McDonald’s CEO is backing down after facing customer scorn for prices going sky-high at golden arches across the country. The burger giant’s CEO, Chris Kempczinski, spilled the fries on the fast food chain’s mixed Q4 results and shared secret sauce strategies to win back penny-pinchin’ customers during Monday’s analyst briefing.
After the earnings results came out, McDonald’s shares took a bit of a hit, falling around 4% on the NYSE at closing. While global same-store sales did show a 3.4% increase, which is good, it was a bit lower than what Wall Street was expecting. Kempczinski mentioned that this could be partly due to the impact of the Middle East war on the earnings results.
On the domestic front, same-store sales experienced a 4.3% increase, aligning more closely with previous quarters and meeting the company’s expectations for what the CEO referred to as “normalized growth”.
McDonald’s CEO Stressed ‘Affordability’ for the ‘Low-Income Consumer’
McDonald’s in the U.S. experienced growth in average check with strategic menu price increases. However, the CEO noted a sales decline after the adjustments. Especially among individuals with lower incomes earning $45K or less per year. “Eating at home has become more affordable,” Kempczinski admitted. “The battleground is certainly with that low-income consumer.”
“What you’re going to see is more attention to affordability,” the CEO claimed. “Think about that as an absolute price point, which is more important for that consumer to get them into the restaurants than maybe value messaging. We are set up well to go after that.”
A McDonald’s restaurant in Connecticut faced heavy criticism recently for its exorbitant prices. A customer balked when they were billed $7.29 for an Egg McMuffin and $5.69 for a side of hash browns.
During the summer, a franchisee in the neighboring town of Darien, Connecticut, faced criticism for pricing a Big Mac combo meal at $17.59. Viral posts pointed out that they offered a Quarter Pounder with Cheese and Bacon meal for $19.
Franchises can set their prices and decide whether to participate in corporate promotions, resulting in varying menu prices across locations.
McDonald’s anticipates a slowdown in US growth, projected to range between 3% and 4%. This is compared to the 4.3% growth witnessed in the most recent quarter. The majority of this growth was attributed to “heightened menu prices,” according to the company’s statement.
Fast food prices may climb higher, riding the wave of nationwide minimum wage increases. California’s fast food workers will soon be earning $20 an hour. That has caused McDonald’s and Chipotle to serve up some price hikes on their menus.
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