It was inevitable. As food price inflation continues to worsen, it’s getting harder and harder for lower-income folks to eat healthfully. Now, even Fast Food giants are raising their prices in spite of traditional crushing competition. And struggling families are losing one of their last price breaks…
Food banks are facing soaring demand while donations are falling,
because fewer and fewer folks can afford to give.
Fortune magazine recently revealed that more than 60 percent of Americans are living paycheque-to-paycheque. Even so-called ‘rich folks are suffering. Their problem is, they’re swamped with debt for the big houses, foreign vacations, luxury vehicles and, generally, their accustomed high maintenance lifestyles.
The latest blow to those with big dept came this week when the U.S. Federal Open Markets Committee (FOMC) boosted the prime rate by 75 basis points, repeating the increase it imposed in June. That’s significantly increasing the cost of servicing consumer debt like car loans, mortgages and credit card balances. The move is supposed to put the brakes on inflation, but so far prices have kept rising. In fact, inflation is at a 40-year high.
Hard on businesses, too
The jumps in the prime rate are also pushing businesses to make some drastic decisions. The most obvious one, for the Fast Food Industry, is to raise menu prices. In just the past 2 weeks, McDonald’s, Wendy’s and Chipotle have announced significant retail price hikes.
According to Fortune, MDonald’s CFO Kevin Ozan announced, in the company’s first-quarter conference call in April,that the iconic chain had issued ‘strategic price increases’ this year to deal with high fuel, labor, and food costs. The move follows a 6% jump in prices at the burger chain in 2021.
Chipotle raised its prices roughly 10 percent in 2021, and added another 4 percent in the first quarter of 2022. Wendy’s has hiked prices almost 5 percent already this year to help maintain its margins. Domino’s Pizza is raising the price of it’s legendary $5 Mix-And-Match deal to $6.99 – the first such increase in 12 years.
Look for similar reactions to what Domino’s called ‘significant cost inflation’ across the Fast Food sector.
More than just inflation
Industry leaders also blame rising wholesale prices and what some observers say may be a permanent employee shortage for adding pressure on menu prices.
“The labor market has shrunk. As leaders, we’ve got to actually plan for that shrinkage,” Checkers/Rally CEO Frances Allen told Bloomberg. She also pointed to the recent trend toward automation and Artificial Intelligence in the industry to offset the employee shortage. But that will mean big time capital investments for Fast Food operators, and they’ll have to finance those at sharply increased interest rates.
The bottom line…
So… The folks who can least afford to pay are footing the bill for Food Price inflation. And even Fast Food joints, which offered them one last respite from rising food costs, are closing that door.
What next?
For one thing, more and more folks are turning to food banks to fill their stomachs. But that’s hitting food banks hard. Demand is not only up sharply but donations are down, since fewer folks can afford to give.
Mass starvation in the ‘wealthiest’ countries in the world? That’s an extreme, I’ll grant you. But it wouldn’t hurt for the giant banks and the top 1 percent to spread around some of their close-held billions and cut interest rates – especially on credit card debt – to help avert the coming disaster.
~ Maggie J.