McDonald’s bet on value meal deals appears to be working.
On Wednesday, the fast-food giant said sales at U.S. stores open for a year or more were up 6.8 percent in the fourth quarter from year-earlier levels. Overall, global same-store sales rose 5.7 percent in the quarter.
The company introduced a couple of high-profile promotions in the quarter, including the return of its popular Monopoly game and a limited-time Grinch meal deal that sold out rapidly in several locations.
But it has been a tough slog for restaurants over the past year as many contend with a slowdown in eating out among consumers. After two years of increases in the prices of burgers, burritos and chicken wings, many lower-income — and in some cases, middle-income individuals — are eating out less frequently.
Recognizing that many consumers were struggling with sticker shock on their fast food orders, McDonald’s has leaned heavily into value meals like a $5 Sausage Egg and Cheese McGriddle or a 10-piece Chicken McNuggets meal for $8 as a way to lure customers.
“By listening to customers and taking action, we have improved traffic” and strengthened value affordability perceptions among customers, Chris Kempczinski, the company’s chief executive, said in a news release.
In the past year, McDonald’s stock has risen 4.7 percent to $324.91, while the stocks of restaurant chains that haven’t offered discounts on meals, such as Chipotle or Cava, have slid more than 30 percent.
But for McDonald’s, the value strategy isn’t free. Many costs, including labor and the price of beef, remain stubbornly high, and McDonald’s said last year it expected to spend about $75 million in the fourth quarter to cover half of franchisees’ costs for offering the value meal deals. Franchisees own about 93 percent of McDonald’s restaurants around the world.
The belief behind the strategy is that consumers come in for the value meal but end up ordering extra items.
Global revenue for the chain, which includes fees from franchisees, increased 10 percent in the quarter from a year earlier, to $7 billion. Net income rose 7 percent, to $2.2 billion.
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change.
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