We wrote back-to-back stories on McDonald’s, bridged by only a weekend, that illustrate the fast-food giant’s strange and often contradictory year.
On Friday, we revealed that the Chicago-based chain’s latest Grinch Meal promotion was working so well that many of its locations were running out of the socks included in the meal.
And then on Monday we highlighted McDonald’s new franchising standard that will increase its oversight on operators’ pricing decisions, to ensure that “value” is at the forefront.
Take these two together and you can reasonably conclude that McDonald’s struggles to maintain traffic growth when it is not including footwear or similar items with a meal in a fancy Christmas box.
That’s the McDonald’s of recent vintage. The company, perhaps more than any other restaurant chain in the U.S. outside of Taco Bell, is exceptional at getting customers in the door with some form of marketing promotion.
Yet struggles to maintain traffic between those promotions, when the company’s price-value equation takes center stage.
The company’s Grinch Meal, much like its Minecraft Movie promotion in April and a string of similar campaigns dating back to 2020, at the very least, did exceptionally well. The company ordered tens of millions of socks and, apparently, it still wasn’t enough.
That’s a common situation right now. Companies can get people in the door with the right promotion, particularly when that promotion taps into consumer nostalgia. Wendy’s and Burger King have had similar results with promotions in recent years, including Burger King’s Spongebob Movie Menu that it started running last week.
So why can companies get customers in the door for nostalgic promotions like those but they can’t do so during the rest of the year?
U.S. franchisees raised prices about 40% from 2019 to 2024. That was largely over their own cost increases, but the higher menu prices frustrated consumers and contributed to a weak fast-food environment.
Franchisees set prices. In the McDonald’s system, operators use a third-party consultant, chosen by the company, to help set those prices based on costs and local market conditions. The new value standard will ensure that franchisees are working with the consultant.
It’s a sticky wicket, however. McDonald’s has spent the past 10-plus years dealing with an effort to define the company as a “joint employer” of its franchisees’ workers. Getting into the business of regulating operators’ prices could, in theory, play into that those hands—if not at the federal level, then potentially in states like California.
Yet the company’s price-value reputation post-pandemic has hurt traffic at the chain’s restaurants, enough that it has threatened the company’s sales results.
McDonald’s decision to effectively codify value is indicative of the chain’s concern about that reputation. The company is intent on avoiding similar situations in the future.
The two stories could illustrate a dichotomous economy. Higher-earning consumers are still spending, and their traffic to fast-food chains is up. That could be driving sales at such chains when there are innovative marketing promotions, as more of those higher-earning consumers visit McDonald’s, Burger King and other chains.
But fast-food chains need a steady stream of lower-income consumers to maintain traffic on a daily basis.
Either way, the result is a wide range of performance, depending on what McDonald’s is promoting.