McDonald's Prolongs $5 Meal Deal to December Reflecting Struggles of Core Customers

McDonald's has decided to extend its $5 meal deal, which was initially a summer promotion launched in June, until December across all US locations. This decision reflects the fast-food giant's recognition that its main customers are finding it difficult to afford Big Macs amidst rising inflation and high interest rates, a consequence of unsuccessful Bidenomics. Current data indicates that a large number of low- and middle-income consumers are grappling with a financially destructive blend of overwhelming debts and depleted personal savings.

Fast-Food Chains Engage in Value Wars

Fast-food chains are intensifying their value wars, with McDonald's launching the $5 meal deal in June. This deal allowed customers to choose from a McDouble or McChicken sandwich or 4-piece Chicken McNuggets, a small fry, and a small soft drink. The promotion is now set to continue until December. Joe Erlinger, President of McDonald's USA, said in a statement, "Together with our franchisees, we're committed to keeping our prices as affordable as possible, which is why we're doubling down with even more ways to save." He added, "The extension of the $5 Meal Deal, and the other offerings we're announcing for our fall line-up, are just a few of the ways we're working hard to offer great meals at a fair price."

Fast-Food Chains Acknowledge Consumer Financial Struggles

The introduction of meal deals by fast-food companies early this summer indicates that low/mid-tier consumers have reached a financial impasse, as perceived by management teams. The burden of inflation and high interest rates has resulted in a reduction in consumer spending. Even Dollar Tree and Dollar General have recently expressed concerns about increasing consumer pressures. The most recent consumer data reveals that individuals have maxed out their credit cards and reduced their personal savings to a record low. This is a worrying sign as storm clouds loom overhead. In the meantime, auto delinquencies have skyrocketed this summer as some consumers with those $1,000 monthly payments, likely overwhelmed by negative equity, are forced to choose between paying bills or buying food. Earlier this week, Goldman referenced new high-frequency data that examined foot traffic at brick-and-mortar stores, which only indicated 'thrift trends outperforming.' The recurring theme in the second half of this year is that low/mid-tier consumers are experiencing significant pressure as the labor market slows and economic momentum trends in the wrong direction.

Bottom Line

McDonald's decision to extend its $5 meal deal is a clear indication of the financial struggles faced by its core customers. The ongoing value wars among fast-food chains and the rising consumer pressures are a reflection of the broader economic challenges. As the labor market cools and economic momentum trends downwards, it's clear that low to mid-tier consumers are under significant pressure. What are your thoughts on this matter? Feel free to share this article with your friends and discuss. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.