As inflation rises, even the fast-food industry has to consider a value-added value option. The big fast-food chains are feeling the pinch of inflation at all angles. The cost of supplies, food and labor are all increasing at an alarming rate. The labor force is demanding a minimum of $15 an hour, while watching inflation rise the prices on everything around them.
The popularity of Wendy’s (WEN) – Get Wendy’s Company (The) Report Biggie Bag is rising as are prices on everything — except the Biggie Bag. The Biggie Bag is a bargain at $5. The choices to toss in the bag are a Jr. Cheeseburger, Crispy Chicken BLT, or a Double Stack. The Biggie Bag still includes a 4-piece chicken nugget, small fries, and a small drink. As an added bonus, Wendy’s 4 for $4 has the Jr Cheeseburger, 4-piece nugget, fries, and drink.
Burger King’s (QSR) – Get Restaurant Brands International Inc. Report Value Menu offers 20 items between $1 and $2.29. This value menu lets diners pick between burgers, fries, nuggets, drinks, chicken, and desserts. This is a great price when compared to McDonald’s Happy Meal, which costs more than $4 in most locations.
Fast-food restaurants are stuck in a tight spot of trying to keep supplies stocked, paying a reasonable wage to employees and serving reasonably priced food customers want. It’s a trifecta for the restaurants who are undoubtedly struggling.
McDonald’s: Inflation Costs vs. Value for Customers
McDonald’s (MCD) – Get McDonald’s Corporation Report is considered the king of fast food in almost every category, and even it’s feeling the sting of rising inflation and business costs. McDonald’s is now offering a starting wage of about $15 an hour, although exact starting wages may vary. While the restaurant is competing for entry level workers, the hours available to operate are also taking a hit. Some locations have had to modify their hours of operation and or dining room service hours according to the availability of workers. These struggles are not McDonald’s alone; most businesses face similar challenges.
Inflation is coming at the restaurants from all angles. The transportation costs to get goods delivered to the restaurants has skyrocketed with the rise of gas and diesel rising to unprecedented rates, as well as prices rising for the drivers of these deliveries. Prices on all goods have increased for McDonald’s, but McDonald’s is still working to deliver a reasonably priced meal to customers.
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McDonald’s Corp. has a market cap of nearly $2 billion, but 93% of the locations across the world are owned by franchisees. This means that the people who are working to provide for their communities are also struggling as the prices increase for all facets of their business.
McDonald’s late last month posted better-than-expected second-quarter earnings as global comparable sales continued to impress at the same time inflation forces higher costs on fast-food customers.
The world’s biggest restaurant said same-store sales rose 9.7% for the period on a global basis, firmly ahead of Street forecasts, as covid restrictions faded and restaurants reopened, while U.S. sales jumped 3.7%.
McDonald’s Spotlights the Value Menu
McDonald’s now has the $5 Crispy Chicken Sandwich Meal; the deal is currently for a limited time only. The deal will run through Sept. 4, 2022. Diners can choose between a crispy chicken, spicy crispy chicken, or a deluxe crispy chicken sandwich. The Crispy Chicken Sandwiches are a southern-style fried chicken served on a toasted potato roll. The combo includes a medium fries and soft drink.
McDonald’s may have opted to have the value chicken sandwich in part because chicken is more readily available and is considered to be a little healthier than beef. McDonald’s is the second-largest purchaser of chicken, with KFC being the largest.
According to quarterly research surveys, a McDonald’s franchisee sells about 260 chicken sandwiches a day. Some families might feel a tad bit better about serving up chicken from a fast-food restaurant rather than burgers. McDonald’s will feed a family of four for about $20 if both parents get the Crispy Chicken Sandwich Deal and the kids either get items from the $1 $2 $3 Dollar Menu or a Happy Meal, depending on locations.
Source: https://www.thestreet.com/investing/mcdonalds-value-meal-inflation?puc=yahoo&cm_ven=YAHOO&yptr=yahoo