many say they are eager for a value meal that brings customers in the door but have concerns about people trading down from pricier options, like the $9 Big Mac combo.
“There simply is not enough profit to discount 30% for this model to be sustainable,” an independent franchisee group said in a message last month to its roughly 1,000 members.
The company said a local $5 promotion in upstate New York has performed well with lower-income consumers while driving additional sales by wealthier customers who buy more than just the $5 meal deal.
For McDonald’s though, the promotion — which runs four weeks nationally and longer in markets like Dallas and Las Vegas — is not just about driving sales. The national campaign is also geared toward dispelling the notion that McDonald’s has become too expensive after images of an $18 Big Mac combo meal in Connecticut went viral on social media along with claims that prices have doubled in recent years.
The company’s prices have increased by an average 40% since 2019 to offset rising costs, Erlinger said in a May blog post. He said the $18 price tag is an anomaly found at just one of the company’s more than 13,700 locations.
That’s cold comfort to customers like Dylan Covington, 33, who lives in Fort Wayne, Indiana, and used to eat at McDonald’s about once a week. Price hikes have prompted him to cull his McDonald’s visits to every two or three months. Instead, he said he heads to a local restaurant where he can get a bigger sandwich for about the same price.
“McDonald’s was always the cheap option,” Covington said. “Now it’s not even that. I don’t see a reason to go there unless I’m craving a Big Mac specifically.”
