McDonald's Franchisee Group Says $5 Value Meal Can't Exist Without Company Investment

• McDonald's franchisees are considering the value meal promotion through an independent advocacy group.
• The discounted offering is beneficial to consumers but requires ongoing contributions from the company to ensure its sustainability for operators in the future.
• Beginning June 25, the menu will feature a $5 value meal that will be available for approximately a month.

The franchisee advocacy group is considering the company's upcoming value meal promotion, supporting affordability for customers but urging the company to provide ongoing support to sustain the discounted offering for operators.

In order to offer more affordable options to consumers, the owner/operators must make them affordable. McDonald's resources and financial investment are crucial for any sustainable affordable strategy, as stated in a letter to membership by the National Owners Association board.

McDonald's business model is characterized as a "penny profit business, with 10-15% margins," and the letter argues that there is not enough profit to discount 30% for this model to be sustainable. As a result, the letter demands a financial contribution from McDonald's.

Last week, CNBC reported that the $5 value meal would be introduced on menu boards starting June 25 and last for approximately a month. The combo includes a McChicken or McDouble, four-piece chicken nuggets, fries, and a drink. Purchasing these items individually would result in a significantly higher cost.

Brands are responding to the inflation-driven pullback of lower-income consumers from certain restaurants by offering greater value to customers.

Coca-Cola 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 did not respond to the NOA letter regarding its membership. In a statement to CNBC about the value meal, the company stated, "We understand the importance of offering meaningful value to our customers and communicating it through national advertising, which has been true since our inception and is even more crucial today."

McDonald's has previously stated that the average cash flows for U.S. franchisees have increased by nearly 50% since 2018. Despite inflation, 2023 was one of the best years for franchisee cash flow in the company's history.

The NOA letter recommends that the company innovate on its menu, reintroduce snack wraps made from existing chicken breasts, and offer affordable options with lower food costs to make them more accessible for owners to sell.

The group proposed adding the top two beverages from CosMc's to flagship locations to thrill both customers and staff.

The advocacy group earlier in the year proposed adding affordable options to the menu without reducing the prices of "core and iconic" items.

In February, the NOA stated that McDonald's CEO Chris Kempczinski has made public comments about the growing need for affordability among US consumers. This message is not new or unique, as value has always been a core aspect of our Brands.