McDonald’s (MCD) is switching gears during a time when an alarming consumer trend is hurting its pockets.
An increasing number of consumers, convinced inflation at fast-food restaurants is out of control, are opting instead to cook cheaper meals at home.
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According to a recent survey from LendingTree, roughly 78% of consumers view fast-food as a luxury. Another 62% of Americans said they eat less fast food due to high prices, and 56% said they choose to make food at home when they want an easy and cheap meal.
Related: McDonald’s makes a desperate move to win back fleeing customers
To be sure, the cost of eating out has jumped. It was up 7.5% in 2022, and it was still up 4.8% year-over-year, according to the October Consumer Price Index report.
And that's even as inflation overall has fallen below 3%.
Consumer resistance has contributed to McDonald’s facing declines in its sales and revenue all year, and it has been on a shaky road to recovery. During the third quarter of 2024, McDonald’s revealed that its U.S. comparable sales increased by a measly 0.3% year-over-year, while its net income only shrunk by 3%.
To make matters worse, the company faced an E.coli outbreak last month, which sickened more than 100 people, hospitalized 34, and even killed one person. As a result, McDonald’s sales and visits took an extra tumble.
McDonald's makes a major menu adjustment
Now, McDonald’s is making a bold move designed to attract consumers back into its restaurants, and it appears to be a response to recent complaints about high prices.
The company just unveiled its new “McValue” menu, which is set to go into effect on Jan. 7, 2025.
It contains the fast-food chain’s current $5 Meal Deal, which offers a meal that consists of a McChicken sandwich, four-piece chicken nuggets or a McDouble, along with fries and a drink for $5. The meal deal was expected to expire sometime during the late summer, but it was recently extended after analysts claimed that the deal was struggling to significantly boost traffic in restaurants shortly after it debuted.
The new McValue menu also includes a brand-new deal called “Buy One, Add One for $1,” where customers can buy a “full-priced” menu item from the McValue menu and add one more item of their choice for $1, according to a new press release.
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The McValue menu contains breakfast, lunch and dinner items such as hash browns, 6-pc. Chicken McNuggets, Sausage McMuffin, a double cheeseburger, etc.
"When it comes to value, we know there's no one-size-fits-all. We've worked closely with our franchisees to create a new platform that will let our customers define value on their own terms," said McDonald's USA President Joe Erlinger in the press release.
McDonald's responds to complaints about price increases
The move from McDonald’s comes after Erlinger said in an open letter in May that the average price of a McDonald’s menu item has increased by roughly 40% since 2019, hitting back at consumers who alleged that prices have been hiked up by over 100% during that time period.
“Recently, we have seen viral social posts and poorly sourced reports that McDonald’s has raised prices significantly beyond inflationary rates,” said Erlinger in the letter. “This is inaccurate.”
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According to a recent report from the Roosevelt Institute, the fast-food industry is notorious for charging prices that are higher than their marginal costs (an additional cost incurred to produce a good/service). The institute found that in 2023, McDonald’s raised its prices 85% above its marginal costs.
Amid the recent criticism, it appears that McDonald’s is letting consumers know it hears them loud and clear. During an earnings call last month, McDonald’s Chief Financial Officer Ian Borden said that the company will be heavily focusing on “value and affordability” going forward.
“I think certainly lower-income consumers and families are consumers that are under more acute kind of pressures,” said Borden. “I think on disposable income, obviously, two really important parts of our consumer base. I think for all of those reasons, that's why obviously we have such a heightened focus on value and affordability and making sure we get that right for the context we're in each and every one of our markets.”
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