A recent quarterly financial call with McDonald’s President and CEO revealed that Fast Food menu prices have risen faster than the overall rate of inflation over the past year. And that’s causing some potentially serious problems for the burger behemoth…
The McDonald’s of the Future: Smaller, sleeker, faster… Thanks to AI, automation,
digital ordering and payment, delivery, take-out and drive-through.
But menu prices probably won’t drop as a result…
McDonald’s President and CEO Chris Kempczinski told analysts that the chain’s costlier menu has triggered a drop in business from low-income customers. “[W]e would say [that] is $45,000 and under [annual family income], [and] was negative from an industry standpoint,” Kempczinski said. “That’s part of the business. We’re seeing traffic in the quarter was down.”
According to U.S. Bureau of Labor Statistics figures, Fast Food restaurant prices were up 6.2 percent over the past year. Over the same period, full-service restaurants hiked their prices 4.3 percent over the past year.
They have no choice
You often hear that lame old rationalization in TV and movie dialogue: “Why did you have to kill him?” “I had no choice. It was him or me.” But in the case of the Fast Food restos, it’s a valid statement.
Operators are up against a wall, particularly in the US where some fast food workers will be making a government-mandated minimum wage of $20 an hour or more starting in the new year. In some jurisdictions, they’re already making $15 or more. In Canada, the minimum wage is nationally set at $15, with staged increases coming at regular intervals thereafter.
But they’re also facing continually increasing food prices. Sure food price inflation has eased – particularly in the US. But the prices most foods reached when they shot up over the past few years aren’t going down. And probably won’t.
The Fast Food chains are rushing their ‘Resto of the Future’ business model revamps into the marketplace. But at best they’ll need until 2030 or so before the changeover from the old Fast Food model is complete. And all the new automation, the new reliance on AI, the new emphasis on drive-through, take-out and delivery, and steering customers to digital ordering and payment won’t pay for the changes by themselves.
The Fast Food operators literally have no choice but to raise menu prices to stay afloat. And prices will have to remain high to meet the cost increases they will inevitably have to deal with in the future.
Confusion among the masses
Angry comments about soaring fast food menu prices have gone viral. Social media posts showing Big Macs priced at almost (US)$18.00 have spurred major media stories. But many post commenters seem to have missed the point. One thing that’s inescapable, reading the at times outraged comments is… There’s a lot of confusion about Fast Food prices out there.
Curiously, there is evidence that McDonald’s menu prices may not, in fact, be based on food and operating costs. A CBS News story this past summer postulated that McDonald’s prices are higher in high-income areas – and much lower in lower-income areas. But there’s also evidene to support the theory that menu prices are set to what the market will bear.
“[W]hat affects the price differences between McDonald’s locations? The owners,” CBS’ Caitlin O’Kane wrote. “About 90 percent of McDonald’s locations are independently owned, and the franchisees have the ability to set their own prices, McDonald’s says. That’s why the company doesn’t list prices on its corporate site – prices vary depending on where you are.”
One commenter to the viral TikTok post suggested folks just go to the store, and buy ground beef and some buns: “It’s always cheaper.”
I’ll go with the commenter who replied (with evident frustration): “I don’t understand the complaining. Just don’t spend money there. It’s that simple.”
Kids! (From 8 to 80!) – the future of Fast Food is in your hands. Where you buy your Fast Food – if you continue to eat Fast Food – will determine the fate of the industry. Back in my day, we called it ‘voting with your wallet’.
~ Maggie J.