McDonald's fast food restaurant in Manhattan, New York, USA, on July 6, 2024.
Beata Zorzel | Norfoto | Getty Images
After a tough second quarter, McDonald's Restaurant executives and analysts said they are refocusing on how to win back consumers through deals, as they pushed to extend the $5 meal platform.
In a memo to the U.S. system obtained by CNBC on Monday, U.S. President Joe Erlinger said McDonald’s is struggling to sell affordable meals, adding that he expects “industry and competitive challenges” to continue throughout the year. Erlinger encouraged operators to look forward to build momentum for the coming year, adding that “a long-term mindset is critical” to the company’s success.
“Reversing this narrative and reestablishing our position as a value and affordability leader is possible, but it cannot be done overnight,” he wrote. “It will happen through sustained, coordinated action that shows the customer that we are on their side.”
The company reported results that fell short of analysts’ expectations on Monday for both earnings and revenue. Same-store sales fell across the board, including in its core U.S. market, where they fell 0.7%. The company had anticipated challenges in the previous quarter, and the stock rose Monday on the back of the results.
Erlinger also acknowledged areas where the company “fell short” in the U.S. this quarter. He noted that same-store guest numbers were negative for the fourth straight quarter, and a decline in the number of items per transaction also led to a decline in average checks.
“We are still losing traffic share from lower-income consumers,” he wrote, but added that trial rates for the value meal launch were highest among lower-income consumers, and that sentiment around McDonald's value was starting to improve.
The company will extend the $5 meal deal beyond its initial four-week period in most of its U.S. markets as the fast-food giant says the offer is bringing traffic back to restaurants. In a memo to the U.S. system obtained by CNBC last week, executives wrote that nearly every business unit, which includes 93% of its restaurants, voted to extend the promotion past its original end date late this month. The memo said a majority of locations will extend the offer through August, or plan to vote on whether to do so.
In a note Monday, Erlinger pointed to upcoming decisions on future expansions and value propositions. On the call, executives said U.S. franchisees are in a strong financial position to invest in value propositions, and they are working with owners now to assess overall profitability.
“Value and affordability have been part of our DNA since we first opened our doors, but we have an affordability gap that needs to be closed and we must continue to take actions that show our customers that we are listening,” Erlinger wrote in the memo. “We have a strong plan for the second half of the year, but there are several important decisions coming that will position us to compete and build momentum over the next five months and into 2025.”
McDonald's did not immediately respond to a request for comment.
