McDonald's CEO sees a McFlation 'battleground' with customers revolting over $8 chicken sandwiches and $3 hash browns

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“Something’s not right here,” one TikToker user said in a video about the hash brown price hike. “I’m still gonna eat it, but it’s not right.”

McFlation extends to the rest of McDonald’s products: Despite having a Dollar Menu, there’s no food items on it that cost under $1. McDonald’s breakfast becomes even more expensive if you account for a $7.29 McMuffin in Fairfield, Connecticut. And last month, an X post about an $18 Big Mac meal went viral and sparked debate about the chain’s steep prices. 

McDonald’s is feeling the heat from upset customers. It reported global same-store sales growth of 3.4% in its 2023 fourth quarter, falling short of its expected 4.79% increase. U.S. sales growth likewise disappointed, reaching 4.3%, still under the estimated 4.45%.

CEO Chris Kempczinski alluded to high prices as a reason why the company missed sales expectations for the first time in four years. 

“I think what you’re going to see as you head into 2024 is probably more attention to what I would describe as affordability,” Kempczinski said in the earnings call. 

He admitted that for customers making $45,000 annually, it’s cheaper to just stay home and cook.

“The battleground is certainly with that low-income consumer,” Kempczinski said.

McDonald’s did not respond to Fortune’s request for comment.

McFlation is going strong after two decades

McDonald’s may want to win the battle with customers seeking affordable meals, but its history of raising prices suggests the company started the war itself. 

In 2008, McDonald’s disgraced its dollar menu, raising the price of the double cheeseburger to $1.19 and replacing the dollar version of the cheeseburger with an inferior McDouble — a product with one slice of cheese instead of two.

From 2006 to 2008, costs of food considerably increased, necessitating the price hike. Burger buns were 24% more expensive, and cheese costs rose 6.6%. At the time, the menu change sparked similar controversy to today. The dollar menu accounted for 14% of McDonald’s sales.

“We’ve seen an uptake in a number of restaurants that are enjoying a lot of success because of their value offerings,” Harry Balzer, a restaurant industry analyst at the NPD Group, told ABC at the time. “Right now, consumers are clearly looking for a deal, and those that are offering one that is new and noticeable are winning.”

But perhaps the greatest touchstone for measuring McDonald’s inflation — so iconic that its price is used to measure purchasing power parity between currencies — is through its iconic, eponymous Big Mac. Once $2.36 in 1996, the burger cost $5.69 as of December 2023, almost doubling in price.

Burgernomics says the U.S. dollar is strong, a result of inflation, which failed to dip below 3% last month, according to a Labor Department report on Tuesday. More broadly, the consumer price index for food away from home rose 5.1% over 2023, and the index for limited-service meals, which includes fast food, rose 5.8%. That’s compared to the food-at-home index of 1.2%, which indicates a nationwide trend in fast-food prices soaring compared to grocery prices.

McFlation is everyone’s McProblem

Despite complaints over consistent price increases in McDonald’s products, the inflation problem isn’t unique to them.

“What’s going on at McDonald’s is part of a larger scene out there,” Mark Kalinowski, CEO of Kalinowski Equity Research, told Fortune.

Wendy’s story over the past two years has mirrored McDonald’s: In August 2022, the company reported lower-than-expected sales, which it attributed to lower-income customers preferring to eat at home versus going out. Burger King was similarly hit with inflation in 2022, planning to cut their 10-piece chicken nugget meal down to an eight-piece meal. (However, the company bounced back at the end of 2023, reporting a same-store sales increase of 6.3%.) Yum Brands, parent company to KFC, Taco Bell, and Pizza Hut, reported underwhelming 2023 fourth-quarter earnings.

Kalinowski said that as for McDonald’s, the company will likely address price hikes, but not with lower prices. Customers can expect to see modest price increases, but with more targeted discounting through app promotions. Customers are more informed than ever before and perfectly capable of finding good deals.

“If you’re looking to maximize your food dollar as much as possible and still want to use restaurants in some way, shape, or form, you can find deals out there,” Kalinowski said.

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