McDonald's sales have fallen worldwide for the first time in nearly four years amid rising prices and ongoing boycotts over the war in Gaza.
The fast food giant said same-store sales decreased by 1% in the second quarter of the year - its first drop since the COVID pandemic forced thousands of branches to close in early 2020.
Under-pressure chief executive Chris Kempczinski admitted it was "clear that our value leadership gap [over rivals] has recently shrunk" but said the company was "working to fix that with pace".
However, he conceded that same-store sales - sales at branches that have been operating for at least a year - were also likely to be down over the next few quarters.
Total revenue for the period was flat at $6.5bn, while net income fell by 12% to $2bn, the results also revealed.
McDonald's blamed the figures on a fall in the number of its customers in the US, which was partly offset by price rises, along with the "continued impact of the war in the Middle East" and weaker demand in China.
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Mr Kempczinski said the costs of paper, food and staff had increased by as much as 40% in some markets as he defended higher menu prices.
Industry-wide figures suggest fast food chains in the US have suffered a 2% fall in customers so far this year amid inflation pressures.
Mr Kempczinski said the firm was working on new product lines and meal deals in an attempt to entice customers back, with meal deals having an impact in markets such as the UK.
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Boycotts against the company were launched last year when McDonald's Israel announced it was donating thousands of free meals to the country's troops fighting in Gaza.
The giveaway prompted critics to accuse the fast food chain of helping to support the mass killings of Palestinians.
Israel has denied targeting civilians.
Sources at the global headquarters of McDonald's in the US tried to distance the firm from the row by saying the company was keen not to take sides in the conflict and was against violence of any kind.
Its Israeli franchise, which sparked the controversy, was taken over by the company earlier this year.
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