McDonald’s Says “McFlation” Linked to California’s Wage Increase Could Be a Good Thing for the Company

By: Georgia | Published: Apr 20, 2024

When TikTok user, shannon_montipaya went to a McDonald’s drive-thru in Southern California, she didn’t expect to kick off a nationwide conversation. 

Her video showcasing a $25 McDonald’s meal — 40 nuggets and two large fries, but no drink — got people talking. “OK, so it’s $25.39 for 40-piece nuggets and two large fries. You couldn’t even throw in the Sprite?” she quipped, highlighting a surprising lack of beverages for the price.

Viral Reaction to McDonald's Pricing

The video struck a chord, gaining 2 million views as viewers began sharing their reactions and recollections of more affordable times at McDonald’s. 

Two side-by-side images of a McDonald's digital drive-thru menu. The left screen shows a 40-piece Chicken McNuggets meal with spicy nuggets option and two large fries for $25.39, with a caption below saying 'you couldn't even throw in the Sprite'

Source: shannon_montipaya/TikTok

The collective nostalgia and shock were evident in comments like, “Remember when 40 pieces nuggets was $5 and a large drink was $1,” highlighting a widespread feeling that fast food prices have gone up significantly.

Price Increases at McDonald's Since 2014

A report by FinanceBuzz revealed a steep 100% increase in McDonald’s prices since 2014, with a once $5.99 nugget meal now costing $10.99. 

A McDonald's meal laid out on a black tray, featuring two large drinks, a box of 6 Chicken McNuggets, a Big Mac in its box, and a large fries container

Source: Wikimedia Commons

McDonald’s, however, told Fox Business that this report is “not an accurate representation of pricing at McDonald’s restaurants.”

McDonald's Price Increase in the Last Year

McDonald’s says it has increased its prices over the last year by 10%. “We certainly know consumers are wary or weary of pricing,” McDonald’s CFO Ian Borden told analysts. “We’re going to be consumer-led in our pricing decisions as we look forward to 2024.”

The storefront of a new McDonalds restaurant with signs and glass windows and doors

Source: Wikipedia Commons

“Our pricing broadly is coming down in line with inflation getting back to what I’ll call more normal levels,” Borden said.

McDonald's Doesn't Select Menu Prices

While prices at McDonald’s have increased, the company is not the one who determines the prices. Instead, that falls onto the franchisee’s owner.

A McDonalds burger, box, bag, and drink are on a table

Source: Canva

The prices you see at your local McDonald’s restaurant reflect the fees, royalties, services, and goods that the franchisee has to buy from the company. Before money goes into the franchisees’ pockets, the prices need to cover the costs of all goods and services.

Low-Income Customers Are Affects

While the increase in prices may deter some people from eating out, McDonald’s said at its earnings call in October that its price increases largely hadn’t put customers off.

A McDonald's employee, wearing a headset, a black sweater, and a red tie, is handing over a McDelivery bag through a drive-thru window to a customer in a car

Source: McDonaldsCorp/X

“Where you see the pressure with the US consumer is that low-income consumer,” CEO Chris Kempczinski said. “Call it $45,000 and under. That consumer is pressured. From an industry standpoint, we actually saw that cohort decrease in the most recent quarter, particularly I think as eating at home has become more affordable.”


McDonald's CEO Pitches D123

Kempczinski has pitched to franchisee owners that they need to push the D123 (everyday value) platform, which offers items at $1, $2, and $3 to “provide good value for that low-income consumer.”

McDonald's Restaurant sign, Alfran Street, Green Bay, Wisconsin (1992) photography in high resolution by John Margolies.

Source: Library of Congress/RawPixels

The brands hopes that this push will bring back the consumer who has opted for dinner at home rather than eating out.


California's Minimum Wage Increase

However, California’s new $20 minimum fast food wage has already caused some problems for fast food franchises in the state.

A woman fanning out some money in front of her face. She is holding dollar notes of varying amounts. Only her eyes are visible.

Source: Alexander Grey/Unsplash

In April, California raised its minimum wage for fast food workers to $20. This law would only apply to fast food chains that did not include bakeries and had more than 60 locations in the U.S.


Impact of Minimum Wage Increase on Fast Food Prices

The conversation soon turned to the impact of California’s minimum wage increase for fast-food workers, now at $20, on the prices of fast food. 

A person seated at a wooden table is holding a burger with lettuce visible on a sesame seed bun

Source: Prudence Earl/Unsplash

The connection between wage policies and food prices became a focal point, with one commenter noting, “20 minimum wage…..welcome to your new normal,” suggesting the wage increase is a direct contributor to higher fast-food prices.


McDonald's Franchise Owner's Tough Decision

Since the bill became law, franchises have felt the impact of the pay increase. “The last 12 days since this unprecedented law impacted franchisees in California has literally been a whirlwind. Frankly, it feels like an eternity,” McDonald’s franchise owner, Scott Rodrick, said during an appearance on “Varney & Co” (via Fox Business).

Woman in Brown Classic Trench Coat Eating Mcdo Fries during Daytime

Source: Freestocks/Pexels

Rodrick has been contemplating raising prices, laying off staff, and cutting hours to afford the new minimum wage increase.


McDonald's Franchise Owner Says He Won't Lay Anyone Off

Rodrick says that the last thing he wants to do as a McDonald’s franchisee owner is lay off employees during a time of economic uncertainty.

Three cheerful McDonald's employees, two men and one woman, are standing behind the counter. They are dressed in blue McDonald's t-shirts and gray aprons with yellow accents. The background features a menu board with various food items

Source: McDonaldsCorp/X

“There’s a lot of discussion on that subject on restaurants, closing restaurants, laying people off. Frankly, in my organization, that’s the very last thing I’m looking at. I have 800 people, 800 human beings that run my restaurants. That’s the last lever that I’m looking at,” Rodrick explained.


