Burger King’s New $5 Meal

By Douglas A. McIntyre Published May 25, 7:36AM EDT

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Burger King’s New $5 Meal — © krblokhin / iStock Editorial via Getty Images

It is how direct competition works between rivals when they try to take market share from one another. McDonald’s (NYSE: MCD | MCD Price Prediction) started offering $5 meals. Within a few days, the much smaller Burger King did the same as it launched its “Have It Your Way” meals.

The McDonald’s deal will start on June 25 and last a month. It caused friction with franchisees who did not want to bear the burden of lower margins. Some said McDonald’s should have supported the decision financially. The protest did not seem to go anywhere.

The two fast food chains offer a “complete meal.” That means a sandwich, drink, and fries. People do not need to order anything extra. It may be one attraction of the plans to consumers.

Why the price cuts? The core reason is that consumers think fast food prices have gotten too high. McDonald’s said as much when it announced mediocre earnings. At the time, CEO Chris Kempczinski commented, “Consumers continue to be even more discriminated against with every dollar that they spend as they face elevated prices in their day-to-day spending, which is putting pressure on the [quick-service restaurant] industry.”

Food prices are among the most damaging and enduring aspects of the inflation that started two years ago. The Federal Reserve of St. Louis reports that food prices have risen 50% since the start of the COVID-19 pandemic. Americans are looking for ways to save on fast food consumption and grocery purchases. Target (TGT), Walmart (NYSE: WMT), and Amazon (NASDAQ: AMZN) have recently cut grocery prices to attract or keep customers. Amazon has just cut grocery prices.

What happens next? Burger King and McDonald’s will need to decide whether the drop in margins attracts enough customers. If so, the $5 meal may stay around.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.