McDonald’s $5 Value Meal in Trouble

By Douglas A. McIntyre Published May 22, 7:10AM EDT

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McDonald’s $5 Value Meal in Trouble — © Alst / Getty Images

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Fast-food businesses are trying to battle inflation and other hurdles.
McDonald’s Corp. (NYSE: MCD | MCD Price Prediction) franchisees fear the $5 value meal will undermine their margins.

Faced with a customer base that believes inflation has made its food too expensive, McDonald’s Corp. (NYSE: MCD) has announced a $5 value meal to offset the perception. The $5 menu includes a McChicken or McDouble, four-piece chicken nuggets, fries, and a drink. Just as the program launched, McDonald’s franchisees said it was too expensive for them to support it, which puts the program in jeopardy.

Who Pays the Price?

Franchisees feel the squeeze.

A large group of franchisees represented by the National Owners Association wrote in a letter to its membership, “The fact remains that in order to provide the consumer with more affordable options, they must be affordable for the owner/operators. McDonald’s vast resources and financial investment are essential to any sustainable affordable strategy.” In other words, these owners say that they do not want to make McDonald’s more successful using their bank accounts.

McDonald’s responded with a statement that is unlikely to quell the criticism: “We know how much it means to our customers when McDonald’s offers meaningful value and communicates it through national advertising. That’s been true since our very beginning and never more important than it is today.”

CNBC points out that franchisees had a usually profitable year in 2023. They clearly do not think that justifies a low-margin $5 meal plan that will undermine their margins.

McDonald’s Is Not Alone

Inflation hits businesses and their customers.

McDonald’s is in trouble, along with other fast-food businesses that have been hit by food and fuel inflation. Its stock is down 10% this year, while the S&P 500 is up 11%. Rival Starbucks Corp. (NASDAQ: SBUX) has done even worse. After weak earnings, its shares are down 19% this year. Each continues to wrestle with similar problems.

The company has additional hurdles even if McDonald’s can convince franchisees to support the $5 meal. The minimum wage is rising in many states. In California, it will be $20 an hour this year. This is another reason McDonald’s may have lower margins than in the past.

The $5 meal is a temporary solution.

The Price of a Big Mac in Every State

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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.