McDonald’s franchisee group says $5 value meal can’t last without company investment

An
independent
advocacy
group
of


McDonald’s
franchisees
is
weighing
in
on
the
company’s
upcoming
value
meal
promotion,
cheering
affordability
for
the
consumer,
but
pushing
for
future
contributions
from
the
company
to
make
the
discounted
offering
sustainable
for
operators
in
the
long
run. 

“The
fact
remains
that
in
order
to
provide
the
consumer
with
more
affordable
options,
they
must
be
affordable
for
the
owner/operators.
McDonald’s
vast
resources
and
financial
investment
are
essential
to
any
sustainable
affordable
strategy,”
the
board
of
the
National
Owners
Association
wrote
in
a
letter
to
membership.

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.