If there's one safe haven in the world of food that has always been associated with accessibility, it's McDonald's.
But the fast food giant is facing criticism from all sides these days. In the US in recent months, many customers have posted photos on social media showing Big Mac trios for more than $18 – almost $25 CAD.
It's still astonishing that despite its 40,000 stores and enormous market power, McDonald's is unable to keep its costs under control.
You are not crazy
Nostalgics will say that it was cheaper in their time. As an economist, I always like to point out that while prices are rising, so are wages. In general, the “real” wage in Canada has increased by almost 50% since the 1980s.
However, that doesn't seem to be the case with the Big Mac. For this reason, mathematician Hélène-Sarah Bécotte had fun following the evolution of the price in relation to the minimum wage.
In 1986, the minimum wage was $4.35 an hour and the Big Mac cost $1.89: you had to work 24 minutes to afford the famous sandwich. Starting in 2023, the minimum wage will increase to $15.25: the burger costs $7.47… 29 minutes!
So this means that Quebecers are behind in terms of purchasing power, expressed in Big Macs per hour.
Greed that hurts
In contrast to grocery sales, fast food is a highly competitive market. Since its founding in the 1940s, McDonald's has mastered the art of doing things quickly, well and cheaply – a rare combination in the business world.
These values seem to have been lost in recent years; In 2023, the company admitted that the average price of its products increased by more than 10% (while inflation fell below 4%). This led McDonald's CEO Chris Kempczinski to recognize that the company was now considered unaffordable “for people making less than $45,000 a year.”
The share price has now risen 60% since 2020. Shareholders 1, customers 0.
And there's still gaming at McDonald's! With gross margins of 92% on soft drinks and 97% on coffee, we can certainly cut everything by a few percentage points and still make a reasonable profit.
Whose fault is it?
At a time when franchisees are facing a significant decline in the profitability of their restaurants, the company recently announced it would increase franchisee royalties, something it had not done in thirty years.
The food industry has been in a real legitimacy crisis for two years; Consumers feel like they are quickly being left out and have little alternative to these huge companies run by managers who are out of touch with reality.
In the case of fast food, voting with your feet and rewarding those who are truly committed to fighting inflation will always be the best way.