The McFlation Crisis: Is McDonald’s the New Luxury?
Since its inception in 1955, McDonald’s has been the established king of American fast food, long maintaining a reputation as a restaurant where anyone can enjoy a comfort meal for just a few dollars. But the days of the Dollar Menu are long gone, and customers are starting to wonder if the golden arches still provide a bargain. Since 2019, the average price of a McDonald’s menu item has increased by nearly 40%, posing a threat to the brand’s reputation for value (Battle 2024). In an era when economic pressures and inflation have reshaped the fast-food landscape, McDonald’s faces an identity crisis. The fast-food giant is now tasked with the challenge of retaining its core base of budget-conscious customers without sacrificing the profit margins that sustain its empire.
That identity crisis extends far beyond customer perception; it’s evident in the numbers. Over the last few years, McDonald’s has experienced a steady decline in visits from U.S. customers with household incomes of less than $45,000 per year (Durbin 2025). According to CEO Chris Kempczinski, many of these customers, and others, no longer see McDonald’s as a good value (Durbin 2025). In May, Kempczinski reported that the company’s U.S. first-quarter traffic among low-income consumers declined by “nearly double digits,” while middle-income consumer traffic fell by almost the same amount, contributing to the biggest drop in McDonald’s quarterly U.S. sales since the pandemic (Paoli 2025). The rising price sensitivity among budget-constrained consumers is particularly troubling for a fast-food chain that deliberately targets the lower-income consumer, and who historically visit McDonald’s more frequently than middle- and high-income customers (Lin-Fisher 2025).
In an effort to restore its long-standing reputation for value, McDonald’s introduced a series of new promotions designed to reconnect with price-conscious consumers. In early summer 2024, the company launched a $5 Meal Deal — a bundle that includes a McChicken or McDouble, four-piece chicken nuggets, fries, and a drink. Earlier this year, McDonald’s rolled out a new McValue Menu, allowing customers to add a second menu item for just $1 after purchasing one at full price. These promotions proved to be popular and helped improve the public perception of McDonald’s affordability. The company responded by extending both deals through the end of 2025, hoping to maintain momentum with value-seeking customers.
The new value deals significantly boosted visits to the fast-food giant; however, they have yet to translate into higher sales (Battle 2025). After nearly a year of offering these value deals, McDonald’s reported that U.S. same-store sales for the most recent quarter had declined by 3.6% compared to the previous year (Haddon 2025). The problem lies in the operational costs of the promotion itself. The $5 meal deal carries a discount of around 40% to 50% compared to buying all the items separately at their regular price, which is eroding the company’s already shrinking profit margins, according to Tom Dillon, McDonald’s U.S. finance chief of operations. Although Dillon notes that the promotions are still a moneymaker for franchise owners and are driving some of the highest increases in customer visits in the fast-food chain’s history, profit margins for McDonald’s started to decline last summer after initiating their value campaign, and have yet to recover since (Haddon 2025).
Another dimension in McDonald’s struggle with affordability lies in its relationship with franchisees, who own and operate roughly 95% of the company’s 13,500 locations in the U.S. While McDonald’s corporate leaders offer pricing suggestions and propose national promotions, franchise owners ultimately set their own prices and can vote on certain price points or whether they want to participate in national campaign promotions. They can, and at times have, voted against promotions advanced by the company (Haddon 2025). In recent years, many franchisees have gone against McDonald’s pricing guidelines and have raised prices to offset higher operational costs. At the same time that the average price of its menu items rose 40%, there was also a 40% increase in labor, packaging, and food costs (Durbin 2025). The increase in these costs is ultimately passed on to the consumers. Peter Saleh, a managing director of research for BTIG, notes that fast-food operators are more dependent on hourly labor than casual dining, where there are more tipped employees making a smaller base rate, creating even more difficulty for franchisees to maintain their profit margins as states have worked to increase the minimum wage rate (Lin-Fisher 2025).
Despite the increased pressure of operational costs, McDonald’s corporate officials have continued to advocate for franchisees to sell the $5 Meal Deal at its intended price. However, in July of this year, some franchisees began to argue that the costs of certain items had gotten too high to sustain the discount. To protect their margins, many locations pushed the price up to $6 for a Meal Deal that includes the McDouble cheeseburger (Haddon 2025). As the divide over menu pricing between McDonald’s corporate leadership and franchisees intensifies, the stakes to appease budget-conscious customers and offer value deals have never been higher. Before the Covid-19 pandemic, McDonald’s value offerings accounted for only 10–12% of total sales, but that share has since climbed to more than 30%, driven by the popularity of the $5 Meal Deal, buy-one-get-one discounts, and app-based promotions (Lin-Fisher 2025). McDonald’s is now finding itself walking a fine line between preserving its affordability and protecting its franchisees’ profit margins as it works to restore the value its customers seek.
