Data shows that restaurants from McDaonald’s to Cheesecake Factory are under pressure to lower prices as grocery costs fall faster than eating out.
A host of fast-food restaurant CEOs have admitted that customers are fed up with relentless menu price increases in earnings this month.
And a new analysis of figures from the U.S. Bureau of Labor Statistics shows that annual inflation for home food fell to 1.2 percent in January. By comparison, eating out has increased by 5.1 percent.
Experts say restaurants are likely focused on lowering prices — or at least avoiding further price increases.
Companies like McDonald’s and Chipotle have acknowledged that price increases last year helped boost their profits.
And a new analysis of figures from the U.S. Bureau of Labor Statistics shows that annual inflation for home food fell to 1.2 percent in January. By comparison, eating out has increased by 5.1 percent
During an earnings call earlier this month, McDonald’s CEO Chris Kempczinski admitted that consumers are spending less than $45,000 a year at restaurants
“The problem is that places like McDonald’s were once cheap treats but are now becoming expensive luxuries. And customers are fed up with constant price increases,” Neil Saunders, director of consultancy GlobalData Retail, told DailyMail.com.
“In comparison, we’ve seen supermarkets like Walmart and Kroger make more of an effort to keep prices low.
“Restaurants will have to stop price increases, otherwise people will increasingly eat in the dining room.”
During an earnings call earlier this month, McDonald’s CEO Chris Kempczinski admitted that consumers are spending less than $45,000 a year at restaurants.
“Eating at home has become more affordable,” he said.
‘The battleground certainly lies with those consumers with a low income. I think what you’re going to see as you get into 2024 is probably more of a focus on what I would describe as affordability.”
McDonald’s increased menu prices in the U.S. by about 10 percent in 2023 and made similar increases the year before.
The chain came under fire last year after one of its restaurants in Connecticut was busted for selling a Big Mac meal for $17.59.
The problem is not exclusive to McDonald’s. This week, Yum Brands, the parent company of KFC, Pizza Hut and Taco Bell, also reported disappointing results.
Pizza Hut’s turnover fell by 4 percent and KFC’s turnover remained stable.
Cheesecake Factory will report its latest results for the final quarter of last year this evening – where bosses will reveal sales and are also expected to outline the effect of price rises.
For the previous update to Wall Street, for the three months ended Oct. 3, the company said prices were 9.5 percent higher but customer numbers fell by 1 percent.
Laura Murphy, director of PR agency Bolt, which specializes in food and drink marketing, told NBC News that people just want cheap food.
“People are saying to leaders in the fast food industry, ‘This is what we’re looking for, this is what we want. We want efficiency. We want affordability,'” she said.
‘Let’s get back to offering simple food in an affordable way that is efficient, fast and really gives people the basics of what they are looking for.’
‘Let’s get back to offering simple food in an affordable way that is efficient, fast and really gives people the basics of what they are looking for.’
Companies that supply supermarkets like Target, Walmart, Costco and Kroger are now helping them drive down prices.
For example, Ramon Laguart, CEO of Pepsi – which makes both soda and Lay’s chips – noted in his recent recast call that the company would not raise prices above its “normal price level.”
Walmart CEO Doug McMillon noted that in-store food prices were only “slightly” higher than last year.
By comparison, Walmart CEO Doug McMillon noted that in-store food prices were only “slightly” higher than last year
Annual inflation was 3.1 percent in January, down from 3.4 percent in December but still 0.2 percent higher than expected
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“Prices are lower than a year ago for items like eggs, apples and deli snacks, but higher in other places, like asparagus and blackberries.”
It comes after a separate study by HelpAdvisor analyzed how the cost of grocery shopping varies by state.
The data showed that the average household now spends $1,080 on monthly groceries.
California households spent the most money, averaging $297.72 per week, or $1,190 per month.
It was followed by Nevada, Mississippi and Washington, where weekly spending was $294.76, $290.64 and $287.67, respectively.