Fast-Food Giants Compete with $5 Meal Deals to Woo Inflation-Weary Customers

Fast-food chains are battling declining consumer demand by introducing value meals priced at $5 or less. McDonald's, Burger King, and Taco Bell have launched competitive deals to attract customers seeking affordable options amid rising inflation.

Value Meals Surge in Popularity as Fast-Food Chains Battle Declining Consumer Traffic and Rising Costs

Quick-service restaurants have expanded their selection of value meals priced at $7 or less to attract consumers weary of inflation. That is the most significant headline in the fast-food industry, with prices commencing at $1.99.

The value-deal battle is a response to the declining demand from consumers. The Wall Street Journal reported (via FranchiseWire), that guest traffic in the industry has decreased by 3.3% this year through June 16 compared to the same period in 2023, citing Black Box Intelligence. This decline is evident in various venues, including fast-food drive-through lanes and sit-down restaurants. The Journal article also stated that Circana, a market research specialist, reported that nearly 30% of fast-food orders included some form of promotion during the first quarter of this year. This represents a 3% increase from 2023.

McDonald's

McDonald's, the world's largest restaurant chain, commands focus with each action. According to USA Today, the $5 Meal Deal, implemented on June 25, allows consumers to select a McDouble or McChicken sandwich and a four-piece McNuggets selection, French fries, and beverages. According to Fox Business, McDonald's U.S. President Joe Erlinger stated that restaurants in specific locations, including Dallas, Denver, Kansas City, Las Vegas, and Phoenix, intend to extend the promotion beyond the planned one-month duration.

In May, Lisa W. Miller & Associates conducted a survey that revealed that over one-third of frequent fast-food patrons expressed interest in the brand's $5 meal offer. Erlinger recently disclosed to The Journal that sales experienced a steady increase on the first day of the promotion. Additionally, he stated that McDonald's and its franchisees were "satisfied with the profitability of the meal."

In April of this year, McDonald's made headlines in the fast-food industry, but not in a positive sense. The company's profits could not meet expectations due to consumers' resistance to price increases. The average Big Mac now costs $5.29, a 21% increase from 2019, and a 10-McNuggets entrée is now approximately $9.19, a 28% increase from 2019. In April, Fox Business reported that McDonald's CEO Chris Kempczinski stated, "consumers continue to be even more discriminating with every dollar that they spend … putting pressure on the QSR industry." A survey conducted by Lending Tree on May 20 lends credence to this assertion, as it revealed that 80% of consumers regard fast food as a luxury.

Burger King

According to NBC's Today program, Burger King launched its $5 Your Way Meal on June 13. Burger King disclosed to Bloomberg that it intended to commence its partnership in mid-June to surpass McDonald's. In an email to Today, a Burger King spokesperson jabbed at McDonald's, stating that "our priority at BK is to offer guests great value all year long—never just for a single month."

The special offers consumers the opportunity to choose from three sandwiches: the Whopper Jr., a Bacon Cheeseburger, or a Chicken Jr. Additionally, they will receive French fries, four chicken nuggets, and a soft drink. “Eat like a king who’s on a budget: three tasty options, fries, drink, and nuggets, all for five bucks. Wait, that can’t be right,” a TV commercial announces, following up with, “Just confirmed that that’s the real price.”

Taco Bell

Taco Bell entered the value-deal competition by introducing its Luxe Cravings Box on June 27. The combo entrée is priced at $7 and includes a medium drink, a double taco, chips, nacho cheese sauce, and the five-layer Chalupa Supreme beef burrito. According to San Diego's ABC affiliate, Taco Bell claims this represents a 55% reduction in the typical menu prices for those items.

Taylor Montgomery, Taco Bell North America's chief marketing officer, was quoted in the TV station's report as stating, “With the launch of the $7 Luxe Cravings Box, we’re giving consumers our most craveable items at an affordable price point… We believe consumers shouldn’t have to choose between affordability and abundance.”

Wendy’s Breakfast and Biggie Bags

Wendy's $3 brunch, introduced on May 20, is more than half the price of Taco Bell's. Consumers can select either a bacon-egg-cheese English muffin or a sausage-egg-cheese English muffin in addition to seasoned potatoes. Chief Financial Officer Gunther Plosch observed that the "consumer is still under pressure" and that visits from lower-income households are down, while traffic from higher earners is up. These are indications that consumers are monitoring their pennies.

Wendy's had competed with its $5 Biggie Bag until June 30. Diners who purchased $5 Biggie Bags (a Jr. Bacon Cheeseburger or Crispy Chicken Sandwich, which is served with nuggets, Jr. Hot and Crispy Fries, and a small soft drink) could receive a complimentary small Frosty when they utilized the Wendy's app, as reported by Fox Business.

Sonic and Jack in the Box

Sonic Drive-In is not about to be surpassed, even if Wendy's $3 breakfast sounds rock-bottom. On July 1, it made headlines in the fast-food industry by introducing its Fun.99 Menu, which features items priced at $1.99. Customers can choose from a quarter-pound double cheeseburger, chili-cheese hot dog, a small order of tater tots, and 16-ounce smoothies. The new Bacon Ranch Queso Wrap and Southwest Crunch Queso Wrap are also available.

Sonic's chief marketing officer, Ryan Dickerson, told Fox Business that Sonic's agreement prioritizes diversity. “Many restaurant brands are touting value meals and discounts, and you see a lot of recycled ideas with limited options,” said Dickerson, pleased that Sonic customers don’t “have to settle for the same old, tired discounts or boring meals.”

On May 29, Jack in the Box made headlines in the fast-food industry by introducing its all-day Munchies. These items are priced at $4 or less: Chicken Nuggets, French Toast Sticks, Jr. Bacon Cheeseburger, Jr. Cheeseburger, Jr. Chicken Sandwich, Jr. Jumbo Jack, Tiny Tacos, Sourdough Grilled Cheese, Two Tacos, Value Drink, Value Curly Fries, and Value French Fries.

Other Restaurants

The Wall Street Journal reported that even non-QSR restaurants participate in the meal-deal trend. Denny's "diner deals" commence at $5.99, for example. Denny's CEO, Kelli Valade, told the newspaper last week, “You have to meet them [customers] where they are.” Applebee's, Chili's, and Buffalo Wild Wings are among the casual brands recently implementing promotions.

Nevertheless, The Journal reports that specific competitors are remaining steadfast. For instance, Darden Restaurants, which operates Olive Garden and LongHorn Steakhouse, does not offer specials and instead emphasizes that its current prices are a substantial value. In a recent earnings call, CEO Rick Cardenas stated, “We’re not going to do things to buy sales even with the increasing discounting our competitors are doing.”

Is the Value-Deal Battle Likely to Persist?

Is the value-deal battle sure to attract customers for good? Mani Kulasooriya, the CEO and co-founder of Cut+Dry, a food-service e-commerce ordering platform, is pessimistic. Fox Business quoted him as stating that "Fast-food wars will center on $5 deals, but as restaurants go head-to-head, it will take more to restore customer loyalty." Kulasooriya cautioned that the $5 excitement would not endure if restaurants could not maintain quality while promoting quantity. In reality, the chatter may impede customer retention once the prices have stabilized. Additionally, he anticipated that "winning brands will prioritize menu innovation."

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