Is the recent surge in prices, including an $18 Big Mac combo, a sign of trouble for America?
During an earnings call with Wall Street analysts, McDonald’s CEO Chris Kempczinski revealed that low-income customers earning less than $45,000 annually are increasingly avoiding McDonald’s.
At some locations, the cost of a typical McDonald’s meal, comprising a Big Mac, fries, and a drink, has soared to nearly $18. Even simple items like hash browns now come with a hefty price tag of $6. This steep rise in prices has left consumers frustrated with inflation.
Despite the price hikes, global same-store sales in the latest quarter only saw a modest growth of 3.4%, falling short of the anticipated 4.7% growth. Much of this growth was driven by increases in menu prices, indicating the impact of rising prices on consumer behavior.
Kempczinski acknowledged the challenge of attracting low-income consumers, noting that “eating at home has become more affordable.”
Recent incidents of “outrageous pricing” at McDonald’s outlets have further fueled customer dissatisfaction. For instance, customers were charged $7.29 for an Egg McMuffin and $5.69 for hash browns at a Connecticut location. In another instance, a Big Mac combo meal was priced at an astonishing $17.59, with additional meal options costing up to $19.
McDonald’s franchisees are feeling the financial strain from increasing costs of insurance, equipment, and labor. Rising minimum wage laws, such as California’s upcoming $20-an-hour minimum wage for fast food workers, are adding to their financial burden.
Despite decreasing commodity costs for items like eggs, dairy, and vegetables since August, fast-food chains continue to raise prices, raising concerns among experts. John Zolidis, president of Quo Vadis Capital, cautioned against excessive price hikes, warning that the industry could go too far.
Kempczinski emphasized the need to address affordability concerns, aiming to slow price increases to a “low single-digit” pace in the coming years. He stressed the importance of optimizing pricing strategies to minimize customer resistance and ensure sustainable growth.