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

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.

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.

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

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

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.

“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.”

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

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.

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.

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

“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.

“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.

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.

“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.”

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.

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.” 

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

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.

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

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.

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

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

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.