Fast food appeals to consumers because it offers consistency and convenience. But perhaps even more important, it makes these offers in exchange for a relatively minimal amount of money, enabling people to feed themselves and their families affordably. Yet just like any retailers of products these days, fast food chains face dramatically rising costs, suggesting the need for them to increase their prices if they hope to remain profitable.

Noting price pressures and market fluctuations, companies such as Starbucks and Yum Brands (which owns KFC, Taco Bell, and Pizza Hut) report failures to attain their earnings goals. In turn, various fast food chains, including Burger King, Wendy’s, and Starbucks, have adjusted their pricing strategies. At McDonald’s for example, the cost of a Big Mac increased by 21 percent between 2019 and 2024.

Consumers notice such changes. The cost of taking their family out to eat has jumped, leading them to raise strong complaints. In its attempt to appease these angry, cash-strapped, and hungry consumers, McDonald’s introduced a new (and limited time) $5 value meal promotion. For those diners quick enough to grab it, they could choose a McDouble cheeseburger or McChicken sandwich, together with a small order of fries, a 4-piece box of chicken nuggets, and a small soft drink, for $5.

Beyond the immediate promotional offer, McDonald’s has committed to offering more transparency to consumers, such as by announcing price changes in advance rather than springing any future increases on them. This effort represents a more long-term strategy, seeking to ensure continued customer loyalty.

Similarly, other fast food chains have sought to combat consumer perceptions of rapid price increases by offering their own promotions. However, the deals rarely can last indefinitely. They function as loss leaders that can draw in cost-conscious consumers, while hopefully encouraging additional purchases of other products with higher margins. Instead, for retailers that need to rationalize their pricing to cover their costs, an incremental approach may be preferable, to avoid sparking consumer backlash.

Discussion Questions

1. If the $5 value meal promotion can only last a short time, what other options does McDonald’s, and its competitors, have to boost sales and attract new customers?
2. Visit your favorite fast food location. Have prices increased recently? By how much?

Sources: Jordan Valinsky, “McDonald’s Releases a New $5 Value Meal to Combat Inflation,” CNN, June 20, 2024; Lauren Hirsch, Sarah Kessler, and Ephrat Livni, “Companies Counter Pushback on Price Increases With Promotions,” The New York Times, June 1, 2024; Kristopher J. Brooks, “Top McDonald’s Exec Says $18 Big Mac Meal Is ‘Exception,’ Not the Rule,” CBS News, May 29, 2024; OpenAI ChatGPT, “Assistance with Research on Fast Food Pricing and Value Menus in Response to Inflation,” ChatGPT, July 1, 2024; Ramishah Maruf, “Red Lobster’s Endless Shrimp Deal Was Too Popular, Company Says,” CNN, November 29, 2023.