Fast food prices are climbing.
Despite a preponderance of hot deals — McDonald’s $1 $2 $3 Dollar Menu offers two-buck Bacon McDoubles; Burger King is virtually giving away nuggets at 10 for $1 — the price of regular, non-value orders is going up, Bloomberg reports.
“Median fast-food hamburger prices have jumped 54 percent over the last decade to about $6.95, according to menu researcher Datassential,” Bloomberg says, while humble chicken sandwiches — always the bridesmaid, never the bride — are up a still-notable 27 percent. Both, Bloomberg notes, “surpass overall U.S. price inflation during that same time.”
For example, McDonald’s now offers a full meal, including “a burger, fries, a drink, and a pie” for $6 — a caloric bargain. At the same time, though, the chain’s honey-barbecue glazed chicken tenders top $6 with no drinks or sides. And prices vary by location and city, but in Chicago, a new Bacon Smokehouse Quarter Pounder meal will run you “nearly $9” — a price point that puts it in direct competition with more traditionally upscale “fast casual” options.
Bloomberg crunches the numbers: “In 2012, a hamburger from a fast-casual joint like Habit Burger or Shake Shack Inc. used to be nearly 30 percent pricier than fast food. But the difference has narrowed to less than 8 percent as median fast-food burger prices creep higher faster.”
(Earlier this year, the CDC reported that rich people eat more fast food than poorer people, and while there are a lot of possible reasons for that — including a weirdly amorphous definition of fast food — one of them could be this: Fast food is not cheap.)
But here’s the thing: Fast food should cost money. The price bump puts chains in a tough position but it also brings prices in line with what food production actually costs. Prices aren’t going up because of the cost of ingredients, they’re going up because of the increased cost of labor. It is expensive to pay people, and to (sometimes) give them benefits.
As the New York Times reported earlier this year, fast-food wages, which began to rise in 2014, have continued to increase faster than overall wages, although the pay “is still less than half the average for an hourly employee.” Given the tight labor market, that’s pushed companies to “offer more incentives — like dental insurance, sign-up bonuses, and even travel reimbursement — to entice workers.” (The actual positive impact of these benefits remains a subject of some debate.)
This presents a challenge for fast food restaurants, who are locked in a vicious battle for marketshare — a battle that has traditionally depended (and still depends) on low-wage workers — but who are now under pressure, governmental or otherwise, to pay their employees something resembling a living wage.
Thus, menu stratification: The ultra-cheap deals create what Dunkin’ Donuts CEO Nigel Travis said was an “increasingly challenging operating environment,” but they work — at least, sort of. The numbers suggest they do successfully draw customers, even if, as Grub Street observed earlier this year, they aren’t actually all that profitable for chains.
Meanwhile, the rest of the menu is getting more expensive, not just to keep up with the rising cost of labor but to offset the now-requisite discounts. One Burger King franchisee in Arkansas told Bloomberg he’d likely be raising menu prices on certain items to help recoup the revenue lost to the discounts, which hit at the same time as coming 75-cent bump in the state’s minimum wage, to (a still-minimal) $9.25.
And so, the next time you are in the drive-through line at 2 am, it is worth considering that perhaps, paying just under $9 for a burger is perhaps not such an egregious price. Alternatively, there are always the 10-for-$1 nuggets.