In a conference call with investors on Monday, McDonald’s CEO Chris Kempczinski acknowledged that the company’s success through the earlier parts of the pandemic was slowing down. Same-store sales, aka sales at existing outlets from one period to the next, rose 3.4 percent over the last quarter, lower than Wall Street projections.
Some of that, the company claims, is due to ongoing boycotts. Despite not being on the official BDS list of Israeli companies to pressure with a consumer boycott, many began boycotting the company after McDonald’s Israel announced it was giving free meals to IDF soldiers (in response, McDonald’s franchises in countries like Turkey and Jordan pledged aid to Gaza).
But a bigger issue for McDonald’s may be the loss of “low-income” customers. The Chicago Tribune reports that the company saw “fewer visits and lower spending by customers earning $45,000 per year or less,” with Kempczinski saying those customers are more likely to be eating at home. And while low-income customers are not the “average” McDonald’s customers, the company was excited to be making gains with this segment just over a year ago.
It doesn’t help that McDonald’s’ reputation as a low-cost dining option is being threatened by viral social media posts in which customers complain that $18 combo meals are too expensive for the brand. But is $18 for a beef sandwich, a side, and a drink really so bad? How much exactly should fast food cost?
McDonald’s is in the business of keeping its own costs low. It is one of the largest buyers of beef, pork, chicken, and potatoes in the world, which theoretically allows it to pass savings onto the customer. But its main goal is to maximize the profit it can make off those cheap eggs and burgers. The price of a $6 hash brown may cover rent and wages, but a considerable percentage is pure profit for the company (though McDonald’s doesn’t make its profit margins on individual items public.)
Due to its franchise model, which allows franchise owners to set their own prices, McDonald’s prices vary wildly across the U.S. “The price of the items sold at McDonald’s have to do with inflation but also commercial property prices, gas prices, interest rates, car prices, health insurance cost, flight costs since you have to fly foods around the country, and more,” David Klyman, a financial strategist, told Huffpost. This map highlights how prices fluctuate, with many cheaper options found in the Midwest and South, and more expensive menu items in the Northeast as well as in Arizona and New Mexico. And even if inflation has gone down, once the price of a burger goes up it’s unlikely franchisees will bring it back down — if they can keep turning more of a profit, they will.
Impressive worker wins in California and ongoing pushes to raise the minimum wage mean labor has also gotten more expensive. “Between the pandemic’s onset and August 2023, the average hourly wage at a limited-service restaurant [i.e. counter service] increased by nearly 30 percent,” writes Eric Levitz at Vox.
Fast food companies have been weaponizing these victories, blaming high prices on the need to raise wages. Kempczinski and other CEOs have provided hand-wringing quotes about how things will just have to get more expensive, and if you don’t like it you can blame the workers. “California keeps looking for ways to raise prices, drive away more businesses and destroy growth through bad policy and bad politics,” reads one histrionic press release on the McDonald’s website, as if being able to pay workers a living wage isn’t a key determiner of whether or not your business is successful.
This is the main source of tension in any restaurant, though: How do you keep a meal at a price that is high enough to keep your business running, but low enough that customers will still pay? An $18 Big Mac combo might seem expensive to many, even if it is the “true” cost that factors in rising rents, the cost of beef and grain, and the cost of fair wages. But “expensive” is a relative term. Wage stagnation continues to be a problem, with many workers’ raises barely keeping up with increased consumer costs and rent.
Perhaps there is a world in which CEOs don’t make $20 million a year, where companies do not seek endless growth, where billions in net income is recognized as far more than enough. Maybe then there wouldn’t be such a divide between what a burger costs to make and what it’s sold for. And maybe more of that money could go to workers, who may then consider $18 a completely reasonable price for a meal.
