May 30, 2024


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McDonald’s has high hopes that a $5 meal deal will help it bring back price-cautious consumers – and one analyst says it could, so long as it’s done correctly.

“If the messaging is good, then I think McDonald’s has diagnosed the problem correctly, which is that they need increased visibility around the value that they offer,” said Sara Senatore, Bank of America’s senior analyst for restaurants. And it could be wise to focus on national advertising, rather than taking a local level approach, she added.

A promotion like this will require that the fast-food chain’s franchisees get on board, and that could be easier said than done. An estimated 93% of U.S.-based McDonald’s are operated by a franchisee. In the past, the chain has failed to get the support of its franchisees for similar promotions, in part because some owners worry they’ll lose money. In states like California, concerns around costs are more pronounced in part because of a new state law that raised the minimum wage for fast food workers to $20 an hour.

Even so, McDonald’s, which boasts over 14,000 locations in the U.S. alone, is likely to make the case to franchisees that they will gain more in volume than they will lose in their margins and thereby increase their profits, Senatore said.

McDonald’s CEO Chris Kempczinski is well aware that the chain needs a more defined advertising strategy. Last month, Kempczinski told analysts during the company’s first quarter earnings call that, “what we don’t have in the U.S. right now is a national value platform at the same time that our competitors are out there with the national value platform.”

“What you don’t want to do is lose customers because they don’t think that you have competitive value on the menu,” Senatore said.

Price point value matters, and so does advertising. Kempczinski said that what the chain needs to do is get better aligned around a strong national value plan that it can use “to drive high consumer awareness on it.”

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