This balancing act also helps explain why McDonald’s is unlikely ever to resurrect its once-beloved Dollar Menu. McDonald's is a high-volume, low-margin business, and offering singular items at this price point became financially infeasible. The Dollar Menu rolled out in 2002 and was officially phased out by 2013, largely due to rising ingredient costs over that 10-year span. During that time, the profit margins for franchisees selling $1 burgers were severely squeezed by the cost of buying beef. The price of uncooked beef rose by 69% between 2002 and 2013, an average annual increase of 4% (Kelly 2020). From a business standpoint, the Dollar Menu was fundamentally a traffic-driving strategy to attract customers to the establishment with the expectation that they would trade up to higher-margin items during their visit. However, that wasn’t the case, as McDonald’s customers ended up spending less money on average for each visit (Binnie 2023). The company found itself selling more, but not making more, setting the stage for McDonald’s to rethink how it defined value.
In the years following, the company experimented with several other value-focused pricing strategies, such as the “McPick Two,” which allowed customers to order two of their premium items for $5, and the "$1, $2, $3 Menu,” offering different items at these three price points (Binnie 2023). Since then, McDonald’s has shifted away from competing on the lowest possible price and has instead emphasized the illusion of value with bundled deals that encourage larger transactions, such as the $5 Meal Deal. Yet, the same economic pressures that ended the Dollar Menu continue to create challenges for the company's new value promotions, causing growing tension between McDonald’s Corporate leadership and its franchisees. Ultimately, McDonald’s ongoing struggle to balance affordability and profitability leaves it with the dilemma of satisfying budget-conscious customers and protecting its inexpensive image without undermining the company’s overarching financial stability.
As McDonald’s struggles to maintain its affordable image, many budget-conscious consumers “may have been outpriced,” and are now “finding value elsewhere,” said R.J. Hottovy, Head of Analytical Research at Placer.ai (Ziegler 2025). He claims that “consumers make more choices based on quality and shop around for the best value,” causing McDonald’s to lose customers to fast-casual and casual restaurants as consumers hunt for bargains (Ziegler 2025). For decades, McDonald’s attracted customers through low prices and consistency, but those qualities no longer hold the same appeal. As one customer put it, “I don’t see paying that much money for McDonald’s as worth it. Other places are worth it, but not McDonald’s” (Ziegler 2025). In recent years, the price gap between fast-food, fast-casual, and sit-down restaurants has been shrinking, said Sara Senatore, an analyst at Bank of America. Consumers are struggling to justify spending more than $10 at McDonald’s when a few extra dollars can buy meals at Shake Shack, Chipotle, or even Chili’s, which are perceived as higher quality and offer better value per dollar spent (Ziegler 2025). Chili’s, for instance, has directly used McDonald’s price hikes against them by questioning the chain’s value in recent advertising. Chili’s has begun promoting a burger on its $10.99 “3 for Me” menu as having “twice the beef of a Big Mac” and urged consumers to ditch the “tiny drive-through burger” (Ziegler 2025). In Chili’s most recent quarterly earnings, same-store sales rose 24% thanks to a 16% increase in traffic, which is far different from what McDonald’s is experiencing today (Nguyen 2025). The collapse of McDonald’s value advantage has opened the door for competitors to redefine affordability in today's budget-conscious environment, and the result is a food service industry where McDonald’s no longer leads on pricing.
Ultimately, McDonald’s has evidently pushed itself into an identity crisis — continuing to market its brand around “value” even though customers have failed to agree. This disconnect is hardly surprising, given that McDonald’s has led the industry in price inflation, with the average cost of its menu items rising roughly 100% since 2014—an increase that far outpaces its competitors (Zhu 2024). In the end, McDonald’s ongoing struggle with rising costs while working to protect its affordability has left the company chasing a moving target. The $5 Meal Deal may have briefly restored McDonald’s perception of value, but it remains a short-term solution to a larger problem. Continued increases in operational costs will inevitably sustain the tension between franchisees and corporate leadership, as diminishing profit margins leave little room for compromise. McDonald’s new value promotions will eventually fade due to their unsustainability, and in turn, the company will roll out yet another “value” campaign that feels familiar to the last, but just with a higher price tag. This cycle of short-lived deals with gradual price hikes reflects a brand that is caught in an identity crisis, a company that must raise its prices to protect its bottom line, and a cultural icon that is still trying to convince Americans that it's still the king of affordable fast food.
Citations
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Lin-Fisher, Betty. “Fast Food Used to Be a Cheap Meal Option. Why Has That Changed?” USA Today, September 9, 2025. https://www.usatoday.com/story/money/2025/08/31/fast-food-cheap-meal-rising-costs-price/85784487007/.
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Nguyen, Janet. “Here’s How Much Prices at McDonald’s and Chipotle Have Gone up since the Pandemic Began.” MarketPlace, August 25, 2025. https://www.marketplace.org/story/2025/08/21/heres-how-much-prices-at-mcdonalds-and-chipotle-have-gone-up-since-the-pandemic-began.
Ziegler, Hannah. “Did McDonald’s Price Itself out of a Market It Dominated for Decades?” The Washington Post, May 9, 2025. https://www.washingtonpost.com/business/2025/05/09/mcdonalds-value-restaurants/.
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