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McDonald's Admits Consumers Are Broke With Planned Reintroduction Of $5 Meal Deal

Tyler Durden's Photo
by Tyler Durden
Saturday, May 11, 2024 - 05:50 PM

 Gen-Zers, millennials, and baby boomers have something in common: Many of them can no longer afford a Big Mac combo meal at McDonald's following three years of 'McFlation,' which has sent the price of some combo meals as high as $18. 

The primary appeal of fast-food burgers (even though the food is terrible for your health) is cheap and fast. However, 3.5 years of disastrous Bidenomics (enabled by Fed chair Powell) has sparked an inflation shitstorm that continues to spread through the economy like stage-four cancer, with low-consumers under severe pressure - this was even acknowledged by McDonald's in its latest earnings report.

Now, McDonald's could re-launch $5 combo meal deals, according to Bloomberg, citing a person familiar with the upcoming promotion. This could include a McChicken or a McDouble, fries, and a drink. 

The potential new offering comes as Goldman analysts warned that low-income consumers are in rough shape and pulling back spending amid mounting stagflation threats. 

"With >75% of the US consumer universe having reported Q1 results, we see indications that the US consumer is proving more stretched than previously anticipated as inflation combined with a bit of softening in the macro (lower payrolls & an uptick in unemployment in April), elevated gas prices & high interest rates continue to eat into spending power & consumer confidence," Goldman analysts headed by Bonnie Herzog wrote in a note to clients on Thursday. 

Herzog's commentary on McDonald's earnings report is a very ominous sign about the faltering economy: 

  • McDonald's (MCD, CS) - US QSR industry comparable traffic was negative in Q1 and mgmt expects it to remain negative for the full year. Separately, mgmt noted that while the pressure may be more pronounced on the low-income consumer, all income cohorts are seeking value.

McDonald's CEO Chris Kempczinski said on the company's earnings call on April 30 that he's "laser-focused" on bringing back affordability for low-income consumers. 

Here's how meal deal will work, according to Bloomberg's source:

At McDonald's, franchisees pay into an advertising fund and get to weigh in on major marketing campaigns, including promotions such as the viral Grimace Shake. A prior attempt to get operators — who run about 95% of US stores — to endorse the $5 meal initiative failed earlier this year, the person said. Some operators were concerned about losing money on the roughly four-week promotion, particularly in states such as California, where the minimum wage for fast-food workers jumped 25% to $20 an hour earlier this year. McDonald's has said that franchisee cash flows are up about 50% since 2018 and are still on the rise, though an independent group representing operators has raised concerns about the cost of labor and investments to freshen up stores.

To sweeten the deal, McDonald's enlisted money from Coca- Cola Co. that could help cushion a potential profitability hit for franchisees, the person familiar said. The size of the beverage company's contribution hasn't been decided, and the burger chain wasn't expected to put up funds. Coca-Cola, which often contributes to customers' marketing programs, declined to comment.

The big takeaway is that McDonald's $5 meal deal is a direct response to Bidenomics' failure, which has sent many low-income consumers into a dangerous financial mess of insurmountable credit card debt and drained personal savings. 

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