Despite Rising Menu Prices, Sales At McDonald's Only Went Up
Though it's hard to find a Big Mac for less than $5 these days, McDonald's consumers don't seem to care too much. Like many fast-food restaurants and other institutions, McDonald's has experienced inflation starting in 2022 and continuing into 2023. While Mickey D's saw an overall jump in Q1 prices (via AP News), it surprised analysts by producing a substantial 12.6% increase in same-store sales. That was nearly 4% higher than projections.
While prices have increased, so have customers. In recent years, the fast food industry weathered not only a large drop in revenue across the board during the pandemic but also inflation and supply chain issues. However, despite these challenges, McDonald's has brought in $5.9 billion in revenue for Q1, another bump that was larger than was forecasted.
When compared to its competitors in the fast food industry, the recent numbers look pretty good for McDonald's. The world's largest fast food franchise was close to the top of the pack regarding sales increase percentages. In fact, only Wingstop, which saw a 20.1% boost this quarter, outranked McDonald's increased sales. Other Q1 winners included Starbucks (12%), Subway (11.7%), and Taco Bell (9%) (via Yahoo Finance).
What does the future hold for McDonald's
As inflation continues to be a cause for concern in 2023, McDonald's and other fast-food chains find themselves in a tricky position. According to Marketplace, customers are seeking out fast food (despite rising prices) because it is still the cheaper option amid rising grocery prices. However, these chains have to be careful to not raise their prices too much that it wards off customers. In that regard, McDonald's seems to have gotten the memo. While Taco Bell and Wendy's both saw massive price hikes last year (14.6% and 35% respectively), McDonald's actually saw a 5% decrease in prices by the end of Q4.
According to CNBC, CEO Chris Kempczinski also recognized that customers started to push back against higher prices for some of McDonald's items in Q1. While Big Macs are still flying out of the kitchen, customers have shown more reluctance to order a side of fries, given price changes. Sales for fries and other extras have taken a slight dip as a result.
With recent layoffs and inflation still a cause for concern, it remains to be seen if the chain can continue its current success. One thing is certainly clear, consumers are still drawn to the golden arches, and inflation hasn't scared them away just yet.