McDonald’s looks to $5 meal in effort to lure back frugal customers

McDonald’s (MCD) is switching up its game plan in its battle for price-conscious customers. The fast-food chain is reportedly considering adding a $5 menu, to lure back customers who are tightening their spending budgets on fast-food amid a slew of price increases, according to a new report from CBS News.

The new menu is expected to consist of a McChicken, four-piece chicken nuggets or a McDouble, along with fries and a drink, according to a source who spoke to CBS News.

The move from McDonald’s comes after it revealed that it observed “flat to declining” traffic in its stores during the first quarter of 2024.

“As I reflect on the first quarter of the year it is clear that broad based consumer pressures persist around the world,” said McDonald’s CEO Chris Kempczinski during an earnings call on April 30. “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day to day spending which is putting pressure on the QSR industry. It is worth noting that in Q1, industry traffic was flat to declining in the U.S., Australia, Canada, Germany, Japan, and the UK. And across almost all major markets industry traffic is slowing.”

McDonald’s has reportedly increased its menu prices by 100% since 2014, which is more than three times the national rate of inflation, according to a recent study from FinanceBuzz. For example, the study found that McDonald’s McDouble sandwich was $1.19 in 2014, now, in 2024, the sandwich sells for around $3.19, which translates to an increase of 168%. Medium fries at the restaurant were also priced at $1.59 in 2014, this year it is sold at roughly $3.79.

McDonald’s had the highest price hikes between 2014 and 2024 compared to other fast-food restaurant chains such as Popeyes, which increased its prices by 86% during that time period. Taco Bell was ranked as No. 3 in the study with a 81% price increase, and Chipotle was No. 4 at 75%.

Many customers have even taken to TikTok to denounce McDonald’s soaring prices, claiming that the fast-food chain is losing its affordability.

McDonald’s revealed in its first-quarter earnings report for 2024 that its U.S. comparable sales increased by 2.5%, a decline it claims was mostly driven by “strategic menu price increases.” Its total revenues also increased by 5% year-over-year, bringing in around $6.1 billion during the first quarter.

McDonald’s isn’t the only fast-food chain that has flagged a softening in consumer spending in its stores. Yum Brands (YUM) , which owns restaurants such as KFC, Taco Bell and Pizza Hut, reported a 3% year-over-year decline in total revenues during the first quarter of 2024.

“As we communicated on our last call, we expected the first quarter to be our most challenged from a same-store sales perspective due to prior-year laps, a return to a more normal inflationary environment, and discrete consumer demand pressures, including markets impacted by the Middle East conflict,” said Yum Brands Chief Financial Officer Chris Turner during an earning call on May 1.

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