A fast-food giant is paying the price for years of menu price increases.

Shares of McDonald's (NYSE: MCD) have fallen nearly 31% from their February high and are down 22% year to date. If that trend holds through year-end, it would mark the company's worst annual performance since 2002.

Earlier this week, at its investor day, McDonald's warned that U.S. same-store sales in the current quarter would be "slightly negative." In the prior quarter, sales grew just 0.8%, the slowest pace in more than a year.

The announcement came alongside an $8.5 billion multi-year improvement plan covering technology investment, store remodels, and an expanded chicken and beverage lineup. The market, however, was unimpressed. Investors worried that a sharp increase in capital spending would eat into profits, and the stock slid further.

Price Hikes Have Cost the Brand Goodwill

The root of McDonald's' troubles lies in pricing.

After the pandemic, McDonald's repeatedly raised menu prices to offset higher beef, labor, and fuel costs. According to The Economist's Big Mac Index, the price of a U.S. Big Mac rose roughly 23% between 2019 and the end of 2025.

At the same time, consumers are tightening their belts under the strain of inflation and rising interest rates, growing increasingly selective about every dining dollar.

Jacob Aiken-Phillips, a Melius Research analyst and the only one tracked by Bloomberg with a "sell" rating on the stock, put it bluntly:

They've raised prices a lot, and McDonald's is no longer seen as the best value in dining. I can go to Texas Roadhouse, spend about the same, and enjoy a real sit-down meal with my family.

In 2024, a social media post showing an $18 Big Mac meal went viral and sparked an uproar. McDonald's responded at the time that it was a one-off price at a single location out of more than 13,700 stores nationwide.

Rivals Seize the Opening

McDonald's pricing pressure looks even sharper against rivals' strong numbers.

Burger King, owned by Restaurant Brands International, posted an 8.5% jump in U.S. comparable sales last quarter, beating expectations, helped by its revamped Whopper and a Star Wars tie-in. Yum Brands' Taco Bell saw same-store sales rise 7%, with $5, $7, and $9 meal bundles effectively driving traffic.

On share performance, Burger King's parent is up 5% year to date, while Taco Bell's parent is down 8.4%. Both lag the S&P 500's 13% gain, but they remain far ahead of McDonald's' 23% decline this year.

Franchisees Push Back, Discounts Stall

McDonald's value strategy is also facing internal resistance.

CEO Chris Kempczinski said on the second-quarter earnings call that roughly one-third of franchisees were not following the company's pricing guidance, and consumer awareness of related promotions was below target.

Nearly 95% of McDonald's locations are franchised. Franchisees are broadly resistant to discount offers, such as this year's "10 items under $3" deal, because such promotions drive volume but directly squeeze already pressured operating margins.

Can the "Next" Plan Deliver?

Facing mounting pressure, McDonald's has rolled out a new strategy called "Next," aimed at reviving the brand through technology investment, store renovations, and reopening play areas that were closed during the pandemic.

Seaport Global analyst Eric Gonzalez said he is cautiously optimistic but noted that these changes will take "at least a year to show meaningful results." He also argued that negatives such as higher capital spending and near-term sales pressure are already reflected in the current valuation. McDonald's trades at about 17 times forward 12-month earnings, well below its five-year average.

Even so, Wall Street remains broadly positive on McDonald's. Of analysts tracked by Bloomberg, 24 rate the stock buy or equivalent, 16 are neutral, and only one recommends selling. The average price target implies roughly 28% upside from last Friday's close.

Rebecca Walser, chief investment officer at Walser Wealth Management, said her firm currently holds McDonald's shares, but that investors now need to see real improvement in food quality and value, along with signs of a sustained traffic recovery. Walser said:

McDonald's is part of American culture: Happy Meals, the Hamburglar, Ronald McDonald, the play areas. They need to rebuild that experience. We genuinely believe McDonald's can get through this rough patch.

A McDonald's spokesperson reiterated on Friday that the company will act with urgency and aims to have its U.S. business back on a stronger trajectory by the end of 2026.