Over the past several years, prices at McDonald’s and other fast food restaurants have been steadily increasing to the point that millions of Americans say they can no longer afford the once-budget-friendly cuisine.
Until recently, McDonald’s was adamant that their new prices were absolutely necessary due to high inflation. However, the company’s CEO recently announced that it was really greed that led to McDonald’s “value execution,” and Americans can expect lower prices at all locations very soon.
Let’s Talk Numbers: McDonald’s Sales Dropped This Year
Since its inception in 1940, McDonald’s has seen a steady increase in sales almost every single year. However, as of the second quarter of 2024, global sales have dropped by 1% since the same time last year, with a 0.7% drop in the US alone.
While 1% may not seem like a significant decrease, for a company as big as McDonald’s, that’s equal to billions of dollars lost. Now, the company has finally realized that changes need to be made.
Why Is McDonald’s Losing Money?
With more than 13,500 locations in the US and over 36,500 restaurants around the world, McDonald’s is unquestionably one of the largest chains on the planet.
Some reports say that more than 70 million people eat at McDonald’s every day, but that number has certainly dwindled this year. And the reason why is quite simple: McDonald’s is just too expensive.
How Expensive Is McDonald’s?
According to CNBC, McDonald’s prices have increased by 40% in just five years since 2019. Another report claims that the fast food giant has raised its prices by 100% in only ten years.
While prices vary from state to state, the average cost of a Big Mac right now is $5.69, compared to just $4.18 in the 2010s. One customer even reported paying $18 for a Big Mac combo in Connecticut this year.
Millions of Americans Say Fast Food Is Now a Luxury
In response to this reality, nearly 80% of Americans now consider fast food a luxury and have significantly reduced their visits to their favorite chains, including McDonald’s.
Even though grocery prices have also increased, most American families have found that it’s far cheaper to feed their families at home rather than purchase fast food. And companies like McDonald’s have felt this shift in their overall sales.
McDonald’s Explains the Drop in Sales
McDonald’s CFO Ian Borden explained, “Consumers in that low-income category and I think families, which are obviously two big cohorts of our consumer base across most of our markets, just eating out less frequently than they have been previously.”
It’s important to note that there are really two reasons Americans are eating at home more than before: the prices at fast food chains are too high, and Americans are struggling to keep up with the ever-increasing cost of living. But McDonald’s can only fix one of these problems.
McDonald’s CEO Admits the Company Can Lower Its Prices
In a recent statement, McDonald’s CEO Chris Kempczinkski explained that high inflation, as well as other “external pressures…disrupted long-running value programs and led consumers to reconsider their buying habits.”
However, he also said, “But there were also factors within our control that contributed to our underperformance, most notably our value execution.”
Lowering Prices Won’t Improve Sales Overnight
Kempczinkski’s comment that McDonald’s “value execution,” i.e., how they price their menu items, was at least partially to blame for the company’s underperformance this year, was certainly big news.
But for consumers, the more exciting aspect of the executive’s announcement was that prices will be dropping in the very near future. As Kempczinski said, “We are resolved to reignite share growth in all our major markets regardless of the prevailing market conditions. This won’t happen overnight, but it will happen.”
McDonald’s Already Rolled Out the $5 Meal Deal
Although McDonald’s hasn’t substantially decreased its prices just yet, the company did offer a summer $5 Meal Deal throughout most of its US locations.
However, the McDonald’s CEO and other company executives understand that a few meal deals aren’t going to completely change the industry overnight.
Even With These Deals, Bringing Americans Back to Fast Food Will Take Time
Joe Erlinger, the president of McDonald’s US, explained, “We expect customers will continue to feel the pinch of the economy and a higher cost of living for at least the next several quarters in this very competitive landscape.”
In other words, they don’t expect customers to immediately start flocking back to fast food restaurants just because prices are marginally lower. First, the mindset of the American people will have to change.
Most Other Fast Food Chains Are Seeing Delicing Sales
Of course, McDonald’s is not the only company experiencing a decline in sales. Starbucks, KFC, and Pizza Hut all reported disappointing sales this quarter.
Some of these companies plan to use the same tactics as McDonald’s and offer special discounts or extended loyalty programs to regain customers. However, also like McDonald’s they understand that it will take some time for things to get back to “normal.”
McDonald’s Will Be Just Fine
While it’s nearly impossible to imagine a giant company like McDonald’s or Starbucks closing its doors for good, if it had continued raising prices as it had over the past several years, that very well may have happened.
But now it’s clear that most of these fast food chains plan to lower prices this year and into next year, and within just a few quarters, it’s extremely likely that their sales will be growing once again.
