McDonald's is slashing prices on combo sets. This is a new twist in the fast food price war

McDonald's will bring back its Extra Value Meals combo packs and cut prices on them in an effort to win back customers with limited incomes who are increasingly bypassing fast food because of its rising costs. That could be a signal of a broader price war in the industry, the AP suggested. Against that backdrop, analyst TD Cowen raised his target price on McDonald's securities, which rose in Tuesday trading while major U.S. indexes fell.

Fast-food chain McDonald's on Tuesday announced it is expanding its value-priced offerings to appeal to economy-minded customers. Starting Monday, Sept. 8, the company will bring back Extra Value Meals sets, which were last heavily promoted before the Covid-19 pandemic, to the menu. According to the company, customers will be able to save 15% on combo sets compared to buying a meal, fries and a beverage separately.

McDonald's CEO Chris Kempczynski said on CNBC that the new combos are aimed at customers who don't yet use the McDonald's mobile app for discounts and don't order items from the existing bargain menu. That's about half of the chain's customer base.

"The pressure is especially intense right now on low- and middle-income consumers. We see that the economy has actually split into two layers," Kempczynski noted.

For more than a year, McDonald's and its competitors have relied on discounts and promotions to bring customers back to their restaurants, CNBC notes.

The chains' sales are being pressured by rising prices, AP notes. According to last quarter's report in early August, McDonald's comparable sales - revenue at restaurants in operation for at least a year - rose 2.5% in the April-June period. However, they increased mostly due to price increases, not customer numbers, the agency wrote. Visits to fast-food establishments by low-income consumers fell at double-digit rates across the industry in the second quarter, McDonald's reported.

"It's all too common today for a consumer to drive up to a restaurant and see combo sets priced above $10. This certainly creates a negative perception of value. We need to fix that," Chris Kempczynski said in August in a call with investors after the report.

The company also attributes the situation to rising costs. According to McDonald's data, the average price of dishes in the menu from 2019 to 2024 has increased by 40% - the same amount has been added to the price of labor, packaging and products.

The flow of customers to fast-food chains is also shrinking amid lower spending by low-income consumers. And they are the ones on whom the fast-food industry relies heavily, Kempczynski said. In an effort to attract that audience, McDonald's last summer launched a promotion with a $5 set. The move intensified a price war in the fast-food market, Bloomberg wrote. The company then added a "buy one, get a second for $1" offer.

Other chains are also trying to capture the attention of potential customers. For example, Domino's launched a Best Deal Ever promotion in late August, offering any pizza with any toppings for $9.99. McDonald's example may encourage competitors to do the same this time around, the AP suggested. Customer traffic at U.S. fast-food chains fell nearly 1 percent in the second quarter, but price increases slowed sharply from previous quarters: indicating more promotions, said Revenue Management Solutions, a consulting firm cited by AP.

Investors reacted positively to the company's announcement. At the trading on September 2, McDonald's shares grew by about 1%, although all major U.S. stock indices, on the contrary, declined. Compared to the beginning of 2025, McDonald's shares are now 8.5% more expensive - this corresponds to the dynamics of the S&P 500.

TD Cowen on September 2 raised its target price for McDonald's shares from $315 to $330, while maintaining its recommendation to hold the securities. Its target assumes growth of quotations by about 6%.

The company's initiatives to reduce prices for its products and return the popular Snack Wrap roll to the menu in mid-July caused a positive reaction from several Wall Street analysts. Thus, Goldman Sachs assumed that during the year the securities may grow by about 15%, as the company, despite price competition, is able to outperform its rivals and strengthen its position in the market.

At the same time, the opinions of analysts, who assigned ratings to McDonald's securities, were almost equally divided. 18 experts took neutral position with recommendation to hold (rating Hold), and 17 advised to buy (Buy and Overweight). Two more analysts believe that the company's securities should be sold. Wall Street consensus target price of $333.3 implies growth of quotations by almost 7% from the closing level on Friday, August 29 (on Monday, September 1, there were no trades in the U.S.).

This article was AI-translated and verified by a human editor