As several major fast-food chains prepare to announce their second-quarter financial results, with sales expected to be down, management teams are working feverishly to create $5 meal deals that could win back lost customers.

Hoping to boost sales and profits for the third quarter, fast-food chains like McDonald's, Taco Bell, Burger King, and Wendy's have introduced or reintroduced $5 meal deals.

Fast-food restaurants typically withstand economic downturns better than the broader dining sector. However, recent price hikes have led many consumers to conclude that fast food is no longer value for money. More than 60% of respondents in a recent LendingTree survey said they have reduced their fast-food spending because it's too expensive.

The soaring menu prices at fast-food restaurants have frightened many customers, particularly those with low incomes, who constitute a significant portion of the sector's customer base. Sensing this backlash, chains like Chili’s, part of Brinker International, have used marketing to highlight their value compared to the cost of a fast-food meal. Casual-dining chains have taken some market share from the fast-food sector, said Darden Restaurants CEO Rick Cardenas in June. "It's a battle for the poorest customer," said Robert Byrne, senior director of consumer research at Technomic, a restaurant market research firm.

This shift in consumer behavior has also worried Wall Street. Shares of McDonald's and Wendy's have dropped by double-digit percentages this year. Taco Bell's parent company, Yum Brands, is down more than 1% in 2024. In contrast, the S&P 500 has risen 14%. "Investor sentiment is that the second quarter is likely to be a forgettable one – you’ll see many major chains likely miss consensus estimates," KeyBanc analyst Eric Gonzalez told CNBC.

McDonald's is set to announce its second-quarter earnings today, Monday, while Wendy's will release its results on Wednesday. Restaurant Brands and Yum Brands are expected to announce their quarterly earnings next week.

Typically, fast-food chains focus on discounts and value meals in the first quarter, when consumers try to save money after the holiday season. As temperatures rise, so do restaurant sales, and businesses usually don't need to rely on promotions to attract customers.

But this summer is different. Fast-food chains need discounts to drive traffic – and sales growth. If chains fail to persuade customers to add a milkshake or another entrée to their orders, the discounts reduce profits and become unsustainable long-term. This is a significant concern for investors who are already wary that the chains won't see the traffic increase they hope for.

Subway's $5 footlong is a prime example. Although popular with customers, it displeased franchisees as their profits shrank, leading to restaurant closures.

Investors aren’t the only ones cautious about the promotions. Franchisees, who often push back against discounts that hurt their profits, are also skeptical. Franchisees have gained more power in resisting parent companies' strategies for deals in recent years. Many franchisees are now stronger, with more restaurants and sometimes even private equity backing.

At McDonald's, franchisees formed the National Owners Association in 2018 to oppose unpopular discounts and store renovation plans. Since then, the chain's operators have been more resistant to management's plans. An initial $5 value meal proposal at McDonald's didn't gain approval, so Coca-Cola contributed marketing funds to make the deal more appealing to operators. Coke CEO James Quincey said during the company's earnings call last Tuesday that Coca-Cola has seen weaker sales in the U.S. To boost demand, Coke is partnering with food service customers to promote combo meals, according to Quincey. On Monday, McDonald's extended the value meal beyond the initial four-week window. Ninety-three percent of its restaurants voted in favor of the extension, executives wrote in a memo cited by CNBC.

The cheap meal brings customers back to its restaurants, according to both executives and traffic data. June 25, the launch day of McDonald's $5 meal, saw 8% more visits than the average Tuesday in 2024, according to a Placer.ai report. The pattern continued in subsequent days, as the chain exceeded its average annual daily visit numbers. Placer.ai also found that discounts helped increase traffic at Buffalo Wild Wings, Starbucks, and Chili's.