McDonald’s biggest problem may soon fix itself

After a rocky few months in the restaurant industry, things are starting to look up for troubled businesses.

In the past two years, high inflation has caused prices to rise in almost every sector, leading people to become more conscious of their spending habits.

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Consumers are now prioritizing value when choosing their next meal, opting for options that will give them the most bang for their buck.

This shift in customer spending has encouraged restaurants, especially fast food restaurants, to come up with creative ways to offer great deals to their customers while generating positive profit growth.

Dismal comparable restaurant sales figures are reversing and expected to turn positive in Q4, according to an industry study from Black Box Intelligence.

In August, same-store sales fell 0.4 percent year-over-year, marking the third consecutive month of negative growth, but were up 2 percent from the previous month.

Same-store traffic reported a 3.6 percent decline from last year, the second-worst decline since January. However, traffic was up 1.1% month over month.

Although fine-dining restaurants performed best overall, restaurants in the fast-casual sector also reported positive growth.

Ronald McDonald’ is sitting on a restaurant bench outside McDonald’s

McDonald’s develops win-win offers centered on value

Various fast food chains are listening to customer demands by incorporating more value offerings in their menus, which has resulted in positive responses.

During McDonald’s Q2 2024 earnings call, McDonald’s CEO Christopher Kempczinski said that due to inflation, McDonald’s is looking to expand value offerings that will be more beneficial in the long term, rather than promoting one-off or limited.

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Recently, McDonald’s (MCD) has extended its $5 value meal deal, which was originally only supposed to last for a few weeks in the summer, until the end of the year.

In addition, McDonald’s is currently offering free large fries with a minimum $1 purchase when you download its mobile app and Free Friday Fries with a minimum $1 purchase when you order online.

According to McDonald’s latest earnings report, global comparable sales fell 1% and net income was flat compared to the previous year.

However, despite reporting declining numbers, the $5 meal deal is proving to be a successful promotion by increasing traffic and increasing sales due to its popularity among lower-income customers.

“We have seen a lot of enthusiasm and the number of $5 meal deals sold is beyond expectations. Offer trial rates are highest among lower-income consumers, and brand sentiment around value and affordability has begun to shift positively,” McDonald’s President Joseph Erlinger said in an earnings call .

McDonald’s is proving to be one step ahead of the game

McDonald’s focus on its menu and staff could get the fast-food chain back on track.

According to the same study, restaurants fully staffed in back-of-house positions, which refers to kitchen and store staff, reported a 3.6 percent increase in traffic.

Those fully staffed in front-of-house positions — which refers to customer-facing employees such as servers — saw an even bigger 4.6 percent increase in sales.

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Last month, McDonald’s announced that it would add cash kiosks to its restaurants in addition to its original cashless kiosks.

The company also said that this addition will not result in any workforce reductions; it would simply be a way to improve efficiency.

Although McDonald’s has missed analysts’ EPS expectations for the past two quarters, the company’s shares are up 2.18% YTD as of Tuesday’s market close.

McDonald’s is scheduled to report its third quarter earnings on October 29.

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