McDonald’s is gearing up to win back its core budget-conscious customers by supercharging its value menu with new, wallet-friendly options, a move it hopes will reinvigorate foot traffic among lower-income diners.
Starting next year, the fast-food giant plans to introduce a “more holistic U.S. value platform,” aiming to emphasize affordability and convenience at a time when consumers have been tightening their belts.
For over a year, traffic has dipped in the quick-service restaurant sector, and McDonald’s is feeling the pinch. Bank of America’s senior restaurant analyst, Sara Senatore, explains that McDonald’s reliance on lower-income customers has left it particularly vulnerable to shifts in consumer spending.
The solution, she suggests, is to make a more aggressive value play, offering deals that help bring back customers who have been opting to eat at home.
This focus on value was underscored in McDonald’s recent third-quarter earnings call. CEO Chris Kempczinski acknowledged the tough climate, with the chain facing slowing traffic for two quarters in a row. He noted that while McDonald’s is seen as the go-to option for affordability, its “value leadership gap has shrunk,” a clear signal for McDonald’s to step up its offerings.
Kempczinski confirmed that McDonald’s is working closely with its franchisees to enhance value in major markets, providing a strong incentive for customers to come back.
McDonald’s has already started expanding its value offerings, and if analyst predictions hold true, the chain’s new menu strategy could include items priced as low as $1, budget-friendly meal bundles, and perhaps a breakfast option that keeps things cheap.
The popular $5 meal deal has already proven effective in drawing customers back, especially lower-income diners. McDonald’s CFO Ian Borden pointed out that this offer successfully grew traffic among this demographic for the first time in over a year, and as a result, the deal is now extended through December.
The shift toward value-focused offerings hasn’t been without challenges. McDonald’s also reported margin pressure in its latest quarter, driven largely by the expanded value push. While inflation is expected to remain modest, Bank of America anticipates that McDonald’s might continue to see some pressure on its margins if this strategy continues.
Yet for the company, investing in value seems like a necessary move, especially if it means recapturing its base and staying competitive in a challenging environment.
