$5 Fast Food Meals

So McDonald's is starting the summer fast food wars with a $5 meal (McDouble or McChicken with 4-pc nuggets, small fries and small drink). Wendy's has their own Biggie Bag (which got more expensive in the past few years but is now back to $5) and Burger King also brought back their $5 deal.

The interesting sidebar on this is in Cali, the $20 minimum wage was predicted to eliminate jobs because of the increase in fast food operating costs but I heard some report where there were jobs added in May vs eliminated. That might just be a blip but despite the recent outrage of ~$20 Big Mac meals, but it seems like more people are going the fast food route because it's still more affordable (and convenient) than fast casual (and above) dining.

There are usually bargains in the apps that fast food places are pushing and I sort of understand driving the deals through app usage but this also makes it less accessible.

It will be interesting to see how this plays out if these deals last (McDonalds plans this promotion for 4 weeks).

The unhealthy game is afoot!

Assuming the cost of food/packaging is about 25% of the retail price ($1.25), and assuming the $20.00 an hour worker was making $17.00 previously (so about $3.00 or more per hour to make up), each fast food company has to sell 5 or so per hour to break even, not get ahead. Why 5? The customers that were paying $12.00 for a pricier meal are now down sizing to a cheaper meal so profits overall will be lower. This is a volume play - of course - so it will be interesting to see in Q3 results what impact this $5.00 plan has on same store traffic. 4 week promotions aren't enough to see if there is a genuine change of habit or if it's just a blip. Those purple shakes moved the needle, but it wasn't sustaining.

irvinehomeowner said:

The interesting sidebar on this is in Cali, the $20 minimum wage was predicted to eliminate jobs because of the increase in fast food operating costs but I heard some report where there were jobs added in May vs eliminated. That might just be a blip but despite the recent outrage of ~$20 Big Mac meals, but it seems like more people are going the fast food route because it's still more affordable (and convenient) than fast casual (and above) dining.

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I went to Tokyo Central in Gardena and Waka Sakura had 1+ hour wait, so ended up going to the food court to order some "fast casual" from Kagura. It was like $15 for pork katsu plate and, their kitchen staff didn't know how to cook rice or katsu. I get better rice from my microwave than whatever they were serving. Had to go order some chicken from Tenkatori for edible food.

People complain about McDonalds, but at least their breakfast sandwiches are still consistent after decades. I suspect if their sausage and egg McMuffin ever becomes inedible, Warren Buffett will have Chris Kempczinski on the phone that morning.

Gas prices are drifting down and now fast food is getting cheaper! Maybe the corporations have stopped being greedy for now.

Gas prices are down now that the conversion to Summer Blend is complete AND the pillaging of the Strategic Oil Reserves. Joe can't have high gas prices during an election cycle. Wait until later September, early October and watch average prices rise.

sgip said:

Assuming the cost of food/packaging is about 25% of the retail price ($1.25), and assuming the $20.00 an hour worker was making $17.00 previously (so about $3.00 or more per hour to make up), each fast food company has to sell 5 or so per hour to break even, not get ahead. Why 5? The customers that were paying $12.00 for a pricier meal are now down sizing to a cheaper meal so profits overall will be lower. This is a volume play - of course - so it will be interesting to see in Q3 results what impact this $5.00 plan has on same store traffic. 4 week promotions aren't enough to see if there is a genuine change of habit or if it's just a blip. Those purple shakes moved the needle, but it wasn't sustaining.

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It's a loss leader... like the $1.50 Costco hotdog.

Most people aren't going in just for the $5 meal, they will make it up on the more expensive things.

It's like when McDs had the $1 drinks forever... people were going there and paying more for food. Those drinks are now $1.49... 50% increase over something that cost very little.

Drink promos, yes. Extra orders? Sure! Meal promos with add on....meals? That's a pretty odd anticipatory sales growth strategy don't you think?

sgip said:

Drink promos, yes.Extra orders? Sure! Meal promos with add on....meals? That's a pretty odd anticipatory sales strategy don't you think?

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It's marketing. Drives traffic to stores. Like anything else they do. ps9 loved it whenever they brought back the McRib.

Seems like $5 meal deals is driving traffic up. I know I've bought the Mcds one more than once for a quick lunch break between meetings.