As McDonald's Turns to Value Meals, Is Now a Good Time to Buy the Stock?

As McDonald's (MCD) faces a sluggish near-term outlook and a sluggish near-term outlook, the fast-food giant is leaning into value meals to drive customer traffic and sales. With the broader quick-service restaurant (QSR) industry expected to see continued weaker customer traffic due to broad-based consumer pressures, analysts have revised their forecasts for McDonald's downward. However, the company's new value-based pricing strategy, including the $5 "value meal" promotions in the U.S. and similar initiatives in international markets, has resonated with inflation-sensitive consumers. This recovery is largely attributed to McDonald's new value-based pricing strategy, which has driven positive comparable sales growth for the company in 2025 and beyond.



McDonald's has historically done well during pricing wars due to its large scale and franchise model. When quick-service restaurant pricing competition heats up, McDonald's tends to come out on top. This is because the company has a tendency to lean into value meals, which drives traffic and entices customers into full-price purchases. For example, in its recent fourth-quarter earnings call, the company used the word "value" or a variation of the word "affordable" more than 50 times, indicating its focus on value meals. This strategy has proven successful in the past, as McDonald's has been able to gain market share and outperform competitors during periods of intense pricing competition.



McDonald's value meal strategy is expected to have a positive impact on gross margins by driving additional purchases and increasing overall check transactions. The company has noted that these deals drive other purchases, leading to an average check above the deal price. For instance, the $5 Meal Deal in the U.S. has an average check above $10, indicating that customers are purchasing additional items beyond the deal. This strategy is also expected to be accretive to overall check transactions, as seen with the Buy 1 Add 1 for $1 promotion.

Historically, McDonald's has shown a strong ability to maintain and even improve gross margins during periods of pricing wars. The company's large scale and franchise model allow it to come out on top when competing on value. For example, in the past, McDonald's has successfully gained market share during periods of intense competition by offering value meals and new menu items that entice customers into full-price purchases.

In the context of the recent E. coli scare, McDonald's U.S. same-store sales dropped by 1.4% in the quarter, but the company noted that it saw a decline in check size, partly offset by a slightly positive guest count. This suggests that the company's value meal strategy is helping to drive traffic and mitigate the impact of the E. coli outbreak on sales.

McDonald's digital ordering and loyalty program play a significant role in enhancing the company's value meal strategy and driving long-term growth. The company's digital ordering platform allows it to collect valuable customer data, enabling it to create personalized offers and targeted marketing campaigns. This data-driven approach helps to increase customer engagement and drive sales. For instance, McDonald's can offer tailored discounts on value meals to customers who have shown interest in specific menu items or have a history of frequent visits.

McDonald's loyalty program, MyMcDonald's Rewards, is seamlessly integrated with the digital ordering platform. This integration allows customers to earn points and redeem rewards for value meals, further incentivizing them to choose McDonald's for their dining needs. As of the end of 2024, McDonald's had over 175 million active loyalty users across 60 loyalty markets, demonstrating the program's popularity and potential for growth.



In conclusion, McDonald's value meal strategy is expected to have a positive impact on gross margins by driving additional purchases and increasing overall check transactions. This strategy aligns with the company's historical performance during periods of pricing wars and is likely to help McDonald's maintain and even improve its gross margins in the face of competition. The company's digital ordering and loyalty program contribute to its value meal strategy by enabling personalized offers, targeted marketing, and data-driven menu innovation. These initiatives can help drive customer engagement, increase sales, and support the company's long-term growth. As McDonald's turns to value meals, now may be a good time to buy the stock, given the company's strong historical performance and the potential benefits of its value meal strategy and digital initiatives.