QSRs Grapple With Consumer Price Sensitivity

Rising prices are making eating out unappetizing to many Americans.

Restaurant prices rose 7% in the three months ending in May compared to the year-ago period, per the NPD Group. As a result, consumers with household income under $75,000 cut their fast-food visits by 6%.

Meanwhile, prices for food at home rose 10.4% over the 12 months prior to June 2022, while food away from home cost 7.7% more, according to the Bureau of Labor Statistics’ Consumer Price Index.

As a result of these price increases, some chains have given new attention to their value meals. Wendy’s has brought back its Biggie Bag, which includes a Jr. Bacon Cheeseburger, a Crispy Chicken BLT or a Double Stack with four chicken nuggets, small fries and a small drink.

Burger King’s Value Meal, meanwhile, offers a Bacon Cheeseburger for $1.49 and a hamburger for $1.



For its part, McDonald’s offers two cheeseburgers for $2 and a Hamburger Happy Meal (including kids French fries, side and a drink) for $2.49. Yet McDonald’s isn’t spotlighting these meal deals in its latest advertising. The most-recent ads on McDonald’s YouTube channel include “Our Happy Place,” (a celebration of gay culture) and “Your napkins are gonna need napkins” (a celebration of the fact that McDonald’s burgers are usually dripping ketchup and cheese.

In a call with analysts in April, McDonald’s CFO Kevin Ozan said the chain expects inflation to elevate food and other costs 12% to 14% for the year.

So far, McDonald’s customers are taking it in stride. "Even though we're pushing through pricing, the consumer is tolerating it well," CEO Chris Kempczinski said during the call. Kempczinski added that the company is currently looking at whether it needed more value options on its menu.

In other words, for the moment, McDonald’s is waiting out the economy. Perhaps McDonald’s will be rewarded as inflation halted in July, though as some skeptics have pointed out, the inflation rate is still at 8.5% on an annual basis.

Next story loading loading..