McDonald’s is planning more of these favorite discount deals in a bid to claw back customers after backlash over price rises

McDonald’s is reviewing its prices as the world’s largest fast-food chain faces customer protests over high costs and falling sales.

During a meeting with investors on Monday, CEO Chris Kempczinski confirmed that a “comprehensive overhaul” is underway to lure customers back.

During the meeting it was announced that McDonald’s sales fell for the first time in four years.

Kempczinski raised the possibility of reintroducing the $5 Happy Meal to “change perceptions.”

At the meeting, bosses pointed to the successes of discounts in markets other than the US, such as Germany, where discounts were given on Big Macs and Chicken Nuggets during the festive season, and in the UK, the successful ‘3 for 3’ promotion.

The latter option allows consumers to choose from three items for £3, which is equivalent to $3.85.

Meanwhile, the company is also busy launching its latest permanent item: the Big Arch.

A promotional photo of McDonald’s new epic burger, aptly titled Big Arch

“Consumers continue to recognize us as the value leader relative to our key competitors, and it’s clear that our value leadership gap has narrowed recently,” Chris Kempczinski, McDonald’s chairman, president and CEO, said Monday during a conference call with investors. “We’re working to address that as a matter of urgency.”

Sales at locations open for at least a year fell 1 percent in the April-June period, the first decline since the final quarter of 2020, when the pandemic forced stores to close and millions of people to stay home.

In the U.S., same-store sales fell nearly 1 percent. McDonald’s saw fewer customers but said those who came spent more because of price increases.

Kempczinski defended the higher menu prices, saying paper, food and labor costs have risen by as much as 40 percent in some markets in recent years.

It’s a problem that goes beyond the Chicago burger giant. According to Circana, a market research firm, customer traffic at U.S. fast-food restaurants fell 2 percent in the first half of the year compared with the same period a year ago.

David Portalatin, a food industry consultant at Circana, expects high inflation and rising consumer debt to continue to have a negative impact on traffic in the second half of 2024.

McDonald’s also reported fewer store visitors in France and the Middle East, where people are boycotting the chain over concerns it supports Israel in the war in Gaza.

Kempczinski says weak consumer confidence in China is causing customers to flee to cheaper competitors.

McDonald’s warned in April that more of its inflation-weary customers were seeking better value and affordability. The company introduced a $5 meal deal at U.S. restaurants on June 25, late in the financial reporting period.

McDonald’s restaurant signs are shown in East Palestine, Ohio, February 9, 2023. McDonald’s reports earnings on Monday, July 29, 2024

McDonald’s U.S. President Joe Erlinger said Monday that sales of $5 meal deals are exceeding expectations and are drawing lower-income consumers back to McDonald’s stores.

According to Erlinger, 93 percent of McDonald’s franchisees have agreed to extend the promotion through August.

Other countries, such as Germany and the United Kingdom, are also seeing success with meal deals, the company said. But Kempczinski said McDonald’s needs to offer broader value and reinforce that message with better marketing.

“It is not enough to hit the consumer with one or a few items in the context we are in,” he said.

New menu items are also in the works. The company is testing its value-oriented Big Arch double burger in three international markets through the end of the year, Kempczinski said.

The burger consists of crispy, sliced ​​fresh onions, three slices of white processed cheese, pickles and lettuce – and a brand new Big Arch sauce.

Second-quarter revenue was flat at $6.5 billion, according to analysts polled by FactSet, just below the $6.6 billion Wall Street had expected.

The company’s net income fell 12 percent to $2 billion, or $2.80 per share. Excluding one-time items such as restructuring costs, McDonald’s earned $2.97 per share. That was far short of the $3.07 per share earnings that industry analysts had forecast.

Investors seemed pleased with McDonald’s plans to reverse its decline. McDonald’s shares rose 4% in trading Monday morning.