Non -edible food, McDonald's. McDonald's is making
a major move to win back budget -conscious customers
by cutting prices on popular, sorry, popular
combo meals starting this week. The new, quote,
extra value meals, featuring classics like the
Big Mac, the McCrispy, or Egg McMuffin, with
fries, any drink will cost about 15 % less than
ordering the items separately. To kick things
off McDonald's is offering a Big Mac meal for
just eight dollars and a sausage McMuffin meal
for just five dollars in most areas though prices
will now be one dollar higher and places like
California and Hawaii kind of makes sense. This
comes as McDonald's. faces a drop in traffic
from a lower income customers, especially those
making under $45 ,000 a year. The CEO does admit
that many no longer see McDonald's as a good
value, a big problem when your brand is built
on affordability. Other fast food chains are
likely watching this closely and will and could
be. seeing the start of a broader fast food price
war as inflation weary customers push back on
rising costs. And this is something that I also
find very interesting because about three months
ago for my MBA program, I actually had to do
a whole analysis on McDonald's, like who their
customers were, what was their like kind of segmentation
that they were focused on. And they have always
been historically trying to be one of the cheapest
fast food companies. And they kind of broke away
from that. So what do you think, Alex? So there's
there's two pieces that I find interesting about
this. And I did watch his CNBC interview where
he was talking about this big new initiative
of theirs to drop the prices. Right. Two things,
and he mentions lower income customers dropping
off specifically those under $45 ,000 a year.
There's another quote from that clip that I really,
really liked where he very correctly identified
that right now there are two different economies,
right? There's an economy of everybody making
under $100 ,000 a year and an economy of everybody
making over $100 ,000 a year. And if you pull
those people separately, they are seeing the
economy in very different ways right now. and
I think he's 100 % right. And the problem is,
is that their core demo, as you so interestingly
pointed out, is that under $100 ,000 a year demo.
And the other piece that I saw in some of the
commentary on this, I think Breaking Point said
something on this earlier today, was that part
of the reason McDonald's and everybody started
getting so expensive is, They stopped doing the
things that everybody criticized them for. They
actually increased the quality of their freaking
hamburger meat. They started paying people more.
They started doing other things to get themselves
out of the bad reputation they had for being
absolute garbage, right? They started experimenting
more and changing their menu and doing a lot
of stuff. And that increased the price of their
stuff, right? and so again as a child of the
80s and 90s who remembers when a quarter pound
of a cheese meal with fries and a small drink
was a dollar 99 literally right and i have distinct
memories of it being a dollar 99 um you know
it's you know it's i think he's look they got
to figure this out um And it's not affordable
like if I go take my kid to McDonald's man, what's
a happy meal like eight nine bucks now it used
to be a buck 99 like And it is a huge red flag
and what what the other commentaries on this
is this is the canary in the coal mine Right.
It's not the S &P. It's not the Federates It's
what are people spending money on and and this
is an area where people are really cutting back
You know Yeah So you gotta know do you think
this trick that somebody in the chat said it
to franchise wars hashtag Taco Bell rising does
do you think that this starts a price war I So
I don't think so. Um, I it will with a couple
maybe fast food chains, but overall like not
a I don't know all -out or because Looking at
the competition, it's got to be affecting all
of them, though. Yes and no. So McDonald's took
a huge hit when burger chains like five guys
kind of came on the scene. It is really, really
expensive, but they took a demographic of people
that didn't mind waiting a little bit longer,
didn't. Mind paying a little bit extra for that
little jump in quality. Yeah a little jump in
quality and McDonald's did take a little bit
of a hit there and you kind of mentioned it where
they McDonald's started to try to Experiment
with you know, what can we do? Should we do higher
quality? Another thing that people hated about
McDonald's was their customer service sucked
and that kind of correlates with the price or
the salary that you're offering the employees.
You're not getting high quality employees like
now. There's no customer service. Every McDonald's
I've been into in the last two years. I'm ordering
on a fucking touch pad. Right. Oh, yeah. And
I barely have any interactions with the employees.
Yeah, definitely. But yeah, I it will with some,
but some I don't know, some fast food places,
they're just they're not They're in the same
market, right? Fast food burgers. But they're
going after different segmentations of customers.
And I think they will get it, especially now.
And with all the talk of the tariffs, we're seeing
prices starting to go up on things. There's this
freak out of AI people getting laid off from
jobs. Yeah, I think people are going there's
a not everyone there's a group of people out
there. They're going to be looking at what can
I what is the best value? Like when I'm rushing
home with the kids from soccer practice Do I
want to have to go into a store or into like
a shop like five guys? Probably not. I want to
do fast food Do I want to spend the money for
Chick -fil -a? No, I want something. Is it Sunday?
