The $5 Meal That Won't Save McDonald's

Why loyalty programs can't fix broken unit economics

McDonald’s is simultaneously launching value meals, extending restaurant hours, bringing back Monopoly, expanding its loyalty program, and creating a Digital Marketing Fund. That’s not strategy. That’s panic dressed up as innovation.

Here’s what’s actually happening: foot traffic is down 4% year-over-year despite all these initiatives. Lower-income consumers - McDonald’s core customer base - are visiting quick-service restaurants 10-12% less frequently. And the company’s response is to offer cheaper food to customers who are already not coming.

The deeper issue isn’t pricing. It’s that the economic model for the entire QSR industry is breaking down.

The loyalty program illusion

McDonald’s is counting on its 185 million loyalty program members to drive frequency. After someone signs up, their visit frequency jumps from 10.5 times per year to 26 times. That sounds impressive until you think about causation.

People who sign up for loyalty programs are, by definition, already frequent customers who like your product enough to engage with your app. They’re not new customers. They’re existing customers who are making themselves visible.

The visit frequency increase probably isn’t caused by the loyalty program. It’s caused by the type of person who joins loyalty programs. They were coming 26 times per year anyway; now you can track it.

What loyalty programs actually do is shift spend from less visible channels (cash purchases) to more visible ones (app purchases). That’s useful for data collection, but it doesn’t solve the fundamental problem: fewer people overall are choosing to eat at McDonald’s.

The real cost of a $5 meal

McDonald’s $5 Meal Deal is being positioned as a way to bring back price-sensitive customers. But the math is challenging. A meal that would normally cost $10-12 being sold for $5 means McDonald’s is essentially subsidizing each transaction.

The bet is that customers will come for the deal but also buy other items, or that they’ll return at full price later. Sometimes that works. Often it doesn’t.

What actually happens is that people who would have paid full price now pay promotional price. You’ve trained them to wait for the deal. And you’ve compressed margins on a large percentage of transactions.

This is the discount trap that every retailer eventually faces: once you compete on price, it’s very hard to get customers to value anything else. McDonald’s brand has always been about convenient, affordable fast food. When even McDonald’s feels expensive, the brand positioning is broken.

The bifurcation problem

Here’s the stat that should worry McDonald’s most: lower-income customers are down 10%+, but higher-income customers are up by similar amounts. McDonald’s is becoming two brands - cheap food for people who can’t afford anything else, and convenient food for people who don’t mind the price.

That bifurcation is manageable in the short term but problematic long-term. The lower-income segment is price-sensitive and prone to switching. The higher-income segment has tons of alternatives - Chipotle, Sweetgreen, local fast-casual options.

McDonald’s is at risk of being squeezed from both sides: not cheap enough for budget customers, not good enough for customers with more money.

The digital marketing fund misdirection

McDonald’s announced a Digital Marketing Fund that shifts 1.2% of digital sales into digital marketing capabilities. This is being framed as innovation, but it’s really just reallocation. The money was already being spent on marketing; now it’s being redirected to digital channels.

The theory is that personalized digital marketing will drive better ROI than mass market TV advertising. That’s probably true on a per-dollar basis. But it doesn’t solve the underlying issue: consumers have less money and are eating out less.

You can’t loyalty-program your way out of an economic downturn. Better targeting and personalization helps, but only at the margins.

What the data actually shows

Placer.ai tracking shows that McDonald’s foot traffic was last positive in April, before tariffs were fully implemented. As inflation crept back up to 3% from 2.3%, visits declined. This isn’t about brand perception or marketing effectiveness. It’s about disposable income.

When groceries get more expensive, people cook at home. When rent goes up, people cut discretionary spending. When unemployment rises, people choose cheaper alternatives. McDonald’s can’t change these macro factors through better marketing.

What McDonald’s is doing - value meals, loyalty rewards, extended hours - are all reasonable tactical responses. But tactics don’t fix strategy, and strategy doesn’t fix economics.

The comparison to 2008

McDonald’s is explicitly comparing their current situation to the 2008 financial crisis, when they successfully used Extra Value Meals to drive traffic among lower-income consumers. But 2025 is different.

In 2008, McDonald’s was definitively cheap. A full meal for under $5 was legitimately affordable. In 2025, even the value meals are $5-8, which doesn’t feel cheap to consumers who remember $3 meals.

Also, in 2008, McDonald’s wasn’t competing with delivery apps, ghost kitchens, and the massive expansion of fast-casual chains. The competitive landscape has changed fundamentally.

