McDonald's Bets on $5 Combo to Win Back Customers
Image Credit - McDonald's
20 May, 2024

McDonald's Bets on $5 Combo to Win Back Customers

McDonald's is adding a budget combo meal to menus across the United States to regain customers. For $5 you can expect fries and a drink with the choice of either a McDouble burger, McChicken sandwich, or 4-piece Chicken McNuggets.

The talks happen just weeks after McDonald's reported slower growth in restaurant traffic. Some customers are cutting back on their fast-food spending because of quick-service restaurants hiking prices.

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"Consumers continue to be even more discriminating with every dollar that they spend as they face elevated prices in their day-to-day spending, which is putting pressure on the industry," said CEO Chris Kempczinski. "It's imperative that we continue to keep affordability at the forefront for our customers."

According to FinanceBuzz, McDonald's has raised menu prices more than any other U.S. fast food chain from 2014-2024. Adding to the fact around 25% of people making under $50,000 are limiting fast food due to costs.

"When you look at McDonald's, they're not getting a majority of high-income customers — the middle- and lower-income class are the bulk of their business," analyst Mark Kalinowski stated. "They need to be cautious with their spending, and that's what you're seeing right now."

While the $5 meal deal isn't launching for a couple more weeks, it is already criticized by customers and franchisees. On TikTok, user sources_say questioned how McDonald's could profitably offer such a cheap meal with rising food costs, saying "I'm not going to get that. How is this food so affordable with inflation?"

Some McDonald's franchisees have also expressed doubts they can make a profit at the $5 price point. Executives said on an earnings call that the chain is limiting price hikes for "price-weary" customers as inflation affects budgets.

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While a $5 meal isn't new, with competitors like Wendy's offering similar value combos, it could help McDonald's win back budget diners. The chain has also launched concepts like CosMc's beverage-focused eateries to attract more customers.

"We know how much it means to our customers when McDonald's offers meaningful value and communicates it through national advertising," a company spokesperson told Business Insider. "That's been true since our very beginning and never more important than it is today."

As inflation continues straining wallets, the fast food giant feels pressure to keep combos affordable for its core lower and middle-income customers. McDonald's is betting the $5 combo will pay off and reverse its sales slump.