McDonald’s plans to launch a $5 meal in the United States, which should allow the hamburger chain to once again attract more thrifty consumers.
The offer could include a McChicken or McDouble, fries and a drink, according to a source familiar with the matter who spoke on condition of anonymity. During the company’s first-quarter earnings conference call, Chief Executive Chris Kempczinski said McDonald’s needs to focus on the affordability of its products as consumers become increasingly price-conscious. The company’s results were lower than expected.
“What we don’t have in the United States right now is a valuable national platform,” Mr. Kempczinski said, prompting questions from analysts about what a such offer could imply.
At McDonald’s, franchisees contribute to an advertising fund and participate in major marketing campaigns, including promotions such as the Grimace Shake, which is all the rage.
An initial attempt to get operators — who run about 95% of U.S. stores — to support the $5 meal initiative failed earlier this year, this person said.
Some operators feared losing money with the roughly four-week promotion, especially in states like California, where the minimum wage for fast-food workers rose 25 percent to $20. time at the beginning of the year.
McDonald’s said franchisee cash flow has increased about 50% since 2018 and is still rising, although an independent group representing operators has raised concerns about labor costs and investments to refresh stores.
To sweeten the deal, McDonald’s tapped Coca-Cola Co’s cash that could help cushion a potential hit to franchisees’ profitability, a source familiar with the matter said. McDonald’s did not wish to provide any further details other than those provided by Mr. Kempczinski.
John Palmaccio, president of the Operators Advertising Fund, told Bloomberg News that the company, franchisees and suppliers are coming together to deliver “great value and affordability” now that “our customers really need it.”
Catch up
After years of good results in terms of sales and attendance, McDonald’s is now facing a decline among low-income consumers, who represent a significant part of its customer base.
Mr. Kempczinski lamented during the latest earnings conference call that the company offers local deals and bundles rather than national promotions, as some competitors do. The Burger King from Restaurant Brands International Inc. for example, is offering a $5 duo for a limited time, and Wendy’s Co is offering a $3 breakfast for two.
“McDonald’s sales have been so strong over the last few years that they didn’t really need it,” said Mark Kalinowski, CEO of Kalinowski Equity Research, which focuses on restaurants. “Now that the consumer has shown through their actions that they demand more value than six months ago, McDonald’s is moving with the times.”
With the collaboration of Brett Pulley