Over the past several years, the prices at fast food restaurants in America have increased significantly. Some blame inflation, while others say it’s just corporate greed, but either way, Americans are extremely frustrated.
Millions of Americans have either cut back or completely stopped eating at restaurants like McDonald’s because it’s simply not worth the money anymore. Now, McDonald’s has decided that in order to keep its customers, it will offer an entire meal for only $5, and franchise owners are not happy.
Millions of Americans Can No Longer Afford Fast Food
It’s no secret that the cost of living in the United States has skyrocketed and is truly almost unbearable. Millions of Americans are struggling to pay their bills, let alone purchase anything that might be considered superfluous.
Historically, fast food has been a fantastic option for Americans on a budget. But now that a burger and fries can cost anywhere from $8 to $18, most say it’s simply not worth it. In fact, according to one survey, “80% of Americans now consider fast food a luxury.”
McDonald’s Is Still Making Billions Every Year
With 13,529 restaurants in the United States, McDonald’s is the largest fast food chain in the country. Therefore, it truly takes a monumental change for the company to report a decrease in sales.
But McDonald’s sales aren’t even stagnant; they are still increasing even as millions of Americans cut back on fast food. The company reported more than $6 billion in revenue for the first quarter of 2024, which is a 2% increase from the previous quarter and a 4% increase from the year before.
McDonald’s Wants to Make Even More Money
However, corporations like McDonald’s don’t rest just because their sales are up. To ensure Americans continue eating at McDonald’s, the company decided to release a brand new promotion: the $5 Fan Deal.
The $5 meal includes either a Double Cheeseburger or a McChicken, a small fry, a four-piece chicken nugget box, and a small soft drink. As most McDonald’s restaurants are currently charging at least 30% more for these same products, it’s certainly quite a deal for customers.
McDonald’s Franchises Are Outraged by the Promotion
Although McDonald’s customers are thrilled with the new offering, its franchise owners are far less excited. Essentially, they will have to offer this extreme discount, even though the costs to run their businesses remain the same.
Many fast food owners argue that between the increased cost of rent, labor, and ingredients, they simply cannot lower their prices and still make money.
The National Owners Association Has Written a Letter Complaining About the Promotion
The board of the National Owners Association wrote a letter to its members shortly after McDonald’s announced the new deal.
The letter explains, “The fact remains that in order to provide the consumer with more affordable options, they must be affordable for the owner/operators… There simply is not enough profit to discount 30% for this model to be sustainable.”
McDonald’s Franchisees Say They Need Financial Contribution From McDonald’s
The letter goes on to say, “McDonald’s vast resources and financial investment are essential to any sustainable, affordable strategy…[the $5 deal] necessitates a financial contribution by McDonald’s.”
In other words, if McDonald’s wants the majority of its restaurants to offer the $5 meal deal, they will have to supplement the discount so individual stores don’t lose money with the sale.
McDonald’s Is Outsourcing This Funding
Even though McDonald’s made $25.49 billion in revenue last year, it seems that the giant corporation does not plan to subsidize the $5 meal deal with its own earnings.
Instead, Coca-Cola will provide a large portion of the funding for this promotion. According to the Wall Street Journal, Coca-Cola will give McDonald’s $4.6 million to distribute among franchisers to ease the financial loss of the $5 deal.
McDonald’s and Coca-Cola Have Always Worked Hand-in-Hand
McDonald’s restaurants exclusively sold Coca-Cola products from 1955 to 2007. At that time, some locations began working with Pepsi instead, but the vast majority still only offer Coke products.
Both companies are two of the largest and most profitable in the world, and their partnership has undoubtedly helped both succeed over the past century. To Coca-Cola, $4.6 million is pocket change, and clearly, the company believes it’s worth funding the meal deal to keep McDonald’s America’s favorite fast food restaurant.
The $5 Meal Deal Is the First National Promotion in Decades
McDonald’s $5 Fan Deal is making headlines not just because of its incredibly low price point or even the controversy it’s causing among franchises but also because it is the first national promotion in decades.
After the turn of the century, McDonald’s stopped putting price tags on its promotions as each franchise location set its own prices based on its costs.
McDonald’s Absolutely Can Lower Its Prices
Additionally, this story is turning heads because, for years, fast food chains have claimed that they simply couldn’t lower prices and continue to make a profit. But this deal proves that is simply untrue.
Maybe a McDonald’s McChicken will never cost $1 again as it did in the early 2000s, but it doesn’t need to be $4.29 like it is now. McDonald’s, as well as its many partnerships like Coca-Cola could afford to lower prices and still make tens of billions of dollars every year.
Will McDonald’s Lower Its Prices in 2024?
McDonald’s has announced that, in addition to the new $5 Fan Deal, it also plans to lower prices across the board in 2024. In a recent earnings call, McDonald’s CEO Chris Kempczinski said that the company will be “laser-focused on affordability” this year.
Hopefully, the decision to lower prices will be a win-win for both Americans and the McDonald’s corporation. However, if they do not assist franchisers with this decision, those small business owners will be the ones who pay.
