By Heather Haddon
Profits at the nation's biggest burger chains are under pressure. They're serving up discounts anyway.
Fast-food brands have been struggling with the surging cost of beef, which is up by 48% over the past 12 months at the wholesale level for the industry's typical ground variety, federal data show. And yet, when Americans are eating out, more people are now purchasing items with deals attached to them than at any time in more than 50 years, according to market-research firm Circana.
The combo of more discounts with higher costs threatens to pressure margins even more. Last year, Burger King's average profitability per U.S. restaurant fell about 10%. Jack in the Box said last month that beef costs and softer sales have dented franchisees' profit.
"The days of spending $15-plus on a burger meal are past for us when there's better options," said Josh Fulps, who works in wealth management in Vancouver, Wash. Fulps, 28, said when he goes for fast food, he religiously scouts the McDonald's app for discounts, or goes for Wendy's Biggie Bag value meals.
Prices for beef are expected to stay high because cattle ranchers have scaled back the size of their herds to the lowest overall level in 75 years, and aren't in a hurry to expand.
Traffic to fast-food chains began to fall in 2024, prompting McDonald's, Taco Bell, Burger King and other companies to dish out more deals. U.S. burger chains last year hit consumers with roughly 3,000 promotions, nearly triple 2019's total, according to market research firm Technomic.
This year they're going further, with McDonald's next month offering deals such as a new $3 and less menu, which includes a McDouble or fries or hash browns, according to people familiar with the plan. The new deals represent the fourth nationwide update to the chain's value offerings in around 21 months.
"We're going to do what it takes to deliver for consumers and do that in a way that's profitable for our business," McDonald's Chief Financial Officer Ian Borden said in a February interview.
Fast-food restaurants reported overall profit margins of 4% last year as costs rose, particularly for labor, according to the National Restaurant Association. In 2016, the trade group estimated fast food margins at 6.6%.
Jim Lewis, a McDonald's franchisee for 32 years until retiring in 2019, said Golden Arches operators will likely manage all right, given their high volume of sales. But he said the discount wars will add to other chains' profitability challenges.
"The winner is doing fine, but the burger category is in some stress," Lewis said.
Burger King is sticking with its current value options of $5 for two items or $7 for three, a spokeswoman said, an effort to provide flexibility across burgers, sides and desserts. "We're confident in the results we've seen and the role they're playing in our menu," she said.
New marketing, store remodels and other efforts were helping franchisee profitability in a challenging environment, the company said.
Jack in the Box Chief Customer and Digital Officer Ryan Ostrom said the brand was introducing new offers at the right time, "not just when the other guys do." Wendy's and Jack in the Box said they were committed to protecting franchisees' profitability through technology investments and initiatives to help owners operate more efficiently.
McDonald's stock has gained 0.9% over the past year, while shares of Burger King parent Restaurant Brands have risen about 9%. Shake Shack has fallen 1.8%, Wendy's is down 53.8% and Jack in the Box has dropped 64.4%.
Greg Creed, a former chief executive of KFC and Taco Bell owner Yum Brands, said to work, discounting needs to attract more customers while keeping restaurant operators in the black.
"The future of the brand depends on the financial success of the franchisees, not the financial health of the franchiser," he said.
Bargain offers have helped chains slow traffic losses, though the most cash-strapped consumers have yet to fully return, according to market research firm Revenue Management Solutions. Declines in fast food traffic gradually improved last year, and visits in December were higher than in the same period a year earlier, Technomic said.
Burger chains still lead the U.S. fast food industry, generating twice as much in overall sales as second-ranked fried chicken chains, according to Technomic. But chicken, coffee and Mexican chains are all growing faster.
Since 2019, the number of burger restaurants in the U.S. has declined by around 6%, according to Datassential. Wendy's and Jack in the Box are closing hundreds of U.S. locations between them.
Burger executives say that even at lower prices, buy-one-get-one and $5 meal deals can generate a profit for companies and the franchisees who typically run the bulk of U.S. chain restaurant locations.
Lewis, the former McDonald's franchisee, helped rally franchisees behind a dollar menu at McDonald's in the early 2000s when sales were weak. He said traffic picked up, and so did profit.
"You can tolerate a lot of pain if you get the sales," Lewis said.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
March 20, 2026 12:00 ET (16:00 GMT)
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