Why McDonald's will keep offering its $5 value meal into December

By Emily Bary

The chain continues to highlight affordability at a time when customers are facing budget pressures

McDonald's Corp. plans to keep its $5 value meal running into December as customers continue to look for budget-friendly meal options.

The restaurant chain in June rolled out this offer, which lets customers purchase the following items for $5: four Chicken McNuggets, a small order of fries, a small soft drink and the choice of either a McDouble or a McChicken sandwich.

"Together with our franchisees, we're committed to keeping our prices as affordable as possible, which is why we're doubling down with even more ways to save," McDonald's USA President Joe Erlinger said in a release.

The company will offer other deals, including a 50-cent Double Cheeseburger on National Cheeseburger Day (Sept. 18) and a $2 McCrispy sandwich on National Fried Chicken Sandwich Day (Nov. 9).

Companies across industries in recent months have noted growing budget pressures on consumers. For instance, Dollar Tree Inc. (DLTR) and Dollar General Corp. (DG) both saw soft trends among lower-income customers that weighed on results for the latest period, though Dollar Tree also saw weakness among higher-income cohorts.

Speaking about the value meal on McDonald's (MCD) earnings call in late July, Erlinger said that "trial rates of the deal are highest amongst lower-income consumers and sentiment towards the brand around value and affordability has begun to shift positively."

He added that McDonald's expectation was that "customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape." He believed an emphasis on value could help the company win market share and "return to sustainable guest count-led growth for the brand."

MarketWatch's Charles Passy wrote earlier this year that experts estimated the $5 deal carried a small margin, though McDonald's bigger aims seemed to be bringing customers into its restaurants so they would make the chain part of their routine even after the deal's expiration. Some also would likely be enticed to buy other items beyond what was included in the $5 bundle.

See also: What's next for McDonald's after the $5 value meal? Perhaps a McSmart meal.

McDonald's isn't the only chain turning to deals to win business. Subway temporarily dropped the price of its footlong subs during a recent stretch, while Shake Shack Inc. (SHAK) is offering a Sunday deal for free Chicken Shack sandwiches if customers spend $10 or more on other items.

One strategy for chains is to limit deals to app customers as a way to gain customer data and a way to notify consumers directly of offerings going forward.

While fast-food chains have seen pressure, higher-end chains like Sweetgreen Inc. (SG) and Cava Group Inc. (CAVA) have fared better - and seen nice stock bumps this year in the process.

Read: Restaurants are struggling as price increases backfire. But these chains are feeling pretty good.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-12-24 0804ET

Copyright (c) 2024 Dow Jones & Company, Inc.