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McDonald’s offers $5 meal to regain customer loyalty

by Olga Sokolova

McDonald’s (MCD) has launched its eagerly awaited $5 value meal, a strategic move aimed at drawing customers back to its restaurants amid rising competition and fluctuating sales. The deal, available from Tuesday, includes a choice between a McDouble burger or a McChicken sandwich, complemented by a four-piece Chicken McNuggets, small fries, and a small soft drink.

Joe Erlinger, president of McDonald’s USA, emphasized the company’s commitment to affordability in a press release. “We are focused on providing affordable options to bring customers back,” Erlinger stated. This initiative follows a challenging first quarter where US same-store sales increased by 2.5%, slightly below the anticipated 2.55%. The company also missed revenue growth targets and saw underperformance in same-store sales across all segments.

Franchisees are optimistic about the promotion’s potential to increase foot traffic, although they acknowledge the impact on profit margins. “Value promotions never increase margins — never,” a McDonald’s franchisee, speaking anonymously, told Yahoo Finance. “They do drive guest counts. Hopefully, the increase in guest counts will offset the slimmed-down margins.”

Andrew Charles, an analyst at TD Cowen, echoed this sentiment, noting that the value meal is designed to attract customers. However, he stressed the importance of upselling premium items to enhance profitability. “It’s crucial to encourage customers to order additional items to maximize profitability,” Charles said. This move comes as McDonald’s faces criticism for price hikes. In a recent blog post, Erlinger addressed these concerns, highlighting that the prices of popular items like the Big Mac and Quarter Pounder have increased by approximately 20% since 2019.

McDonald’s isn’t alone in pursuing value-driven strategies. Competitors such as KFC and Burger King have also introduced similar promotions. In April, KFC launched a $4.99 meal featuring two pieces of chicken, mashed potatoes with gravy, and a biscuit. In May, Burger King reintroduced its $5 Your Way Meal, which includes options like a Chicken Jr., Whopper Jr., or Bacon Cheeseburger, along with fries, nuggets, and a drink. As McDonald’s rolls out its $5 value meal, the fast-food giant aims to redefine customer perceptions and reinforce its position as a go-to destination for affordable dining.

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