McDonald’s $5 Meal Deal, launched June 25, was explicitly created to win back lapsed lower-income consumers, who overindex with the brand, following an uncharacteristic drop in same-store sales in the second quarter. Early signs pointed to a traffic bump from the promotion – in mid-July, Placer.ai data found that traffic at the chain turned positive by 3.1% the week after the launch. At the time, it was just one of three weeks this year that the chain generated more than a 3% traffic gain.
The deal was doing what it was intended to do, in other words, and so the chain extended it through August from its initial July 22 end date. New data from Placer.ai emailed to Nation’s Restaurant News this week shows the tailwind continued accordingly. Year-over-year visits were positive for McDonald’s during every week in July and through Aug. 19 with the exception of two weeks – July 1, down 1.8%, and July 8, which was flat. Those two weeks specifically lapped the chain’s viral Grimace Shake promotion in 2023.
Additionally, Evercore ISI noted this week that the chain’s sales trends have turned positive.
"As we look to 4Q, we believe that McDonald’s value menu and incremental product news with advertising investments will lead to continued market share gains. We believe McDonald’s system is more unified than it was just a few months ago with service metrics improving alongside marketing and value," analyst David Palmer said in a note.
That “incremental product news” includes McDonald’s Collector’s Meal launch Aug. 7, which helped yield another spike in traffic the ensuing week, to positive 3.3%.
The formula has also turned Jefferies analysts bullish on the chain, projecting its return to positive same-store sales by the fourth quarter.
"We think a greater focus on value (marketing) is starting to work more meaningfully and drive traffic sooner than expected," Jefferies wrote in a note this week. McDonald’s marketing prowess, the firm added, combined with value-oriented promotions and improvements in food quality and delivery, positions the company well in a competitive and promotional environment.
Indeed, the traction gained by McDonald’s $5 Meal Deal can’t be overstated given just how many players permeated (and continue to permeate) the value space this summer – an industrywide strategy to gain back traffic that has been eroding since late last year. This strategy has been adopted across segments by brands big and small. Yet, according to Numerator, 70% of McDonald’s customers said they ate at the chain in part because of the deal, while 58% said they visited McDonald’s over other quick-service chains because of the deal.
Still, plenty of those other chains also seem to be riding some promotional momentum. Burger King’s $5 “Your Way Meal” was launched in June, for instance, pulling the chain’s year-over-year traffic numbers from an average of negative 5.5% in January to flat-to-about 2% since its launch and through early August, Placer.ai data shows. The QSR segment overall turned from mostly negative in the beginning of the year to positive starting in June – when the value battle began to pick up – through mid-August, except for one week.
Sales patterns seem to be following the positive traffic patterns. QSR prices remain at a higher inflationary level than grocery prices, but they have begun to cool in the past few months and are now up around 4%. Spending at these restaurants, however, jumped by 6.1% in July versus July 2023, according to consumer purchase insights company Affinity Solutions, which tracks permissioned data from more than 140 million debit and credit cards.
“Consumers are embracing discount meals offered at fast food chains like McDonald’s and Wendy’s looking to win back customers. Based on these figures, it’s clear that meal deals help to bring in customers and drive more frequent spend. As inflation continues to ease, it will be interesting to see if these restaurants continue to offer discounted menus,” Affinity Solutions chief executive officer Jonathan Silver said in a statement.
Not just the big players
It’s important to note that major chains with deep pockets aren’t the only concepts that have jumped into the value battle to gain back customers. According to data from technology provider SpotOn, which works mostly with smaller concepts and independents, 3,250 combo menu items were recently added, peaking between July 28 and August 10.
Additionally:
- 210 buy-one-get-one menu items were added with a 90% increase from the week of August 4-10 to the week of August 11-17
- 180 deal menu items (items launched with the word "deal" in them) were added with an 80% increase from the week of August 4-10 to the week of August 11-17
- 115 bottomless menu items were added with a 30% increase from the week of August 4-10 to the week of August 11-17
- 32 all-you-can-eat menu items were added with a 30% increase from the week of August 4-10 to the week of August 11-17
- 26 unlimited menu items (which has been used to describe both food and drink offerings) were added, peaking the week of August 4-10
Coinciding with this “surge” is a bump in sales at small restaurants. Financial tech company Fiserv’s latest Small Business Index finds that small restaurants’ sales and traffic grew year-over-year in June. In August, small restaurants registered an even stronger uptick, with sales up 4.9% and foot traffic up 4.2%.
What do consumers want from a meal deal?
As the industry gains steady footing from such promotional activity, it’s likely some of this activity will linger awhile as consumers regain their confidence. In the meantime, Revenue Management Solutions surveyed consumers to understand what exactly they want from such promotions. For starters, generational preferences are different – older consumers prefer buy-one-get-one offers, while Gen Z consumers prefer combo offers, like McDonald’s and Burger King’s deals. That said, BOGO offers are the top choice among all demographics, and are especially popular among the 76% of consumers who believe prices have gotten too high.
Consumers who eat out frequently, as well as lower-income consumers (those who make $50,000 and below), favor promotions that offer variety and quantity, according to RMS. Notably, despite their growing popularity, app-exclusive meal deals are less popular than BOGO deals, $5 meals, mix-and-match two item deals, and value menus. The least popular promotion, according to consumers, are specific days dedicated to discounting, such as National Ice Cream Day or National Burger Day deals.
Contact Alicia Kelso at [email protected]
