McDonald’s on Monday reported that its revenue was up 14% in the latest quarter — a surge the burger giant said was driven by “strategic menu price increases.”
The Golden Arches brought in a total of $6.69 billion in revenue for the three-month period ended Sept. 30 — beating expectations of $6.58 billion, according to Refinitiv analysts.
However, McDonald’s — which has 13,513 restaurants in the US and over 38,000 abroad — did not disclose how much the franchiser has increased its prices, which generally vary between locations.
One branch in Darien, Conn., charged as much as $18 for a Big Mac combo meal, which includes medium fries and a medium soft drink.
Shares of McDonald’s closed up 1.7% to $260.15.
Net income rose to $2.3 billion, up from $1.98 billion in the same period last year, and same-store sales in the US increased by 8.1%, again attributed to price hikes.
During an earnings call with investors, CFO Ian Borden confirmed that the company’s US prices did increase in the third quarter.
Though he didn’t specify by how much, Borden said McDonald’s expects to increase the cost of its menu items by just over 10% for the full year — the second consecutive annual 10% price hike.
Meanwhile, many consumers have said that fast food has already gotten so expensive, it’s no longer worth it.
One Reddit user asked in a now-viral thread: “What is no longer worth it because of how expensive it has become?”
The top-rated response: “most fast food.”
“A ‘value meal’ at McDonalds now costs just as much as a meal at a lot of sit-down restaurants like Applebee’s,” one user claimed.
“Remember when McMuffins were $2 for $3?” another user recalled.
The McDonald’s app in New York City, for example, where the “$1 $2 $3” menu doesn’t actually have anything worth $1 or $2.
The cheapest option is a small order of french fries, which will run a hungry customer $2.49 — though foodies can now score an order of fries for free every Friday now through Dec. 31.
Last month, the Chicago-based fast food giant announced that franchisees who open new outposts in 2024 will have to pay an increased royalty fee of 5% — the first time in nearly three decades that McDonald’s increased the fee.
For the past 30-some years, a franchisee only had to cough up 4% royalty fees, a percentage of gross sales in addition to rent and other expenses such as payments towards the company’s mobile app.
These higher rates — which McDonald’s used to refer to as “service fees,” but will now call “royalty fees” — will only affect new franchisees, buyers of company-owned restaurants, and relocated restaurants, according to an internal message reviewed by CNBC.
Existing franchisees who plan to maintain their current footprint or who buy a franchise from another operator, as well as those who rebuild existing locations or transfer their franchise to a family member, will not be affected by the price hike.
McDonald’s also edged out Wall Street expectations in the second quarter with a revenue of $6.5 billion — amplified by the successful revival of McDonaldland character Grimace with a limited-edition milkshake and Happy Meal to celebrate the purple blob’s 52nd birthday.
The company called the “Grimace’s Birthday” campaign “one of our most socially engaging campaigns of all time.”
On the heels of the purple fuzzball’s smashing success, McDonald’s announced plans to create a spinoff chain of smaller restaurants called CosMc’s in 2024.
CosMc is a yellow-colored part-alien, part-robot who appeared in the second phase of McDonaldland — the franchise’s fictional world inhabited by Ronald McDonald and his friends.
So far, it’s unclear how CosMc will play into the new brand, which McDonald’s CEO Chris Kempczinski added will be tested in a handful of sites in “a limited geography” come early next year.
Despite recent super-size earnings, McDonald’s laid off several hundred corporate workers in April in an effort to speed up innovation and decision-making.
It also cut pay and benefits for others in a move to consolidate its operations into one national structure that would oversee all of McDonald’s 10 field offices, according to internal emails obtained by the Wall Street Journal.
McDonald’s also booked a restructuring charge of $180 million — or 18 cents per share — during the first quarter to account for severance payments and the closure of some regional offices.