Each one of us has a happy McDonald’s memory. But it seems like we won’t be able to enjoy our favorite meal at this popular food joint as frequently as we did. Wondering why? Because along with gas prices, McDonald’s is also increasing their prices. This is not speculation, it’s really happening.
The Wall Street Journal reported that McDonald’s is going to raise prices approximately 6%, and this price increase is going to happen in the near future. We don’t know an exact day, but soon.
“We are still seeing [6% increases] and that’s pretty much the level we expect for the full-year 2021 over 2020… And that’s really to cover both labor cost pressures and commodity cost pressures,” said CEO Chris Kempczinski, in response to an investor question about menu prices.
There are multiple reasons that McDonald’s is going to raise menu prices, but they all lead back to one thing – money. McDonald’s is paying more than in pre-pandemic times for just about everything they need to keep their restaurants running. They have increased the salaries of their employees. They are also paying more for essential supplies including paper products and food.
Even though McDonald’s is paying its employees more than in pre-pandemic times, the fast-food chain is still having trouble retaining employees. That means a lot of employees are new to the job and not as fast or efficient as more experienced employees would be. This could lead to longer wait times for customers and possibly even more incorrect orders.
In addition, not having enough employees means there may not be enough employees to keep the restaurants open as long as they would otherwise be open during the day, and the restaurants may be short-staffed when they are open. Again, this could lead to longer wait times for customers and could possibly lead to customers deciding to eat somewhere else if their local McDonald’s location closes earlier than another fast-food chain.
Employee wages at McDonald’s have been steadily increasing this year, with an initial bump earlier in 2021 of 5%. In the time since, they have grown again, for a total increase of about 10% so far in 2021. Employees have it even better at company-owned stores, where wages have shot up a full 15%.
The wage hikes come in response to widespread labor shortages: McDonald’s is having trouble fully staffing its restaurants and has been increasing wages in the hopes of attracting new employees. The strategy has been partially successful, but not to the extent anticipated.
Operational cost increases aside, however, McDonald’s has had a successful third quarter, with same-store sales up by 14.6% compared to 2019, and the company beating market expectations with substantial increases in both its net income and overall sales.
McDonald’s offered a few explanations for the sales growth. According to the company, customers are placing larger orders and buying for larger groups. They are also placing more to-go orders. Growth was also driven by increases in menu prices, as well as menu development, including McDonald’s crispy chicken sandwich (which debuted in February), and its hugely successful “Famous Orders” line, which has not only generated sales but helped to steer customers onto the quickly growing McDonald’s app. The BTS meal alone is estimated to have grown the app’s user base by 23%.
Make no mistake, though: however successful McDonald’s latest quarter may have been, the company is ready to protect its margins. So expect to dig a bit deeper in your pockets next time you make a McDonald’s run.
