McDonald's increased profits by 7 percent by charging customers higher prices for McMuffins, Big Macs, McNuggests and fries.
A decline in prices for ingredients such as beef and potatoes, as well as materials such as cardboard for packaging, also had a positive impact on the bottom line.
Photos of jaw-dropping prices at some Golden Arches locations have gone viral, including a single Egg McMuffin for $7.29 and a Big Mac for $8.39. These higher prices are usually found in restaurants with higher rents, such as truck stops.
But experts fear this will soon be a reality in California, as customers there are warned of price increases – due to a new law that raises the minimum wage for fast food workers, which major chains say will mean they will lower prices need to increase.
FILE – A McDonald's sign is displayed at a McDonald's restaurant in East Palo Alto, Calif., on Friday, April 20, 2012. McDonald's reports earnings on Monday, Feb. 5, 2024. (AP Photo/Paul Sakuma, File)
McDonald's CEO Chris Kempczinski said in an earlier conference call that the law would have an “impact on the wages of our California franchisees.”
Fast food workers will be paid at least $20 an hour when the law signed by Democratic Gov. Gavin Newsom takes effect April 1.
According to Revenue Management Solutions, the average cost of a burger in the Golden State is already $7.02.
Now burger prices at McDonald's and other fast food chains, already among the highest in the country, will rise with the new law.
The impact of the price hikes on prices became clear when McDonald's reported its financial results for the final quarter of last year.
Although higher prices helped boost revenue, growth was slower than Wall Street had hoped.
It was the first time in nearly four years that McDonald's missed its sales targets on Monday – causing shares to fall slightly. This was mainly because the chain was having problems in other countries.
Global sales at restaurants open at least a year rose 3.4 percent in the October-December period – well below the 4.7 percent increase expected by Wall Street.
McDonald's is bringing back the Double Big Mac – with four beef patties instead of two and extra sauce.
The company said sales increased because U.S. customers' spending per visit increased – which was “driven by strategic menu price increases.”
Meanwhile, sales abroad, particularly in the Middle East, have been hit by a boycott.
Customers in the Middle East were upset after McDonald's Israel – operated by a local franchisee – provided free meals to Israeli soldiers in October.
In response, some franchisees – such as McDonald's Oman – announced donations to relief efforts in Gaza.
Last month, McDonald's CEO Chris Kempczinski warned that “misinformation” in the Middle East and elsewhere was hurting sales.
In addition to customer boycotts, McDonald's had to temporarily limit store hours or close some locations due to protests.
Comparable sales in the company's International Developmental Licensed Markets segment – which accounts for 10 percent of revenue – rose 0.7 percent in the three months ended December.
That's a big miss from estimates of 5.5 percent growth, according to LSEG data.
A McDonald's customer was left stunned after paying $7.29 for a single Egg McMuffin at a Connecticut drive-thru
It was an unexpected end to an otherwise strong year for the burger giant, which said it recorded a 9 percent increase in global sale store sales in 2023.
Viral marketing hits, like last spring's Grimace shakes, and improved menu items helped boost full-year sales by 10 percent to nearly $25 billion.
McDonald's is among several Western brands that have faced protests and boycott campaigns over their perceived pro-Israel stance. Starbucks cut its annual sales forecast last week, partly due to declines in sales and footfall at its stores in the Middle East.
The company's U.S. business is also showing signs of weakness. According to Placer.ai data cited by Wells Fargo, traffic at McDonald's stores in the U.S. fell 13 percent in October.
In November and December it fell by 4.4 percent and 4.9 percent, respectively.
U.S. comparable sales rose 4.3 percent in the fourth quarter, just shy of estimates of 4.4 percent.
Global same-store sales rose 3.4 percent in the quarter, falling short of estimates for a 4.9 percent increase. That was the slowest sales growth in about three years.
Excluding special items, McDonald's had earnings per share of $2.95. Analysts had expected earnings of $2.82 per share.