McDonald’s’ business is very resilient where the economy is concerned.

The chain has a high perceived value based on its relatively low costs compared with  other food. McDonald’s (MCD) also serves as comfort food.

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In times of economic hardship, that makes it an affordable luxury. You might not be able to afford a steakhouse or even a sit-down meal, but most people can scrape together enough money for a Big Mac or a Value Meal.

The chain also did well during the Covid pandemic because it had invested in the technology needed to pivot from an eat-in model to delivery and takeout. McDonald’s did not build out that capacity because it expected the pandemic, but its investments served it well.

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The fast-food giant’s resilience, however, does not mean it’s immune to struggles. Chief Executive Chris Kempczinski addressed this matter during McDonald’s’ third-quarter-earnings call.

“Let’s turn now to the update on our performance in Q3. On our last call, we shared that the [quick-service restaurant] sector had meaningfully slowed in many of our markets, with industry traffic declines in several major markets and that consumers, especially those in the low-income category, were choosing to eat at home more often,” he said. “This trend continued in the third quarter.”

The Big Mac has remained a bestseller.

Image source: Cate Gillon/Getty Images

McDonald’s worried about consumer behavior

Kempczinski is not happy with his chain’s performance.

“QSR traffic has remained pressured, reflecting industrywide challenges. And while we anticipated a challenging environment in 2024, our performance so far this year has fallen short of our expectations,” he said.

The CEO made clear that he was unwilling to use market conditions as an excuse for underperformance.

“While the QSR industry has slowed, we recognize that there are still many factors within our control to impact performance, guided by our Accelerating the Arches strategy,” he added.

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Kempczinski did see some positive momentum.

“We’re encouraged by signs of progress in the third quarter and the more consistent market-share traction we are seeing, especially in the U.S., which included strong, compelling value platforms, which is fundamental to the McDonald’s brand promise; menu innovation, which excited our customers with great-tasting food; and strong marketing prowess that drove engagement on higher-margin core items,” he said.

McDonald’s sees value as a key driver

Kempczinski says McDonald’s may have lost its way and ceded an important part of its brand identity to rivals.

“We have spoken before about our customers recognizing us as the value leader versus our key competitors, but our value leadership gap has shrunk,” he said. 

“In response, we have moved with urgency in partnership with our franchisees to improve our value offerings in most of our major markets.”

McDonald’s has been increasing value offerings worldwide, he said.

“Some examples that launched in the quarter are the 4-euro ($4.38) Happy Meals in France, three for 3 pounds ($3.90) in the U.K.; and in Canada, we’re providing value to our customers through price-pointed coffee, starting at just $1 (US$0.70),” he said.

Kempczinski sees value not as a gimmick but rather part of a broad strategy.

“[To] provide our customers with simple, everyday affordability they can count on, we’re employing strategies that are designed to work together to generate sustainable guest-count-led growth and increased market share,” he said. 

“As we have said before, we view good value as including both entry-level items and meal bundles at affordable price points,” he added.

McDonald’s has a name for this strategy.

“This means offering Every Day Affordable Price menus … in our markets,” he offered. “At McDonald’s we define EDAP as a platform with an assortment of items all priced at compelling entry-level price points, generally including breakfast, beef, and chicken sandwich options.”

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The chain has committed to delivering strong value.

“We will pair EDAP platforms with strong meal bundles to provide our customers with entry-level meals at affordable price points,” he added. 

“Blending EDAP and meal bundles under a branded value platform allows us to invest in and build recognition and affinity with our customers. So when they’re thinking about an affordable option for food, we’re top of mind.”