Is the $18 Big Mac combo what finally broke America?
Low-income customers making less than $45,000 per year have largely stopped ordering from McDonald’s, the fast-food giant’s chief executive Chris Kempczinski admitted Monday on an earnings call with Wall Street analysts.
A Big Mac, fries and drink has risen to nearly $18 at a handful of locations while hash browns are up to $6.
And it’s driven away customers fed up with inflation.
Global same-store sales in the latest quarter had grown just 3.4%, falling short of the 4.7% growth Wall Street had expected and largely driven by menu price increases, the company said this week.
“Eating at home has become more affordable,” Kempczinski said. “The battleground is certainly with that low-income consumer.”
Last week, a McDonald’s outpost in Connecticut got slammed over its “outrageous pricing” after a customer was charged $7.29 for an Egg McMuffin — and $5.69 for a side of hash browns.
Over the summer, a franchisee in nearby Darien, Conn., was called out for charging $17.59 for Big Mac combo meal.
That location also sold a Quarter Pounder with Cheese and Bacon meal that came with fries and a soda for $19.
Amid the uproar, McDonald’s franchisees say they are being financially squeezed by the rising cost of insurance, equipment and labor.
“I just got my quote for my insurance and it went up by 31% and the cost of equipment is out of this world,” griped one operator who did not want to be identified.
Experts warn that fast food prices will climb even higher as minimum wage hikes are implemented across the country.
California’s $20-an-hour minimum wage for fast food workers goes into effect in April.
McDonald’s and Chipotle both announced that they would be hiking the prices of menu items at Golden State locations beginning this year.
Still, McDonald’s price increases last year exceeded the industrywide average of 7.6%, according to restaurant research firm Technomic.
Analysts say there’s a limit on how much of these costs restaurants can pass onto consumers who were accustomed to menu price hikes of between 1% and 3% before the pandemic.
Fast-food chains across the board have blamed rising commodity costs — despite the fact that prices for eggs, dairy, vegetables and grains have been coming down since August, according to Technomic.
“Now, they’re addicted to raising prices,” John Zolidis, president of Quo Vadis Capital told The Post. “There is a risk that the whole industry goes too far.”
Kempczinski said McDonald’s aims to slow its price increases to a “low single-digit” pace – pulling back from the 10% hike it levied in 2023.
“I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability,” he said on the call with analysts.
“We are optimizing price while limiting customers resistance,” Kempczinski said, suggesting that the company “can get even smarter with our pricing methodology.”
That will likely take the form of targeted promotions on the McDonald’s mobile app, experts told The Post.
This story originally appeared on NYPost
