Subway began phasing out its $5 footlong sandwiches a decade ago. However, fast-food chains are now reviving the $5 price point to attract budget-conscious customers. As many restaurant companies prepare to report their second-quarter results, investors anticipate hearing about reduced customer visits and sluggish sales, with exceptions like Chipotle. To boost results for the next quarter, chains such as McDonald’s, Taco Bell, Burger King, and Wendy’s have introduced or brought back $5 meal deals.
McDonald’s has reported an increase in traffic due to these promotions, although significant sales boosts are not expected. Fast food generally performs better than the broader industry during economic downturns. However, recent years of price hikes have led many consumers to perceive fast food as no longer a good deal. Over 60% of respondents in a recent LendingTree survey stated they have cut back on fast-food spending due to high costs.
Runaway menu prices have deterred many fast-food customers, particularly those in the low-income bracket who form a substantial part of the sector’s customer base. In response to this backlash, some casual-dining chains like Brinker International’s Chili’s have marketed themselves as offering better value compared to fast-food meals. According to Darden Restaurants CEO Rick Cardenas, casual-dining chains have gained some market share from the fast-food sector.
“It’s the war for the less affluent customer,” said Robert Byrne, senior director of consumer research for Technomic, a restaurant market research firm. This shift in consumer behavior has also alarmed Wall Street. Shares of McDonald’s, Burger King parent Restaurant Brands International, and Wendy’s have all declined by double digits this year. Taco Bell owner Yum Brands has seen a slight dip of over 1% in 2024, while the S&P 500 has risen by 14%.
“The sense among investors is that the second quarter is probably going to be one to forget — you’re going to see a lot of large chains probably miss consensus [estimates],” said KeyBanc analyst Eric Gonzalez.
McDonald’s is expected to report its second-quarter earnings on Monday, with Wendy’s slated to announce its results on Wednesday. Restaurant Brands and Yum Brands are expected to report their quarterly earnings the following week. As the industry navigates these challenges, the revival of $5 meal deals aims to attract customers looking for affordable dining options.
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