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Business News/ Companies / McDonald’s new pitch to inflation-weary eaters: a meal for $5
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McDonald’s new pitch to inflation-weary eaters: a meal for $5

wsj

Fast-food chain and franchisees agreed to offer monthlong promotion subsidized by Coca-Cola.

McDonald’s New Pitch to Inflation-Weary Eaters: A Meal for $5Premium
McDonald’s New Pitch to Inflation-Weary Eaters: A Meal for $5

McDonald’s plans to sell a $5 meal bundle this summer as the burger giant seeks to hang on to cost-conscious consumers, and rivals ramp up promotions.

The chain’s U.S. restaurants will sell a McDouble or McChicken sandwich with small fries, a small soft drink and a four-piece Chicken McNuggets for $5. The roughly monthlong promotion is set to begin June 25.

McDonald’s said Wednesday that offering nationally advertised value deals is meaningful for its customers. “That’s been true since our very beginning and never more important than it is today," the company said.

Restaurant chains broadly are pushing deals this year to battle declining customer traffic. Many consumers have grown fatigued with the high cost to eat out, leading them to visit restaurants less often and pare back their spending when they do.

McDonald’s said last month that it had lost its lead on affordability in a few U.S. markets, and that its domestic restaurants would benefit from a national approach to meal deals, breakfast promotions and other value offerings. U.S. franchisees had returned to prepandemic levels of profitability in their restaurants, and could afford to put some of their profits into value offerings now, the company said.

Franchisees, which account for the lion’s share of McDonald’s operators, set most menu prices in their locations. Restaurants in the U.S. offer dozens of local deals, but that can lead to a patchwork of pricing that sometimes frustrates customers.

Coca-Cola is slated to kick in $4.6 million to subsidize costs associated with the deal, according to internal emails viewed by The Wall Street Journal. Coca-Cola, McDonald’s longtime beverage supplier, didn’t immediately respond to requests for comment.

The new discount plan sparked internal debate between the company and U.S. franchisees over the deal’s components and whether it would drive enough business to justify the discounts.

“Our sales and guest-count momentum has slowed considerably," a McDonald’s owner said in one email sent to fellow operators last week leading up to franchisee votes on whether to back the deal. “The fact is that we’ve lost our momentum and we need to get it back."

McDonald’s thanked operators for swiftly approving the deal in an internal message Tuesday night. Bloomberg earlier reported on the chain’s plan to launch the meal deal.

U.S. fast-food traffic declined 3.5% in the first three months of this year compared with the same period in 2023, according to market-research firm Revenue Management Solutions. Starbucks and Wendy’s are among the chains that reported declines in customer traffic in their most recent quarters compared with last year.

The pace of food inflation in restaurants has slowed over the past year, but eating out costs much more than it once did. Fast-food prices in April were 33% higher than 2019 levels, according to the Labor Department.

In recent earnings calls, restaurant executives said that they are sharpening the deals they offer to lure back customers and remain competitive with rivals. Jack in the Box said during a Tuesday investor call that the chain will introduce a “Munchies under $4" deal later this month, while advertising promotions for the rest of the year.

“We know the competition is doing that. So we will be in that game," Jack in the Box CEO Darin Harris said.

Casual-dining chains such as Chili’s and Applebee’s also are increasingly wooing fast-food customers with deals, including on burgers and fries.

McDonald’s still advertises a tiered $1, $2 and $3 value menu it first introduced at U.S. restaurants in 2018, but the number of items listed on it has dropped as franchisees have increased prices in response to inflation. In downtown Chicago earlier this week, for example, four items were on sale at prices of $1.99 to $3.69 during lunch.

Prior to the company’s earnings call last month, McDonald’s pitched a deal including four menu items for $5 or $6 to a chain committee with oversight over promotions, according to people familiar with the discussions. Some operators didn’t approve of it amid concerns it wouldn’t drive enough traffic and would cost too much, they said.

The company had subsequent discussions and gave additional presentations to franchisees. Last week, the four items for $5 deal moved out of committee and U.S. franchisees broadly voted on it this week.

The National Owners Association, a group of U.S. McDonald’s franchisees, said it supported the deal, though it wished the company kicked in more money to support the offer.

John Palmaccio, a McDonald’s owner who chairs the operators’ advertising fund, said that the company and operators are coming together to deliver affordable meals at a time when customers need it. “This is the power and promise of the Golden Arches," he said.

Write to Heather Haddon at heather.haddon@wsj.com

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