May 29, 2024 - Business

McDonald's: We haven't raised prices that much

The McDonald's sign above a restaurant

Photo: Beata Zawrzel/NurPhoto via Getty Images

McDonald's on Wednesday pushed back against the premise that recent price increases have been unreasonable, arguing the Golden Arches offers "meaningful value" for what it charges.

Why it matters: The fast-food industry as a whole is under pressure from a public frustrated by inflation, and is struggling to retain customers as rising prices drive more people to dine in, or find better ways to save money.

Driving the news: In a rare open letter, McDonald's USA president Joe Erlinger said the assertion the chain has hiked its prices "significantly beyond inflationary rates" is "inaccurate."

  • He bashed "viral social posts and poorly sourced reports" about price increases, while acknowledging the company has faced "inflationary pressures." He noted that franchisees set prices in the 95%+ locations they own and operate.
  • Erlinger said "prices for many of our menu items have risen less than the rate of inflation – and remain well within the range of other quick service restaurants."
  • The average Big Mac price is $5.29, he said, up 21% from $4.39 in 2019, which the executive said accounts for "historic" hikes in wages, costs and supply chain issues.

Flashback: Last year, the Golden Arches was pushed into damage control mode after reports of an $18 Big Mac meal (it was at one location) exploded on social media, something Erlinger addressed in his letter.

  • "More worrying, though, is when people believe that this is the rule and not the exception, or when folks start to suggest that the prices of a Big Mac have risen 100% since 2019," he wrote.

By the numbers: McDonald's overall prices are up 20% since 2022, Bank of America analyst Sara Senatore wrote Tuesday in a research note.

  • That compares to 15% at Wendy's and 16% at major Burger King franchisee Carrols.

What to watch: McDonald's and Burger King are reportedly poised to debut $5 value meals following heightened attention to their price hikes.

  • "MCD is responding with urgency: we see the $5 bundle as a placeholder for a more permanent value offer," Senatore wrote.
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