The Rip-Off of Fast Food Consumers and McDonald’s Response

A recent CNN study of earnings calls and analyst notes reveals that the word of the summer on Wall Street is "bifurcation," referring to the division of high-income and low-income consumers. While high-income consumers are faring well, the plight of low-income consumers is stark. According to the study, 80% of American households have less cash available than in 2019, and credit card debt has reached historic highs. A JP Morgan survey found that over 70% of low-income consumers are struggling to make ends meet, with 67% of middle-income households also feeling the pinch.

Given this context, it's unsurprising that 78% of Americans now consider fast food a "luxury." A LendingTree survey found that 62% of Americans eat QSR food less frequently. This trend has been reflected in traffic declines for at least two quarters, with restaurant executives from McDonald's to Jack in the Box acknowledging a more discerning low-income consumer.

In response to these economic challenges, several brands are making concerted efforts to correct the "luxury" perception of fast food. McDonald's and Burger King are promoting $5 meal deals, Wendy's has a $3 breakfast combo, and Jack in the Box has released a Munchies Menu with offerings under $4. Smaller chains are also emphasizing value messaging, such as Peter Piper Pizza's "inflation-busting summer fun family deals." These initiatives are a beacon of hope in the industry's response to the economic trends.

Despite these efforts, McDonald's CEO Joe Erlinger recently released a letter to the company's fans, reiterating the company's "laser-focus on value and affordability." Erlinger addressed viral social posts and reports claiming McDonald's has raised prices significantly beyond inflationary rates, calling this information inaccurate. He attributed price increases to the pandemic, supply chain costs, and wages, noting that the average cost of a Big Mac has risen 21% since 2019, not 100% as some reports suggest. This is a blatant lie, showcasing how top-level CEOs for major fast-food chains cannot be trusted; they have no ethics or integrity, as the majority of fast food items at McDonald's are up over 219%, and the supply chain pricing has not increased to match the pricing, further showing this is just corporate greed.

However, Erlinger's letter also overlooks the broader context and the impact of these price increases on low-income consumers. While he attempts to justify the price hikes, the reality is that many Americans are feeling financially strained. Despite a drop in grocery store prices, the rise in QSR prices by 108% year-over-year highlights this issue. Most consumers are not concerned with franchisee input costs but are instead focused on why their dollar is shrinking and where they can get affordable meals.

In conclusion, if McDonald's and other QSRs do not make sustained efforts to address value perceptions, it will take more than temporary meal deals and public letters to resolve the challenges faced by low-income consumers. The industry urgently needs to find sustainable solutions that genuinely address affordability and accessibility for all consumers, highlighting the pressing nature of this issue.

It is time for CEOs like Erlinger to start being honest with consumers instead of adding to their quarterly bonuses. Every QSR is doing this, including my former favorite Chick-fil-A, which has switched to Sysco chicken, which is full of toxins and antibiotics.