The $18 McDonald’s Meal

By Douglas A. McIntyre Updated May 16, 8:45AM EDT · Published May 16, 7:10AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

The $18 McDonald’s Meal — © Alst / Getty Images

24/7 Insights

McDonald’s Corp. (NYSE: MCD | MCD Price Prediction) 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

∴

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.