McDonald’s CEO has acknowledged that the fast-food giant’s sales have suffered due to increased menu prices, alienating its core customers.
In response, the company has announced its commitment to prioritize “affordability” in the coming year.
The Chicago-based fast-food titan, which recently faced criticism for pricing a Big Mac combo meal at nearly $18, reported that its global same-store sales in the latest quarter only grew by 3.4%, falling short of Wall Street’s expectations of 4.7% growth.
This lackluster performance, attributed in part to ongoing conflicts in the Middle East impacting overseas franchisees, had a significant impact on McDonald’s shares, causing them to plummet by nearly 4% on the New York Stock Exchange, closing at $285.97 on Monday.
More attention
McDonald’s CEO, Chris Kempczinski, addressed the issue during an earnings call with analysts, stating, “I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability.”
One notable trend is the decline in orders from low-income customers earning less than $45,000 per year.
These customers, grappling with the effects of inflation, have increasingly opted to eat at home as grocery prices become more favorable.
Kempczinski acknowledged this shift, stating, “Eating at home has become more affordable. The battleground is certainly with that low-income consumer.”
Despite concerns over high prices, McDonald’s customers should anticipate further price increases this year, albeit at a more gradual rate of 2% to 3%, compared to the 10% increase observed last year, according to restaurant analyst Mark Kalinowski. McDonald’s affordability initiatives are expected to manifest in the form of targeted deals offered through its mobile app.
Kalinowski emphasized, “App discounts will be a significant part of their strategy.”
Public scrutiny
McDonald’s faced recent public scrutiny when a Connecticut location charged a customer $7.29 for an Egg McMuffin and nearly $5.69 for a side of hash browns.
In another incident during the summer, a franchisee in nearby Darien, Connecticut, sparked outrage by pricing a Big Mac combo meal at $17.59.
Additionally, the same location offered a Quarter Pounder with Cheese and Bacon meal, including fries and a soda, for $19, which garnered widespread attention through viral posts.
While McDonald’s expects moderate growth in the US, ranging from 3% to 4%, compared to the 4.3% growth reported in the most recent quarter, much of this growth stems from “increased menu prices,” according to the company.
However, McDonald’s reported positive growth across all its business regions globally, except for the Middle East, where franchisees have experienced a “meaningful business impact” due to ongoing conflicts in the region, as mentioned by Kempczinski in a LinkedIn post in January.
