Rekubit Exchange:McDonald's is considering a $5 meal to win back customers. Here's what you'd get.

New numbers show California's fast food wage increase's impact on prices

McDonald's is considering adding a $5 meal to its menu across the U.S. as a way to coax customers back into its restaurants, according to a source familiar with the plans.

The meal could include a choice of either a McChicken, a McDouble or four-piece chicken nuggets as well as fries and a drink, the person told CBS MoneyWatch. Leaders at McDonald's corporate offices are still in talks with franchise owners about introducing the $5 meal, the source said.   

The discussions about rolling out a new budget meal come just weeks after McDonald's executives reported slower growth in foot traffic at its restaurants. Some inflation-weary customers are cutting back on fast-food dining after many chains, ranging from McDonald's to Subway, have boosted prices in recent years to offset higher labor and ingredient costs. 

The company has to be "laser-focused" on keeping prices affordable to convince customers to return, McDonald's CEO Chris Kempczinski said during an April 30 earnings call with analysts and investors.

"Consumers continue to be even more discriminating with every dollar that they spend as they face elevated prices in their day-to-day spending, which is putting pressure on the industry," Kempczinski added. "[I]t's imperative that we continue to keep affordability at the forefront for our customers."

McDonald's prices

Among all U.S. fast food chains, McDonald's raised its menu prices the most between 2014 and 2024, according to personal finance website FinanceBuzz. About 25% of people who make under $50,000 are cutting back on fast food, pointing to cost as a concern, a January poll by consulting firm Revenue Management Solutions found.

Restaurant chains point to rising labor costs as a key factor driving up prices. Still, industry analysts said fast food chains need to court low-income customers if they wish to continue hitting revenue and earnings projections. 

"When you look at McDonald's, they're not getting a majority of high-income customers — the middle- and lower-income class are the bulk of their business," analyst Mark Kalinowski, president of Kalinowski Equity Research, told CBS MoneyWatch this month. "They need to be cautious with their spending, and that's what you're seeing right now."

To be sure, a $5 meal wouldn't necessarily make McDonald's a pioneer in the fast food industry. In 2015, Wendy's introduced the 4 for $4 meal that includes a small hamburger, four-piece chicken nuggets, small fries and a small drink, and in 2019, the restaurant added its $5 Biggie Bag. The latter deal includes a choice of sandwich, four chicken nuggets, a small order of fries and a small drink.

McDonald's, the nation's largest fast food chain, employs more than 2 million people at its 14,300 restaurants, and another 150,000 employees at its corporate offices. 

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch. He previously worked as a reporter for the Omaha World-Herald, Newsday and the Florida Times-Union. His reporting primarily focuses on the U.S. housing market, the business of sports and bankruptcy.

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