McDonald’s CEO Speaks Out on Affordability After Extreme Backlash from Overpriced Meals

The recent quarter’s global same-store sales saw a growth of only 3.4%, falling short of the anticipated 4.7%. Kempczinski identified the target for improvement as “affordability,” particularly among low-income customers earning less than $45,000 annually.

In response to this trend, McDonald’s plans to focus on catering to the needs of the low-income demographic.

Restaurant analyst Mark Kalinowski suggests that McDonald’s strategy for affordability might manifest through targeted deals offered on its mobile app.

A Connecticut branch faced backlash for charging $7.29 for an Egg McMuffin and nearly $5.69 for a side of hash browns. Another franchisee in Darien, Conn., drew attention for pricing a Big Mac combo meal at $17.59 and a Quarter Pounder with Cheese and Bacon meal at $19. These instances contribute to the overall dissatisfaction among customers, prompting concerns about the chain’s pricing policies.

In a subsequent post, Bespoke noted the astonishing price of a single side of hash browns at $5.69, emphasizing the significant disparity in costs compared to McDonald’s outlets in New York City’s Times Square, where hash browns are priced at $3.99, and an Egg McMuffin costs $5.49.

The criticized Connecticut location advertises an Egg McMuffin meal, inclusive of a small coffee and hash browns, at a staggering $17.63 on its Uber Eats page. Additional upgrades, such as a larger-sized coffee, bacon strips, and a “round egg” (a fresh-cracked egg), incur extra charges of up to $3.

The primary driver of recent growth in the US was attributed to increased menu prices. Despite challenges in the Middle East due to regional conflicts, McDonald’s witnessed positive growth in all other global regions, signaling the resilience of the brand in various markets.

The CEO, Kempczinski, pointed out that the negative sentiment towards the brand in the Middle East is fueled by misinformation regarding McDonald’s stance on the Israel-Hamas war. The company, along with other businesses like Starbucks, has faced consequences from protests and boycotts due to perceived affiliations with political stances.

The ongoing conflict has created a challenging environment for McDonald’s franchises in the region, contributing to a significant business impact.

California’s $20-an-hour minimum wage for fast-food workers has prompted McDonald’s and Chipotle to announce price increases at their Golden State locations starting this year. The broader implementation of minimum wage hikes across the nation could further escalate fast-food prices, posing additional challenges for industry players.

The Guardian reports that this legislation represents a culmination of efforts by fast-food workers who have conducted over 450 strikes since 2020, driven by demands for better wages and working conditions amidst the challenges of the Covid-19 pandemic.

The Fight for $15 labor group reports that these workers held over 450 strikes since 2020, motivated by ongoing work during the Covid-19 pandemic under conditions of low wages, alongside widespread reports of wage theft, denied meal breaks, and workplace harassment.

This council is tasked with overseeing fast-food chains that operate more than 60 locations nationwide, ensuring they adhere to standards approved by council votes, which are then submitted to the California Labor Commission for the rule-making process.

This represents a significant rise from the current median wages, which vary from $16 to $18 an hour across different municipalities. The council will also have the authority to set annual wage increases beginning in 2025.

Valderrama, who earns $16.50 an hour, highlights the significance of the wage increase, stating, “It’s going to mean a lot for us. For me, I work two jobs, but with this new increase to the minimum wage, it’s going to help me a lot, it’s at least some sort of relief.”

Valderrama emphasized the importance of having “a seat at the table where we can talk about things that happen at work that need to change, like management abuse,” illustrating the broader impact of the bill beyond wage increases.

Workers in various sectors are now pushing for the creation of sectoral standard councils at state and municipal levels, aiming to address wages and working conditions, mirroring efforts seen in industries such as nursing homes in Minnesota and farm workers in New York.

This proposed increase reflects a broader trend of recognizing and addressing the needs of workers in essential service sectors, further indicating the ripple effect of the fast-food workers’ legislative victory.

“This is a victory for all working people,” Henry states, highlighting the potential for widespread impact.

Henry remarks on this achievement, saying, “The workers’ determination got the industry to rethink whether they were going to pursue that ballot initiative and agree to take it off the ballot,” showcasing the power of organized labor efforts.

This legislation not only promises higher wages but also aims to improve working conditions and provide workers with a platform for representation and advocacy.

As this legislation sets new standards for worker rights and compensation, it’s important to note the impact of these changes on the price and affordability of McDonald’s food for its ordinary customers.

While McDonald’s and Chipotle have announced impending price hikes in California, they have not disclosed specific figures. For instance, if a worker’s wage increases from $15.50 to $20, nearly a 30% rise, Professor Ashenfelter estimates a 6% increase in prices, turning a $7 Big Mac into $7.42.

The challenges posed by regional conflicts, misinformation, and impending minimum wage hikes further contribute to the complex landscape that McDonald’s navigates in its efforts to sustain and enhance its global presence. The path forward involves not only addressing pricing concerns but also navigating geopolitical challenges and adapting to the evolving economic landscape.