McDonald's Franchisees Divided Over $5 Meal Deal Extension

McDonald’s franchisees are divided over the benefits of the $5 Meal Deal, though most support extending it for another month, according to recent analyst surveys.

Although the $5 Meal Deal was initially set to run through late June and July, many U.S. McDonald’s locations will continue offering it through August, Nation’s Restaurant News reported. The deal, which launched on June 25, includes a choice of a McDouble burger or McChicken sandwich, small fries, four-piece Chicken McNuggets and a small soft drink.

Ahead of McDonald's earnings report on Monday, July 29, analysts surveyed franchisees to gauge their reactions to the Meal Deal. Mark Kalinowski, CEO of Kalinowski Equity Research, reported that franchisees estimate a 1.3% average sales increase due to the Meal Deal, with responses ranging from 0% to 3%. This suggests that the Meal Deal might help retain customers rather than significantly boost sales.

Peter Saleh of global financial services firm BTIG highlighted mixed results, noting that while the deal is driving transactions, it has led to greater trade-downs and fewer additional visits than expected. The performance varied geographically, with stronger sales in urban areas catering to lower-income demographics.

Some operators reported selling over 200 units per day, double the projection, with 20-25% of transactions including the $5 Meal. However, the use of a 20% digital coupon is impacting margins.

“While we appreciate the need to encourage app adoption, we believe this double-dipping will likely be eliminated at some point in the future as franchisees look to extend this promotion into the fall or even until year-end,” said Saleh.