McDonald’s (MCD) has launched its long-awaited value menu.
On Tuesday, Golden Arches launched its $5 meal package, which includes your choice of a McDouble burger or McChicken sandwich, plus four-piece chicken McNuggets, fries and a small soda.
McDonald’s US President Joe Erlinger said in a press release that the team is “focused” on affordable options as the company looks to bring customers back. This comes after a difficult first quarter where U.S. same-store sales rose 2.5%, slightly below the 2.55% expected, along with missed revenue growth and same-store sales across all segments and company profits.
Franchisees hope that this agreement, which will be limited in duration, will encourage consumers to visit more McDonald’s restaurants. However, they also expect to take a hit to margins.
“Value promotions never increase margins – ever,” a McDonald’s franchisee, who preferred to remain anonymous, told Yahoo Finance. “They boost guest counts. We expect the increase in guests to offset the reduced margins.”
TD Cowen analyst Andrew Charles said the value offering is the hook to attract consumers back. But, he added, it’s important for the restaurant to encourage customers to order premium or additional items to “really help maximize profitability.”
Because now? McDonald’s wants consumers to stop thinking that the fast food chain is too expensive and show that it has the right offer at the right price.
After accusations that he raised prices, Erlinger published a blog to share the cost increases of the Big Mac and the Quarter Pounder, among other items. The average prices of both burgers have increased by around 20% since 2019.
McDonald’s is not alone; Other chains are also joining the value craze.
In early April, KFC (YUM) launched a $4.99 meal that offers two pieces of chicken, a side of mashed potatoes and gravy, and a biscuit. In late May, Burger King (QSR) brought back its $5 Your Way Meal, which includes your choice of Chicken Jr., Whopper Jr. or Bacon Cheeseburger, fries, nuggets and a drink.
Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or send an email to bdipalma@yahoofinance.com.
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