Has McDonald’s become too expensive? That’s a question McDonald’s executives are trying to answer as the company reports disappointing earnings. Once a destination for a quick and inexpensive meal or snack, McDonald’s is struggling to attract customers in the United States and around the world. Many customers have expressed dismay over what they feel are unreasonably high prices, some even taking to social media to provide details on their disappointing experiences at McDonald’s. While McDonald’s claims they are listening to their customers, and in response, has introduced a new value menu, the company’s recent earnings figures suggest that more needs to be done.
One of McDonald’s’ key markets in the United States, lower income consumers, have yet to return to the fast food giant after pulling away during and following the COVID pandemic. Indeed, the inflationary pressures felt by much of the world post pandemic continue to linger. For lower income households in particular, those pressures, together with wages that may not have kept pace with rising prices, are forcing consumers to rethink their spending. For some, McDonald’s is now just too expensive. Indeed, according to McDonald’s the average price of a Big Mac Meal is up some 27 percent since 2019. Even so, McDonald’s remains optimistic that it can turn things around. Executives note that the new value pricing isn’t yet fully reflected in earnings reports and that further changes are underway. Whether the value pricing will be enough to draw customers back, however, remains to be seen.
Discussion Questions:
1. Explain the relationship between inflation, wage growth, and lower sales at McDonald’s. In your opinion, will McDonald’s new value menu drive new sales for the fast good company?
2. Discuss the competing economic forces at play for McDonald’s. The company has benefited from sales to buyers “trading down” from more expensive restaurants, but it has also suffered from the loss of lower income consumers for whom McDonald’s has become a luxury option. Can McDonald’s win back lower income buyers and at the same time, maintain the customers who are currently choosing McDonald’s over more expensive options?
Sources| Financial Times: https://www.ft.com/content/f79bbcd4-856e-49ea-8659-e067c67e0109; ABC News: https://abcnews.go.com/Business/wireStory/mcdonalds-same-store-sales-fall-1st-time-pandemic-112362243; Yahoo: https://www.yahoo.com/finance/news/americans-keep-turning-backs-mcdonald-125459359.html; Unsplash: Photo by Erik Mclean on Unsplash