The GLP-1 factor nobody wants to discuss

There’s a trend mentioned in the Placer.ai report that deserves more attention: GLP-1 weight-loss drugs are dampening demand for food consumed away from home. Ozempic and similar medications reduce appetite. As adoption increases, people eat less.

This affects the entire restaurant industry, but it particularly impacts QSR brands whose value proposition is large portions at low prices. If customers are eating smaller portions less frequently, McDonald’s entire model is challenged.

This isn’t a factor you can address through marketing. You can’t promote your way out of customers having physiologically reduced appetite.

The delivery economics problem

McDonald’s has tried to expand through delivery channels - DoorDash, Uber Eats, and their own app. But delivery economics are challenging. After platform fees, delivery costs, and promotional discounts, McDonald’s margins on delivery orders are significantly lower than in-store purchases.

Some of the foot traffic decline is being offset by delivery growth. But delivery growth doesn’t solve the profitability problem. You’re swapping high-margin in-store traffic for low-margin delivery orders.

What’s actually working

The one thing McDonald’s has going for it: higher-income consumers are increasing their visit frequency. This suggests the brand still has some strength. People with money are choosing McDonald’s for convenience, consistency, and speed.

If McDonald’s doubled down on serving this segment - better quality ingredients, improved store environments, faster service - they might maintain stronger margins even with slightly lower traffic.

But that would mean accepting that they’re no longer the cheapest option and repositioning accordingly. That’s a scary move for a brand built on affordability.

The franchisee tension

McDonald’s push for national value pricing creates tension with franchisees. Corporate wants consistent national promotions. Franchisees in different markets have different cost structures and want flexibility to set prices based on local conditions.

The Digital Marketing Fund is partly an attempt to address this by giving franchisees more tools to drive traffic. But if the tools don’t actually work - if personalized digital marketing can’t overcome macroeconomic headwinds - franchisees will push back on funding it.

The convenience store threat

An underappreciated competitive threat: convenience stores are rapidly improving food quality. Wawa, Sheetz, QuikTrip, and others offer fresh food at similar price points to McDonald’s, often with faster service because there’s no drive-thru line.

For someone grabbing food on a highway or commuting to work, a convenience store is increasingly competitive with McDonald’s. Better coffee, comparable breakfast sandwiches, faster in-and-out time.

McDonald’s advantages - brand recognition, consistency, kids’ meals - don’t fully offset the convenience stores’ advantages in speed and location density.

The international question

Interestingly, McDonald’s international business is performing better than US operations. This suggests the problem isn’t entirely about the brand or menu. It’s about US consumer economics and competitive dynamics.

In many international markets, McDonald’s is still seen as a premium Western brand rather than a budget option. The economics are different. The competition is different. The value proposition works differently.

This split makes strategic decisions harder. Do you optimize for US market conditions or global growth? Do you accept that McDonald’s means different things in different markets?

What would actually work

The honest answer is: probably nothing in the short term. If consumers have less money and are eating out less, the whole QSR sector contracts. McDonald’s can fight to maintain share within a shrinking market, but they can’t change the market size through marketing.

Long-term, McDonald’s needs to decide what it wants to be. The “something for everyone” strategy of offering both value meals and premium burgers, both basic coffee and specialty beverages, both kids’ meals and adult options - that worked when the category was growing. In a contracting market, trying to serve everyone means satisfying nobody.

The real strategic question

Should McDonald’s accept lower traffic but protect margins by moving upmarket? Or fight for every transaction by competing on price even though it destroys profitability?

The current strategy appears to be: try both simultaneously. Offer $5 value meals for price-sensitive customers while also promoting premium items for higher-income customers. Use digital marketing to show different messages to different segments.

That might work. But it also might result in neither segment being fully satisfied, with the brand positioning muddled between cheap and quality.

What this means for the industry

McDonald’s situation is a preview for the entire QSR category. If the largest, most sophisticated player with the strongest brand is struggling to maintain traffic and margins, smaller chains face even bigger challenges.

We’ll likely see continued consolidation in QSR. More bankruptcies among smaller chains. More aggressive value promotion that destroys margins. More desperate innovation that doesn’t address fundamental economic issues.

The winning move for most QSR brands is probably to accept that 2025 will be a tough year, protect margins even if traffic declines, and wait for economic conditions to improve. But that’s not a story that satisfies investors or keeps franchisees happy.

So instead we get loyalty programs, digital marketing funds, value meals, extended hours, and Monopoly games. Activity as a substitute for strategy. Movement as a substitute for progress.

It might work. But probably not for the reasons McDonald’s hopes.