McDonald's (DCM) is changing course at a time when an alarming consumer trend is hurting its pockets.
A growing number of consumers, convinced that inflation at fast-food restaurants is out of control, are opting to cook cheaper meals at home.
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According to a recent survey According to LendingTree, approximately 78% of consumers view fast food as a luxury. Another 62% of Americans said they eat less fast food because of high prices, and 56% said they choose to prepare food at home when they want an easy, cheap meal.
Related: McDonald's makes desperate move to win back fleeing customers
Without a doubt, the cost of eating out has skyrocketed. It is up 7.5% in 2022 and is still up 4.8% year over year, according to the October Consumer Price Index report.
And that's even when headline inflation has fallen below 3%.
Consumer resistance has contributed to McDonald's facing declines in sales and revenue throughout the year, and it has been on a shaky path to recovery. During the third quarter of 2024, McDonald's revealed that its US comparable sales increased a measly 0.3% year over year, while its net income only decreased 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 suffered a further decline.
McDonald's makes a major adjustment to its menu
Now, McDonald's is taking a bold move designed to lure consumers back to its restaurants, and it appears to be a response to recent complaints about high prices.
The company has just introduced its new “McValue” menu, which will go into effect on January 7, 2025.
It contains the fast food chain's current $5 meal deal, which offers a meal consisting of a McChicken sandwich, four-piece chicken nuggets, or a McDouble, along with fries and a drink for $5. The dining deal was expected to expire sometime in late summer, but was recently extended after analysts claimed the deal was struggling to significantly increase restaurant traffic shortly after its debut.
The new McValue menu also includes a new offer called “Buy one, add one for $1,” where customers can purchase one menu item at “full price” 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 items for breakfast, lunch and dinner, such as hash browns, 6 pieces. Chicken McNuggets, Sausage McMuffin, Double Cheeseburger, etc.
“When it comes to value, we know there is no one-size-fits-all solution. We have worked closely with our franchisees to create a new platform that will allow our customers to define value on their own terms,” said Joe, president of McDonald's USA. .U.S. Erlinger in the press release.
McDonald's responds to complaints about price increases
McDonald's move comes after Erlinger said in an open statement letter in May that the average price of a McDonald's menu item has increased about 40% since 2019, responding to consumers who alleged that prices had increased more than 100% during that period.
“Recently, we have seen viral social posts and poorly sourced reports that McDonald's has increased prices significantly beyond inflationary rates,” Erlinger said in the letter. “This is inaccurate.”
Related: McDonald's Pulls Beloved Menu Items Over Major Issue
According to a recent report According to the Roosevelt Institute, the fast food industry is known for charging prices higher than its 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 recent criticism, it appears 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 the company will focus heavily on “value and affordability” going forward.
“I think certainly low-income consumers and families are consumers that are under more acute pressures,” Borden said. “I think about disposable income, obviously, two really important parts of our consumer base. “I think for all of those reasons, that's why we obviously have a greater focus on value and affordability and making sure that we get it right for the context that we're in in each and every one of our markets.”
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