24/7 Insights
- McDonald’s Corp. (NYSE: MCD) finds itself caught between increasing costs and consumers unhappy about rising prices.
McDonald’s Corp. (NYSE: MCD) has a problem. Earlier this year, its CEO Chris Kempczinski told investors that customers were “weary” of high prices. The company faced increases in food prices and the cost of fuel to bring that food to its locations. It created a dilemma for company management.
Just how expensive is too expensive? A few months ago, a study of menu prices found that along I-95 in the northeast, a Big Mac meal cost almost $18. The Big Mac by itself costs $8.28. At other local McDonald’s locations, prices were lower, but not by a significant amount. Looked at another way, meals for four could be almost $70. Even at $50, McDonald’s is no longer a cheap fast-food provider.
The latest consumer price index figures showed that “food away from home” prices rose 4.1% year over year in April, compared to 3.4% for the entire index. This “food” number was one of the components that rose the most.
McDonald’s has a dilemma that will not go away quickly. While food prices may come down some, diesel prices have stayed fairly high at $4 a gallon. Transportation is a major part of the supply chain that affects McDonald’s margins.
McDonald’s also has to contend with increases in minimum wages. While the figure is a very low $7.25 in some states, in other states it has topped $12. For many hourly workers in California, it has topped $20.
If Kempczinski is correct, McDonald’s cannot improve profits via higher prices. With rising costs to operate, that creates a major challenge.
Discover the U.S. Town Furthest Away From Its Closest McDonald’s
∴
Want to Retire Early? Start Here (Sponsor)
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
