Consumer Price Resistance
It’s no secret that food prices have shot up over the past few years. From neighborhood spots to Michelin-starred restaurants, diners have been forced to reach deeper into their wallets — or to skip dining out altogether.
The cost of dining out rose by 5.2% last year, while grocery prices rose just 1.3% in comparison. With such a jump in cost, lower cost dining options like fast food restaurants also raised their prices, and consumers just about had enough of it.
One Pricey Nugget
Companies like McDonald’s (MCD) — which used to brag it could raise prices without hurting its sales — are starting to change their tune.
McDonald’s earnings report this week disappointed shareholders with disappointing sales figures at its U.S. stores, and CEO Chris Kempczinski blamed the brand’s affordability. He announced that the burger chain would be slashing prices of some menu items, and promised it would double down on its strategy of pricing items between $1 and $3 moving forward.
It’s Not Just McDonald’s
The problem does not start and end with McDonald’s. Chains like Taco Bell, KFC, and Pizza Hut (YUM) are seeing slowing sales as well.
McDonald’s maintains it raised prices because customers were willing to pay them. Now that this appears to have changed, cheap fast food may be coming back to a drive-thru near you.
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