McDonald's President Responds To Claims About Price Hikes In Open Letter

It's hardly breaking news that restaurant menu prices have skyrocketed in recent years, including at fast food outlets that have historically been on the lower end of the spectrum. In response to a wave of negative social media posts and reports about super-sized price hikes at the home of the Big Mac, McDonald's USA president Joe Erlinger posted an open letter on the company's website. The post details current and historic costs of popular menu items. It argues that although prices have indeed risen, the increase is lower than the nearly 100% claimed by some and not double the rate of inflation, which has also been asserted.

The letter cites the rising cost of wages and supplies like paper products which are not unique to McDonald's, of course. The cost of a simple takeout container has risen quickly in recent years due to increased demand from delivery services and supply chain limitations. A few sauce containers, a paper clamshell, a nice outer bag, and a handful of napkins for each menu item taken to go can easily harm the slim profit margin a restaurant depends on to stay afloat. According Erlinger's letter, the cost of McDonald's goods (food plus supplies) 35% higher than in 2019. Restaurant crew salaries are up 40% in that time frame while the total average menu price has also risen by 40%. It costs more for McDonald's to buy ingredients these days.

The rate of inflation refers to your dollar's spending power over time. The rising cost of goods is one reason inflation happens – that's called cost-push inflation. Supplies cost more, so a product's price goes up. Your dollar then doesn't buy as much. Hourly wages might increase, but not as fast as the cost of what you want to buy. We're seeing that effect in restaurants of all kinds, not just at McDonald's. Overall inflation is up 23% since 2019. Joe Erlinger says McDonald's prices are up 40% but also seemed to cherry-pick items that were only 21% to 28% more expensive on average. Moreover, while some claims about McDonald's price hikes refer to a 10-year period, the chain's letter focuses on increases since 2019. There's plenty of room for both sides to argue.

Big companies are big targets. It's easy to see the profit statements of corporate giants and blame greed if you see the price of your value meal creep up faster than your hourly wage. However, nearly 95% of all McDonald's outlets are franchises owned by business people who are dealing with rising costs and hourly wages of up to $20 in some states. When the price of a simple fast food meal jumps dramatically, that's a shock, for sure, but it's likely driven by increasing expenses. You can save a few bucks at McDonald's if you know the tricks, and Erlinger promises more value meals will be rolling out, too.