Hello Hamburger Friends,
Great deals abound in the world of Hamburger Business Review, but it’s not always as easy as the ads make you think. Today we’re talking about the tactical use of prices and deals and looking at how much value you can squeeze out of a value meal (or how much value they can squeeze out of you).
Our case study is about a flawed 55 cent promotion that over promised and underdelivered, upsetting both customers and franchise operators. It’s not too different from today’s maze of one day promotions and in-app coupons.
Since the dawn of the 5¢ burger in the 1920’s the hamburger has been the food of the people, but as inflation pushes prices up and income disparity keeps wages low the humble hamburger is going out of reach of the common citizen.
The Price of the Hamburger is Too Damn High
The cost of ground beef has risen sharply from the mid-80’s. In 1984 it was just $1.29 per pound and today is $5.59.
As consumers, desperate for their burgers, cry out in pain, some politicians are seeing this as an opportunity to get involved.
“Three Democratic senators are asking McDonald’s about its menu price hikes in recent years, arguing that the increases are higher than they should be — even with inflation and rising operating costs.” -NBC News
Sens. Elizabeth Warren, Bob Casey, and Ron Wyden sent a sternly worded email to McDonald’s President and CEO Chris Kempczinski demanding to understand how a company could dare increase prices more than inflation (which they also shared with the press of course).
Chris Kempczinski is rumored1 to have responded with a patronizing sigh, “We are driven by profits you morons,” before McDonald’s released a statement saying this letter from the senators:
“demonstrates a lack of understanding of our franchise business model and contains contortions of facts and many inaccuracies.”
Elizabeth Warren, showing a lack of understanding about how the world works, said “Fast food is supposed to be about making life easier for Americans, not a fast profit for McDonald’s executives and Wall Street.” We aren’t sure there is one thing that fast food is supposed to be about, but it definitely has a something to do with profits!
What is a Modern Hamburger Restaurant To Do?
And it’s not like McDonald’s isn’t already very aware of the problems with escalating hamburger prices. Back in June 2024 we saw headlines like “Companies Counter Pushback on Price Increases With Promotions.”
We talk about this on the podcast but this article kicks off with the story of McD USA president Joe Erlinger pushing back on the “inaccurate” reports that McDonald’s had doubled it’s prices over the last decade. No, said Joe, we only increased them by 21% over five years. ¯\_(ツ)_/¯
As consumers and politicians (and even the companies themselves) grow more concerned with increasing prices (let’s ignore that pesky income disparity issue, right?) we have entered a new era in the hamburger business…
The Discount Wars
In recent weeks, McDonald’s, Burger King and Wendy’s announced new value meals, while Target, Walmart, Walgreens and Amazon Fresh said they would cut prices on thousands of items. Other companies are becoming more creative: Domino’s will offer $3 coupons to customers who tip their driver at least $3, and in February, Applebee’s launched a “date night pass” that gave couples a chance to eat $1,500 worth of food for $200.
This is different than the Burger Wars of the 80s, which was an ad war pitting McDonald’s, Wendy’s, and Burger King in a battle for market share. While McDonald’s won that war in terms of market dominance, Wendy’s “Where’s The Beef” campaign won the cultural battle.
The Discount War is more like the famed Breakfast Wars from about ten years ago. That battle started when Taco Bell rolled out a breakfast menu and McDonald’s also fought against Tim Horton’s in Canada (we have an episode about that from last season). Like the Breakfast Wars, this is a contest that goes beyond just the burger business. This is a fight for the very limited dollars of the consumer.
So McDonald’s isn’t just fighting other fast food brands, or even other restaurants, but companies like Target, Amazon Fresh, and local grocery stores. Uber Eats and DoorDash present every local food option, meaning a price conscious consumer has a lot of choices.
In the trenches we see McDonald’s using a two-tiered discounting approach. First is the “Meal Deal” where they pair a mid-level sandwich (the McDouble or the McChicken) with a small fry and drink, but add in support from a 4-piece budget item to create a sense of abundance for $5 or $6. The McDouble and McChicken are also part of the “Mix & Match” campaign, which discounts a collection of various items. These deals are heavily promoted and do not require the use the app.
The second approach is to move all the really amazing deals (like a 10 piece nuggets for $1) into the mobile app. The in app deals are exchanged for customer information and also allow for pre-ordering and paying for food and deliveries. Utilizing these tools makes McDonald’s incredibly affordable for those willing to limit their options or use the apps, but still capitalize on the brand power of the Big Mac™, Quarter Pounder™, and, for a limited time, the McRib™.
McDonald’s CEO Chris Kempczinski is expecting a rough 2025.
“We’re starting to talk about 2025, and my message to our teams has been: ‘We need to be preparing for another challenging year’,” Kempczinski said in remarks at a Boston College Chief Executives Club event.
Case Study: McDonald’s 55 Cent Promotion
All of this leads into our case study, which comes from Dr. David Robinson and the University of Berkeley’s Haas School of Business.
The problem: By 1997, McDonald’s was facing an unsettling challenge: slowing sales growth and intense competition. The fast-food giant unveiled an ambitious and nostalgic strategy—“Campaign 55.” The plan was that each month, a signature burger would be spotlighted at the throwback price of just $0.55, a nod to the year McDonald’s was founded. The campaign launched with the iconic Big Mac.
What seemed like a sure-fire way to delight customers took an unexpected turn... Instead of applause, McDonald’s customers, alongside restaurant owners, erupted in protest. The “C-55” promotion became a lightning rod for backlash when the deal ended up feeling like a bait and switch.
Faced with customer and franchise owner anger, McDonald’s corporate abruptly pulled the plug on the campaign that was supposed to last the entire year. We go into more detail on the podcast and discuss how these price reduction strategies can backfire.
Next Up: McDonald’s India
Next week we look at the 1996 expansion of McDonald’s to India and how the country forced the king of standardization to adapt to an incredibly diverse culture that seemingly had no interest in the hamburger.
If you enjoy Hamburger Business Review you can support us by subscribing, buying merch, or even just buying us a burger.
The Golden Arches and the Frequency Illusion
The frequency illusion (also known as the Baader–Meinhof phenomenon) is a cognitive bias in which a person notices a specific concept, word, or product more frequently after recently becoming aware of it.
Family, friends, and loyal HBR listeners have been reporting to us the various ways in which our hamburger investigations and reporting is leading to them seeing more, and craving more, McDonald’s. Comments have included...
“I've never been more interested in eating food from McDonald's than I have been in the last few weeks”
“I am definitely getting a ton more McD ads in X/Twitter than past months.”
“The only thing Maps wanted to show was McD’s?!?”
While we take some responsibility the truth is, as we often say over here, McDonald’s touches everything. And once you start to see that you can’t unsee it. Think of it as being yellow-pilled.
“You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the yellow pill – you stay in McDonald’s PlayPlace and I show you how deep the dipping sauce goes.”
And Happy Thanksgiving!
We hope everyone had a great Thanksgiving (or a great day watching football for those that don’t observe). Mike worked a shift (for time and a half!) and they even had a family meal spread in the break room.
And this year we’re thankful for our co-hosts, producers, media managers, graphic designers, guests, fans, and listeners.
Not really, but we like to imagine.
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