McDonald’s drops a bomb on the fast-food industry

McDonald’s competitors could have trouble meeting the chain’s pricing strategy. | Photo courtesy of McDonald’s.

McDonald’s earlier this month revealed an effort to convince franchisees to offer more nationwide price points. Company executives then told operators in a series of meetings, and word leaked of exactly what that effort will look like: 15% discounts on eight of the chain’s combo meals, compared to the pricing of the items individually.

The fast-food giant was trying to keep the details secret, and even after reports came out the company wouldn’t comment, not even something generic sent over email. 

Yet it still represents a big bomb dropped in the middle of a fast-food value battle. 

Privately, several franchisees have told me they believe the effort will work, including those who are generally skeptical of such things. And they also believe it will create enormous pressure on competitors. Specifically, Burger King, Wendy’s and Jack in the Box, which may feel compelled to do something to match what McDonald’s is doing, or risk losing traffic. They’re not wrong.

Those chains could have a tougher time doing that. Though the price of a medium McDonald’s combo meal varies, its average nationwide is still under $10, at $9.79, and the chain plans to price that at $8 starting in November, while making a 15% discount a set standard. 

By comparison, combo meals for signature items from the other three major burger chains all average more than $10. At Wendy’s, the Baconator combo meal averages $12.72, though that burger, to be fair, is more costly to produce than the others and a Wendy’s medium combo and features a much larger drink than McDonald’s.

At Burger King, the Whopper combo averages $10.97. At Jack in the Box, a medium Jumbo Jack combo costs $10.40, on average.

While McDonald’s has had sales and traffic challenges over the past couple of years, it remains in a more stable situation than any of its competitors right now. 

Burger King remains in the early innings of a multi-year comeback and it’s not that far removed from a mass closure event. 

Wendy’s CEO just left the company to return to the consumer packaged goods industry. Jack in the Box just named a new CEO. Both chains’ same-store sales fell badly last quarter. 

None of them have McDonald’s average unit volumes. Consider these numbers:

There remain some questions about McDonald’s pricing effort. For instance, does the 15% discount on the price of the combo items individually include $1 soft drinks? There are some concerns that operators may have to provide this discount on already-discounted items.

And costs aren’t exactly easing. Much of the reason fast-food prices are that high is because franchisees are paying higher costs. They’re paying $20 wages in California. Real estate costs and their associated lease rates are soaring. Insurance costs, digital costs, construction costs, lending rates are all increasing. 

The Extra Value Meals in particular are a discount. McDonald’s will be pricing its Big Mac combo meal at $8 starting in September, a more-than 18% discount on its national average price. But those higher-priced markets would be giving out a massive, 31% break on the cost of that combo.

We get why McDonald’s is doing this. Because the price of many of these combo meals is over $10, and because chains like Chili’s are marketing against those prices, the company needs to regain the value reputation it had lost a long time ago.

But this still means a value war that’s been raging for more than a year will continue through the end of 2025 and probably longer, absent some major change in the economy. And while the company and its operators have the wherewithal to withstand this, not everybody does.