Burger King to Launch $5 Value Meal to Hit Back at McDonald’s

23/05/2024

Burger King’s offer will include a choice of one of three sandwiches, chicken nuggets, fries and a drink.

(Bloomberg) -- The value war is on. Burger King is coming out with its own $5 meal deal, and will launch the offering ahead of McDonald’s, according to a memo obtained by Bloomberg News.

Burger King’s offer will include a choice of one of three sandwiches with nuggets, fries and a drink, according to the document. Franchisees had voted in early April to approve the deal. Now, the chain is looking to one-up a similar promotion from McDonald’s Corp.

“Regardless of their plans, we are moving full speed ahead with our own plans to launch our own $5 value meal before they do — and run it for several months,” Burger King said in the memo, signed by the chain’s US and Canada President Tom Curtis. Earlier this month, Bloomberg News reported that McDonald’s promotion would run for about a four weeks.

The tit for tat between the burger companies underscores the pressure to attract budget-conscious Americans who’ve pulled back from dining out as they buckle under persistent inflation. About 78% of Americans surveyed by financial firm LendingTree said they viewed fast food as luxury because it’s become too expensive. Meanwhile, as the price gap between quick-service outlets and their fast-casual counterparts has narrowed, some consumers are opting to skip the burger chains and instead spend a couple of extra dollars at eateries such as Chipotle Mexican Grill Inc.

Companies are taking note. The chief executive officer of Burger King’s parent company, Restaurant Brands International Inc., told investors that guests have become more price sensitive. McDonald’s CEO has said the Big Mac seller has to be “laser-focused on affordability.”

Burger King franchisees pay into an advertising fund and have a say on national promotions. Besides the $5 “Your Way Meal,” the chain is testing two other value platforms that could be ready in the second half of the year, according to the memo. It will also feature its Melts and a lineup of spicy products, both higher-ticket items, and keep promoting the Whopper. Burger King declined to comment beyond the memo.

The company’s existing value offerings include a $2.99 chicken wrap and a $5 deal that includes two Whopper Jr. burgers. Other chains are also ramping up their deals, with Wendy’s introducing a $3 breakfast sandwich promotion. Even Chili’s is coming after fast-food with a burger combo starting at $10.99 — roughly the same price as a Big Mac meal at one McDonald’s in Chicago in late May.

Earlier this month, Bloomberg News reported that McDonald’s was looking to launch a $5 meal deal in the US as it seeks to attract penny-pinching consumers. An earlier attempt to get franchisees to endorse the initiative failed amid worries the discounts wouldn’t be profitable, prompting McDonald’s to enlist funds from Coca-Cola Co. to cushion any potential hit.

Operators approved the deal in mid-May. The promotion is slated to kick off on June 25 and include a McChicken or a McDouble, four chicken nuggets, small fries and a small drink. The timing of the launch was first reported by the Wall Street Journal.

In a message on May 19, an independent group of McDonald’s franchisees said the chain needed to pitch in to make value menus feasible. The meal deal is affordable for consumers, but operator margins are thin, the group said. At $5, the bundle is cheaper than buying the items separately.

“There simply is not enough profit to discount 30% for this model to be sustainable,” the group, which declined to comment beyond its message to members, said.

McDonald’s has said that in 2023, franchisees recorded one of the highest cash flow figures in the company’s history even after accounting for inflation. The independent franchisee group has raised concerns about the cost of labor and investments to refresh stores.

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