The news stories about how much Big Macs cost now are making McDonald’s Corp. very angry, and the fast food giant won’t take it anymore.
CEO of McDonald’s USA, Joe Erlinger, wrote a letter to the company’s “fans” in the U.S. to bust some myths, especially those about hyper-inflation. Because his company feeds almost 90% of the people in the U.S. every year, he said he felt obligated to share the “real facts.”
“Recently, there have been social media posts and news stories with questionable sources that say McDonald’s has raised prices much more than the rate of inflation.” “This is not true,” Erlinger wrote.
He said that hearing that a Big Mac meal was priced at $18 in one place “frustrates and worries” him, even though it was only at one of McDonald’s 13,700 restaurants.
“What’s scarier, though, is when people think this is the norm and not the exception, or when they say that the price of a Big Mac has gone up 100% since 2019,” Erlinger wrote.
After ending the previous day at a seven-month low, McDonald’s stock MCD, +1.08% went up 0.6% by midday Thursday. It has lost 8.1% so far in May, putting it on track to lose money for five months in a row. That would be the longest run of wins since the six-month run that ended in October 2016.
He said that the average price of a Big Mac in 2019 was $4.39. There have been big jumps in supply chain and labour costs, as well as other inflationary pressures since then, but the average price of a Big Mac is now $5.29, which is 20.5% more than it was five years ago.
The U.S. Bureau of Labour Statistics’ consumer-price index inflation calculator says that the Big Mac should have cost $5.39 after five years, which is a little more than it did.
Erlinger said that big price hikes can happen all of a sudden because franchisees, who run more than 95% of McDonald’s restaurants in the U.S., set the prices on the menu to cover the higher costs of running those restaurants.
He did say, though, that McDonald’s is always looking for ways to make price hikes less painful by offering deals.
The prices at your local McDonald’s will be talked about and looked at a lot in the coming months, Erlinger said.
“I hope it helps to see some of the common myths I’ve come across and the facts that go along with them,” he said during those talks.
Here some of those “myths,” and McDonald’s response to them:
- Myth: McDonald’s price increases are a result of greed and price gouging. McDonald’s response: “False.” Average prices increases are within the range of other fast-food restaurants over the past five years. And restaurant margins are roughly the same now as they were in 2019, “which is the opposite of so-called ‘gouging.’”
- Myth: The average menu prices at McDonald’s have more than tripled the national inflation rate. McDonald’s ‘Fact’: “This is just simply not true.” The company said the rate of increase in average menu prices, between 2019 and 2024, was lower than the rate of inflation. The average price of an Egg McMuffin has increased to $4.29 from $3.49 in 2019, which is a penny more than what the CPI Inflation Calculator would suggest, while the average price of a quarter-pounder with cheese has increased to $5.39 from $4.49 but the CPI calculator suggests it should be $5.51.
- Myth: A Big Mac Meal costs 104% more than it did in 2019. McDonald’s response: The average price of a Big Mac Meal now is $9.29, up 27% from the average price of $7.29 in 2019.
- Myth: The price of medium fries have jumped 138% since 2019. McDonald’s response: False. The average price of medium fries is now $3.29, or 44% more than the $2.29 it cost in 2019.
McDonald’s stock has shed 15.4% year to date, while Consumer Discretionary Select Sector SPDR ETF XLY has slipped 2.3% and the Dow Jones Industrial Average DJIA has gained 1%.
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