McDonald's is facing slowing sales. Its under $3 value menu shows why

The fast-food giant’s comparable US sales growth slowed to 0.8% during its second quarter, a slower clip than the 2.5% it reported for the year-ago quarter.

The chain also changed leadership of its US business, naming Skye Anderson as president, taking over for Joe Erlinger effective Tuesday.

McDonald’s has spent the last couple of years experimenting with its value offerings, including a $5 meal deal.

It’s one of many restaurant chains, from Chili’s to Burger King, that has experimented with more value-focused menus in the last few years as diners deal with the lingering effects of inflation, layoffs, and broad uncertainty about the future.

In April, McDonald’s introduced another value menu featuring 10 items that cost less than $3 each, including the Sausage McMuffin and the McDouble.

McDonald’s struggled to roll out the new menu to restaurants, CEO Chris Kempczinski said on the company’s earnings call on Tuesday.

Between 60% and 65% of McDonald’s restaurants adopted the under $3 menu as designed at corporate headquarters, Kempczinski said.

Some franchisees used the deal to effectively increase prices on cheaper items by adding them to the menu, he added. “There’s not nearly as much wiggle room that you have when it’s a $5 meal deal,” Kempczinski said.

At the same time, McDonald’s threw a lot of promotions at customers during the second quarter, from the under $3 menu to special offers for the World Cup to KPop Demon Hunters-themed meals — a schedule that was too much for customers, the CEO said.

McDonald’s also cut back on digital discounts, which many customrs had come to rely on, he said. “It’s something that’s valued by our most loyal customers,” Kempczinski said. “That ended up being a bad trade,” he added, referring to cutting digital discounts while rolling out the under $3 menu.

Kempczinski did not say how McDonald’s plans to handle the value menu going forward, though he did tell analysts on the earnings call that the he would “have a better answer” during the company’s investor day later this year.

Executives are also meeting with franchisees next month to talk about the value offerings. “We don’t have a strategy problem,” Kempczinski said. “We simply didn’t execute at the level we needed to in the second quarter.” Do you have a story idea about McDonald’s?

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