McDonald’s (NYSE MCD | MCD Price Prediction) will offer a $3 meal, according to an exclusive report in The Wall Street Journal. In 2024, McDonald’s started its discount program with a $5 meal.
McDonald’s Chris Kempczinski recently said, “We absolutely are going to make sure that we are protecting our leadership position in value.” What is not clear is what it does to McDonald’s profits. It is good to have customers–if you can make money on them. In McDonald’s case, the answer is “yes,” we can make money, which may give it an advantage in a cutthroat market.
McDonald’s is up against chicken joints, pizza joints, and local food stores. The American “eat out and not at home” market is fractured as it tries to get millions of customers a day.
Because McDonald’s has a good margin, it can afford a price war.
In the most recently reported quarter, McDonald’s revenue rose 10% to $7 billion. Its net income rose 7% to $2.2 billion. This margin is driven by its franchise model. McDonald’s collects fees from franchises and has almost no operating expenses against those fees. The franchises do not do as well as the parent company. It is estimated that their margins are about 15%. The low-priced meals are not a spectacular deal for them.
The “affordability” crisis is among the things Americans say they worry about day and night. According to the Urban Institute, “Urban research finds 52 percent of people in American families don’t have the resources to cover what it really costs to live securely in their community.”
If the Middle East war lasts several weeks, gas could hit $5. If it goes on for several months, the sky is the limit. The $3 meal is going to become increasingly attractive.
Top Gaining Stocks
Top Losing Stocks