The letter calls the McDonald’s business model a “penny profit business, with 10-15% margins,” and says “There simply is not enough profit to discount 30% for this model to be sustainable. It necessitates a financial contribution by McDonald’s.”
CNBC reported last week that the $5 value meal would be hitting menu boards beginning June 25 and lasting roughly a month. It will include a McChicken or McDouble, four piece chicken nuggets, fries and a drink. The combo would be substantially less than purchasing those items individually.
The offering comes as lower-income consumers pull back from certain restaurants in the face of stubborn inflation, and brands look to offer greater value to customers.
CNBC reported Coca-Cola had added marketing funds to make the deal more appealing for McDonald’s and its franchisees after an initial proposal did not pass internal hurdles. In a statement last week, Coca-Cola said, “We routinely partner with our customers on marketing programs to meet consumer needs. This helps us grow our businesses together.”
McDonald’s declined to comment on the NOA letter to its membership. In a statement to CNBC last week on the value meal, the company said, “We know how much it means to our customers when McDonald’s offers meaningful value and communicates it through national advertising. That’s been true since our very beginning and never more important than it is today.”
The company has previously noted cash flows for U.S. franchisees are up nearly 50% on average since 2018. Even when accounting for inflation, 2023 was one of the best years for franchisee cash flow in the company’s history, McDonald’s has previously said.
Beyond the $5 promotion, the NOA letter goes on to suggest the company should continue to innovate on the menu, bringing back items such as snack wraps that use existing chicken breasts, creating affordable options with lower food costs so they are more affordable for owners to sell.
The group also suggested taking the top two beverages from McDonald’s spinoff chain, CosMc’s, and bringing them to flagship locations as a way to excite both customers and employees.
These ideas were initially floated by the advocacy group earlier in the year, as it pushed to add affordable options to the menu without discounting “core and iconic” items.
“Recently [McDonald’s CEO Chris Kempczinski] has made public comments about the US consumers’ growing need for affordability. This is not a new or unique message; value has always been at our Brands’s core,” NOA said in a letter to membership viewed by CNBC in February.
Barbara Terrio is a seasoned business journalist, delving into the world of finance, startups, and entrepreneurship. With a knack for demystifying complex economic trends, she helps readers navigate the business landscape. Outside of her reporting, Barbara is an advocate for financial literacy and enjoys mentoring aspiring entrepreneurs.