McDonald's Isn't Worried About Higher Wages and Prices

While these franchises have been feeling heat in the last few weeks, the fast food brand has not seen the wage increase as a negative. In a conference call, Kempczinski said that the increase in wages and the prices could benefit the company.

A McDonald's Restaurant in the sunset

Source: Nothing Ahead/Pexels

“We believe we’re in a better position than our competitors to weather this, so let’s use this as an opportunity to actually accelerate our growth in California,” Kempczinski said.


McDonald's Is an Extremely Successful Brand

According to the Business Model Analyst, McDonald’s has been an extremely profitable company compared to most fast food chains. In December 2022, the company was one of the most successful restaurants across the world with an income of $25.49 billion.

Set of USA banknotes and national flag

Source: Karolina Grabowska/Pexels

While a franchises’ success depends on the franchisee, the brand has a solid profitability record, which is why so many people commit to investing in a McDonald’s business.


Re-focusing on the Value Menu

“As we look to 2024, with elevated absolute prices and muted consumer confidence, we believe that consumers will continue to be more discriminating with their dollars,” Kempczinski said.

A lone dollar bill against a white surface

Source: Kenny Eliason/Unsplash

“But we expect our focus on our MCDs will continue to drive growth across our business. And from a historical perspective, we know our resilience is rooted in our ability to adapt in any environment.”


Regional Variations in McDonald's Pricing

The debate extended beyond California, prompting McDonald’s customers nationwide to compare prices, Fox Business reports.

Exterior view of a McDonald's restaurant with its large, bold signage visible above the entrance

Source: Nik Nikolla/Unsplash

The difference in prices was stark, with a Florida user noting, “50 nuggets here is 15 [dollars],” contrasting sharply with the prices observed in California, illustrating the significant regional disparities in fast food pricing across the United States.


Varied Perspectives on Price Value

Not all viewers agreed on the controversy surrounding the $25 meal deal. 

A McDonald's meal displayed on a tray, consisting of a large portion of french fries spread out, two wrapped burgers labeled 'Double', and a cup of soda with a straw

Source: Alia/Unsplash

Some argued the price was reasonable, with remarks like, “12.50/person isn’t that crazy,” and “You getting a good deal and you complaining.” 


Business Adjustments Ahead of Minimum Wage Increase

The recent minimum wage increase led several fast-food establishments, including MOD Pizza, to close locations in California, reflecting the anticipatory measures businesses are taking in response to increased operational costs attributed to wage hikes.

Two hands are seen at an outdoor dining setting, one hand holding a slice of cheese pizza with a golden crust, and the other dipping a chicken wing into a bowl of creamy ranch sauce

Source: No Revisions/Unsplash

One branch of Fosters Freeze in California also abruptly closed its doors, citing the wage increase as the reason.


Chipotle Raises Prices

Chipotle announced it would be raising its menu prices shortly after the minimum wage bill was passed into law in California.

A Chipotle chain against a blue sky during the day

Source: Mike Mozart/Flickr

The fast food Mexican restaurant says it will raise prices by a ‘mid-to-high single-digit’ percentage in California, according to Chief Financial Officer Jack Hartung.


Employment Challenges Following Wage Increases

The increase in minimum wage has had tangible effects on employment within the fast-food industry, with chains such as Pizza Hut and Round Table Pizza resorting to layoffs. 

The front view of a Pizza Hut kiosk located in a food court, featuring a prominent red and white Pizza Hut sign above the counter

Source: Wikimedia Commons

These moves showcase the direct impact of higher operational costs on employment within the fast-food sector.


Strategic Business Responses to Wage Legislation

Some closures seemed to be perfectly timed. 

Inside MOD Pizza, employees in red and grey shirts are preparing food behind a counter with an array of toppings visible. One employee is sprinkling cheese on a pizza base, while another adds green toppings

Source: Wikimedia Commons

A former MOD Pizza employee noted the closings happened “two weeks before all of the fast-food locations in California got that increase,” suggesting a strategic retreat in response to the wage hikes.


McDonald's Clarifies Pricing Strategy

Amidst the scrutiny, McDonald’s defended its pricing approach, emphasizing that prices are determined by franchisees and vary by location. 

Nighttime scene of a McDonald's restaurant facade illuminated by warm lighting. The iconic golden arches logo is brightly lit against the dark sky


This response aimed to clarify misconceptions about their pricing being universally high and reiterated their commitment to offering value.


Reaffirming Commitment to Customer Value

In the wake of the discussion, McDonald’s reiterated its commitment to value, promising affordable pricing through their app and rewards program. 

A variety of fast food items are arranged on a counter, awaiting pickup. In the foreground, there are multiple McDonald's McFlurry desserts with straws, wrapped burgers, and crispy chicken pieces

Source: Firas Wardhana/Unsplash

“Value is part of McDonald’s DNA, and we’re committed to offering customers great value” they said.


The Dynamics Behind Rising Fast-Food Prices

Shubhranshu Singh, an associate professor of marketing at Johns Hopkins Carey Business School, explained that the trend of fast food prices rising is driven by rising labor costs and growing consumer demand for more budget-friendly dining options.

A close-up view of an open McDonald's Chicken McNuggets box, which is sitting on a wooden surface

Source: Brett Jordan/Unsplash

As economic pressures mount, consumers are increasingly opting for fast food over full-service restaurants, boosting demand. Additionally, Singh notes a decline in fast-food coupons and deals.