Here's why McDonald's $5 deal has customers hungry for the Golden Arches again

• McDonald's is reportedly extending its $5 meal deal beyond the initial one-month sales period.
• Foot-traffic data has shown that the deal drew in more customers to McDonald's restaurants.

McDonald's appears to have deemed its $5 meal deal a success.

The value meal, which the fast-food chain started selling last month, "is meeting the objective of driving guests back to our restaurants," McDonald's executives wrote in a memo seen by Bloomberg.

And the offering is so popular that 93% of McDonald's restaurants have said they will continue selling the meal past the initial four-week period they agreed to, Bloomberg reported.

That's great news for McDonald's, which started offering the $5 meal on June 25, and for inflation-hit customers looking for affordable fast food. The deal includes a McDouble or McChicken, four Chicken McNuggets, a small order of fries, and a small fountain drink.

Some McDonald's customers said the $5 meal wasn't that great a deal before the chain started serving it.

But food traffic data supports McDonald's claim that the meal helped bolster visits to the chain's stores immediately after it started offering the $5 meal.

Although food price increases have slowed down, both groceries and eating out remain more expensive than just a few years ago. Fast-food prices at some restaurants went up by double-digit percentages in 2022 and 2023, a Bank of America analyst told Business Insider earlier this year. Previously, an increase of around 2% annually was commonplace.

Many diners have started seeking alternatives to fast food, such as eating more at home or going to sit-down restaurants where they feel they are getting a better deal.

So, restaurants have started offering deals to lure customers back.

Some came from fast-food chains such as Wendy's, which added a $3 breakfast deal to its menu. But others came from chains that don't always compete with fast food, like Chili's "3 for Me", which allowed diners to get a burger meal for the same price as a Big Mac meal at McDonald's.

The $5 meal appears to have benefited McDonald's sales somewhat, especially as lower-income consumers stop by, BTIG analyst Peter Saleh wrote in a research note last week.

But the biggest effect of McDonald's $5 meal might be on the restaurant chain's image after years of fast-food price increases, Saleh wrote.

"This new deal is an investment in McDonald's value perception, seeking to change the media narrative away from the brand's outsized pricing to refocus on deep(er) value offering," he wrote.

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