Can I not get Chick -fil -A? Very true. Is it
Sunday? But yeah, so I think this is going to
win back some of their customers that they lost.
Because McDonald's was really, really founded
on a very simple menu. And I believe when it
was first founded, it used to just be you didn't
have options. It was just one burger. You just
got a burger. and a fry like that is it and it
was just like that focus on being super simple
a super simple process making it very quick very
cheap very affordable and they've slowly over
the years kind of got away from that so i think
it's going to help mcdonald's and not necessarily
everyone's going to try to lower their prices
and start an all -out war so i would ask you
a couple of questions right Based on the fact
that you're talking about different segmentations,
who do you think is McDonald's most direct competition?
Is it just Burger King? No, it's not just Burger
King. They're also competing with Wendy's. They
do have Taco Bell. I know they don't make burgers,
but they do have Taco Bell as a competitor because
again, like think think college kid right that
like that is a super simple market like segmentation
to think about someone who is in college who's
looking for super quick super easy on the go
i don't have time to be here also i don't have
any money what is the cheapest thing that i can
put in my mouth besides dirt right so taco bell
is actually a competitor there with that market
segmentation I'm trying to think of the other
ones that like was listed out and in the Yeah,
but I it's like Wendy's Taco Bell And I would
quit like Shake Shack Shake Shack's expensive
too. Yeah Shake Shack my daughter and my wife
both love Shake Shack, but Shake Shack So I don't
put Shake Shack and taco and five guys in with
McDonald's so yeah that's that's what i'm saying
is they're separate they're outside of that yeah
my my immediate again i go mcdonald's burger
king wendy's i almost put taco bell oh and jack
of the box i'll put taco bell in its own category
because i'm like that's tacos right it's not
burgers right um so those are the four i and
again kind of going back to the price war again
with them dropping their prices i do wonder if
burger king wendy's can't really drop their prices
anymore they already suck um But I wonder if
Burger King does, right? Those two have always
kind of like jostled and fought. So and look,
the chat is going to kill me. So let's talk Seattle
now in Seattle. For those of you who are watching
from outside the Seattle area on YouTube, this
is Dix. This is a Seattle institution. We love
Dix. Here's the thing about Dix. A plain hamburger
is two dollars and fifty cents, right? A plain,
single, eighth of a pound grilled patty, no kind
of, two bucks, right? 250, okay? Plain cheeseburger,
$3, right? Fries, they only have one size. It's
$3, right? Shakes, one size. It's four bucks,
right? This is Dick's. And going back to what
Jay was saying a few minutes ago, this is kind
of what McDonald's originally was, right? Super
limited menu, cheap. Fast. If you've ever been
to a Dick's and say, walk up, there are no drive
-thru locations, you walk up, hey, I'll take
two deluxe and a thing and you're done, right?
And it is cheap, okay? It's dirt, dirt cheap.
Here's the interesting thing about Dick's, right?
And I actually deal with this at my job because
we're talking about who compices this for labor.
Dick's starts their people at $22 an hour. And
it's 100 % covered health insurance. 100 % employer
paid. Okay. $22 an hour and they charge $2 .50
for a burger. Okay. So companies that are not
there, like they're... Look, you can pay people
decently, but yes, we will talk about Dix. This
is the list of locations. I love Dix. It's it's
it's this That's probably the closest when you
talk about the the Seattle analog I do again.
I think it's a canary in the coal mine. I think
it's it's Them freaking out about this is telling
me that we are if we're not in a recession now
Right, and we just haven't called it one yet
It's coming You know what I mean look man when
you're drunk sometimes you just need a big bag
of dicks And there's no shame In a big bag of
dicks. We had a big bag of dicks at my wedding.
We had so many bags of dicks at my wedding Right.
It was just dicks everywhere Okay Big greasy
bag of dicks This is this is the this is the
actual issue that we have with YouTube Look man
Just is what it is Um, yeah, I think that's pretty
much what we got for this topic. Do you anything
else there to add Jay? I'm just like scrolling
through So I'm looking at the Harvard study that
I had to like for the Harvard case study Yeah,
here you go. Competition. McDonald's competition.
Burger King, Wendy's, Taco Bell. It does actually
list Chick -fil -A as a relatively inexpensive.
Yeah. That's that's it. That's their main competitors.
Again, I don't put five guys in Shake Shack in
the same conversation. Now, I will say this on
the five guys Shake Shack discussion. I actually
prefer Shake Shack now. I like their burgers
better than Five Guys. I think they've got more
options and I could put more good stuff on there
for basically the same price.