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Fast food chains see drop in customers after massive price hikes

American consumers love their fast food but price hikes are preventing them from enjoying a burger or burrito as often as in years past.

Traffic to big fast food chains has dropped 3.5 percent in the first three months of 2024, compared to 2023. McDonald's, Wendy's, Popeyes, Pizza Hut, and Chipotle have likely sold millions fewer burgers, pizzas and burritos. 

Fast food consumers are complaining on social media about the high prices, as one recent story about a $17.59 Big Mac meal at a McDonald's in Connecticut proved. 

Figures from the US Labor Department show fast-food prices are 33 percent more expensive than they were in 2019. By comparison, grocery costs are up just 26 percent while the overall Consumer Price Index (CPI) rose 19 percent in that time.

Are the price hikes caused by 'greedflation'? Fast food chains are accused of hiking prices more than necessary by blaming inflation. FinanceBuzz has analyzed the price hikes. According to the analysis, McDonald's menu prices have doubled since 2014. 

FinanceBuzz collected pricing data for a dozen different chain restaurants over the last decade. We then calculated how much prices have risen in that timeframe and compared it to the overall inflation rate in the same period.

Here are the key findings: 

From 2014 to 2024, average menu prices have risen between 39% and 100% — all increases that outpace inflation during the given time period (31%).

McDonald’s menu prices have doubled (100% increase) since 2014 across popular items — the highest of any chain we analyzed.

Popeyes follows McDonald’s with an 86% increase, and Taco Bell is third at +81%.

Menu prices at Subway and Starbucks have risen by “just” 39% since 2014 — the lowest among chains we studied. These are also the only restaurants where prices have risen by less than 50%.

The Bureau of Labor Statistics reports that the cost of goods has risen 31% since 2014. This means that $100 in 2014 dollars is worth $131 in 2024 dollars. Most change has happened over the last five years. Inflation is up 22% since 2019.

The restaurants in the study raised prices by 60% between 2014 and 2024. That rate is nearly double the national rate of inflation. 

Five different restaurants — McDonald’s, Popeyes, Taco Bell, Chipotle, and Jimmy John’s — raised their prices at more than double the actual inflation rate. McDonald’s raised prices so much that their average menu prices increased more than three times the national rate of inflation.

Consumers are not lovin' it. 

Some chains are bucking the trend and keeping prices the same. One example is Domino's. It has kept its national mix-and-match deal priced at $6.99 since 2022. CEO Russell Weiner said, 'Customers just don't want surprises.'

The situation has accelerated in California, thanks to a new $ 20-an-hour minimum wage for fast food workers. The predictable happened - management at  McDonald's, Wingstop, Jack in the Box, and Chipotle announced that the higher labor costs would be passed on to customers. 

The chains have gotten the message. Starbucks, for example, posted its weakest performance outside of the pandemic or Great Recession. When customers go elsewhere instead of paying higher prices, it gets management's attention. There are plenty of options in most places. Go where your business is appreciated. 

Many fast-food chains described a gloomy outlook. Wendy's CFO Gunther Plosch told investors on Thursday that consumers are "still under pressure" — especially those with household incomes under $75,000. "They are reducing frequency, so visitation is down."

Chains raised prices drastically during the pandemic to offset rising labor and food costs, and it's coming back to bite them. Some diners are cutting back, saying that fast food is just too expensive and no longer represents good value.

McDonald's CFO Ian Borden told investors that consumers were "price weary" and "certainly" dining out less often. Joshua Kobza, the CEO of RBI, which owns brands including Burger King and Popeyes, told analysts that diners had become "a bit more sensitive to price."

In Biden's America, 60% of Americans live paycheck to paycheck. Families are finding it difficult to make ends meet. Fast food is a luxury, not a necessity. 

Some chains are promising to keep price increases low this year. 

"We're going to stay careful on pricing," Plosch said. "We are expecting low-single digit pricing that the system is going to execute this year. I don't think we're going to get too greedy."

McDonald's would "certainly" be "prudent and thoughtful" about any further price increases in the rest of 2024, Borden said.

Shake Shack went one step further. CFO Katie Fogertey told investors on Thursday that the chain, which has raised prices by in the mid-single digits this year, had no further increases planned for 2024.

We'll see if they keep their promises. Otherwise, they will continue to face the consequences. 

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