McDonald’s (MCD) is hoping for a fresh start in 2025 following a year in which its stock underperformed under the weight of lackluster sales and an E. coli outbreak.
Enter its new national value platform, McValue, for some course correction.
It includes a $5 meal deal that launched last June, which led to a slight boost in foot traffic but was later disrupted by the E. coli outbreak that began in October. It also has a buy one, add one for $1 option. Lastly, there will be local deals and in-app exclusives (see image below).
All US locations will begin offering the McValue platform starting Tuesday, Jan. 7.
The launch day has been months in the making, McDonaldâs owner and operator John Palmaccio told Yahoo Finance. He serves as the Operatorâs National Advertising Fund Chair and owns 30 McDonald’s in South Carolina and Georgia.
“We took the time to get it right, working closely with the company to review consumer and deal performance data and make sure the McValue business case was solid,â Palmaccio said.
In the company’s first quarter earnings in April 2024, McDonald’s CEO Chris Kempczinski shared the need for a united, national platform across all US franchisees. In that quarter, US same-store sales grew 2.5%, missing the 2.55% that Wall Street expected.
All fast food players were “out there with a value message” in the US, Kempczinski said, eroding McDonald’s position in the market. The chain did not have a national value menu while competitors had one, he added.
McDonald’s US sales remained under pressure throughout the year as cash-strapped consumers shopped for lower prices and value. In its latest quarter, same-store sales grew 0.3% year over year in the US.
Wedbush analyst Nick Setyan expects the value platform to not be a “big profit driver” but a “big transaction driver.” Customers may trade up to other parts of the menu, add more to their meals, or come back more frequently.
Even 2% same-store sales growth would be “good enough” in this competitive value environment, Setyan said.
This will be the first national value platform since January 2018 when McDonald’s launched the $1 $2 $3 Dollar Menu.
Bernstein analyst Danilo Gargiulo called the 2018 offering “too complex” and “complicated.” A franchise owner who posts on X as McFranchisee shared a similar tone, calling the old value menu “a bit ambiguous to the customer.”
But McDonald’s has a long history of value offerings; this is the fourth official national value platform in recent history.
One of the most known of this generation â the Dollar Menu â launched in October 2002. The company initially said the “Dollar Menu introduction in the fourth quarter did not meet initial sales expectations” in the US and would evaluate it, per the fiscal 2002 results release.
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But in November 2003, US same-store sales grew 10.2% year over year as McDonald’s focused on value and launched the “i’m lovin’ it” brand campaign that September.
For the full fiscal year 2003, McDonald’s systemwide sales, which include all restaurants and franchisees, increased 9% year over year, up from 1% the year prior. US same-store sales for the year also jumped 6.4%, compared to a 1.5% decline from the previous year.
The coveted Dollar Menu stuck around for a decade until it was rebranded to Dollar & More with price points of $1, $2, and $5. At the time of the switch, the Dollar Menu brought in 13% to 15% of all sales.
Then-CEO Donald Thompson told investors on an earnings call it saw a “need to have a $2 price point for some products that are a slight trade-up from just $1-based price points.”
He added that the increase in price “also supports additional margin growth in the restaurants and … gives customers a value ladder of sorts, so that based upon their discretionary spending, they have multiple offers at McDonald’s.”
Now, the company is looking to retake its mantle as a leader in value. For fiscal 2024, McDonald’s revenue is expected to come in at roughly $26 billion, alongside net income of $8.3 billion, per Bloomberg consensus estimates.
Compared to the previous value platform offerings, Gargiulo thinks the McValue menu allows franchisees to have some control.
For example, they can “set the price for the first item” for the buy one, get one for $1 deal.
“Franchisees … will have regional pricing differences,” Gargiulo said. “It’s a little bit more sustainable compared to the original vision of the dollar menu that was particularly hated by franchises.”
He added that over time, the core meal deal could be customized or modified, such as by changing what is included in the deal or lifting the price point of $5.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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