McDonald’s Raising Menu Prices–A Look Into Rising Costs For The Fast Food Giant

The next time you go through the McDonald’s drive-thru to grab a Big Mac—or to take advantage of the McRib’s return—you might be in for a bit of a surprise. Due to rising labor costs and increased supplies, the global fast food chain has seen its prices rise this year.

In 2021, costs have significantly risen

According to SofiThe cost of wages has increased by a staggering 10 percent in the United States in the last year. Add in rising inflation and supply-chain issues, and McDonald’s is paying more for everything from food to restaurant supplies.

The rising costs are often passed on to the customer. This is why fast food chains have raised their prices by six percent for 2021.

“We are still seeing [6% increases] and that’s pretty much the level we expect for the full-year 2021 over 2020… And that’s really to cover both labor cost pressures and commodity cost pressures,” Chris Kempczinski, CEOResponding to an investor question regarding menu prices during a recent earnings phone call

Staffing shortages and employee wages

Employee wages at McDonald’s have been on the rise all year. The initial increase in wages for employees was five percent at the beginning of 2021. Slowly, it grew to a total 10% increase.

Corporate-owned stores have even higher wages. These employees have seen their salaries rise 15% in the past year.

Despite this, the entire restaurant and retail industry has been reporting staff shortages for months, and McDonald’s has not been exempt from this workforce issue. One of the reasons the fast food chain raised its wages so much this year is because they’ve been hoping to attract new employees.

However, the higher wage offerings have not been as successful in staffing restaurants as McDonald’s had hoped.

Still Making Money

Despite all of the cost increases and labor shortages, McDonald’s is still having a successful year. Same-store sales increased almost 15 percent in the third quarter compared to 2019. The overall sales and net income of the chain were also higher than expected.

McDonald’s explained their massive growth in sales by claiming that customers are buying for large groups, placing larger orders, and placing more to-go orders.

The company also points to new menu development—like the crispy chicken sandwich that debuted in February—and the success of their McDonald’s app with the “Famous Orders” line. The rise in prices didn’t hurt, either.

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