For decades, McDonald’s was the most popular fast food chain in America, a place where families and children could enjoy a meal at affordable prices. But those days are long gone. Now, the soaring cost of several menu items is making the company lose millions of customers and billions in sales every year, resulting in worrying cash flow problems that are accelerating its collapse in the very industry it helped to create. In this video, we explore some of the reasons why the world’s largest burger flipper is losing momentum and falling apart in the US market as the brand continues to lose its essence.
May was yet another month where a wave of customer defections hit several McDonald’s restaurants across the US. In nine of the past 10 months, the burger flipper reported losing customers in the United States, and a new analysis reveals that has everything to do with its new pricing strategy.
In April, McDonald’s announced price increases on a number of menu items for the second time in a single quarter. The company noted the decision came amid rising commodity prices and labor costs. The last price hike was seen on February 15, when it raised the cost of five combos by a dollar. But indicators show that consumers are getting fed up with higher costs at McDonald’s restaurants. In the first quarter of 2023, the company reported an average price increase of about 10% in its US locations when compared to the same period of the prior year.
Although executives said that higher menu prices are helping the company to boost earnings and revenue, analysts argue this is also shrinking the chain’s customer base, which will ultimately hurt its bottom line.
Even though same-store sales have risen over the past decade, higher average checks drove these numbers, not customer visits. “How many millions of lost customers will it take before McDonald’s really focuses on reversing this risky trend?” asks Forbes contributor, Larry Light.
He predicts that for the company to increase revenues relying on average checks on a shrinking customer base will require the average customer to spend $20 per transaction. This troubling pricing strategy is accelerating the brand’s downfall. During a call with investors, the CFO highlighted that McDonald’s cannot survive with declining customer counts. Corporate knows that it’s impossible to maintain a chain that operated 38,000 stores across the globe on a shrinking customer base. Still, nothing has been done to prevent this from happening.
Considering its enormous operations worldwide and the conditions that led the company to become a huge success, it is very odd to see that instead of investing in keeping and growing its base of customers who can afford to regularly frequent its restaurants, the brand is focusing on gaining a public that already has hundreds of options of higher priced burger chains out there.
In an industry that is getting more and more competitive with each passing year, being one of the largest and oldest chains in the market is not a synonym for success and growth anymore. Businesses have to adapt constantly and, more importantly, value the customers that they already have. The fall of McDonald’s is a self-inflicted crisis that will spark major repercussions for the company in the near future. And that means America’s most iconic fast-food chain is at serious risk of collapsing all around us, and its downfall will be very painful to watch.
Article and video via Epic Economist.
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Headline grammar!!!!!!!!!!
The peopleless ordering system, horrible WiFi, no peanuts, perpetual broken ice cream machines, no more self-service drinks… There’s plenty of reasons in addition to the high prices that I no longer go to McDonald’s.
McDonald’s is still by far the cheapest compared to other fast food restaurants. McDonald’s parking lots are still filled with more cars than many other restaurants. Sorry, but the sandwiches at these other places are ridiculously crazy expensive. So what? McDonald’s can’t raise their prices? Only other places can? Ground beef is outrageous in the grocery stores! Everything is! Is that McDonald’s fault too? Look to DC for that answer.
Dude you love McDonalds… I’ve never seen such a strong defense of literal Garbage..
I really hope that Big Mac you’ll be getting later is tasty..
How about the fact that the food is incredibly processed, terrible for human consumption and fake. There is literally no comparison to what a McDonald’s hamburger tasted like 30 years ago. The entire menu is fake food.
But I digress. All fast food is pretty much the same.
The only thing that gets sacrificed in the fast food biz is food quality. Hence the reason we buy beef by the half or full side and grill out on either our blackstone or Traeger daily during the summer. Haven’t had need or desire for garbage food for years.
In-n-Out Burger is an exception to the fake food rule. Even their fries are cut fresh by hand.
McDonald’s used to be tasty garbage fast & cheap – now it’s just garbage. That’s why I don’t go.
I quit going to McDonalds a long time ago. Although their closest restaurant is just upmthe street, I would rather drive 20 minutes to my local Whataburger. Why? Because it is cheaper and the food tastes better. It’s that simple.
Don’t look at me! I’m a Wendy’s guy!
McDonald’s is really a real estate company charging rent to franchisees. I like the egg McMuffin and occasional Big Mac though. I think the cost of the infrastructure and real estate taxes are what’s hurting the chain — not the food itself. The food is fine, you get what you want if the workers do it right. That’s the other problem, unreliable workers. I feel sad for the franchisees who loved the food and the culture, but the unreliable workers and costs just killed it for them 😢😢😢
This article could use a few more solid examples to make a better case for its assertion. How much does McDonalds gross on its higher priced meals versus its budget meals? Seems the overhead would be about the same per meal, so the equation would boil down to how many budget meals must it sell to match the gross of one high priced meal? And is there enough demand for the budget meals to warrant a reduction in the price of the high priced meals? Has McDonalds dropped the budget items altogether so customers can only get the higher priced items? I suspect any revenue issues McDonalds is experiencing has more to do with staffing and wait times than prices. It was fast food when you could walk up to the window, place your order from a very limited menu, and walk away with your order in less than two minutes. Now it takes longer than that to read the menu and often you’re waiting several minutes to receive it. Maybe they need to streamline the menu and get back to basics. Waiting for fast food is an oxymoron.
Stores have even curtailed their hours . I generally am on the kob at 5am . You can rarely now find a 24hr mickey D . Am in the capital of my state and nothing is open until 8am – thats ridiculous !. And then the cost as som McD’s are $7 and others are $10 for the same breakfast meal wtf ?.
Ten percent is a modest increase given the government driven inflation. Poor service would be a bigger driver of lost customers. A friend and I stopped at a Greenville, NC Mickey D’s at 6:30AM for coffee to go on our way to a race in 2013. The coffee was rancid, tossed it. Haven’t been in a Mickey D’s since
Too much salt, the burgers don’t taste like beef, the fries don’t taste like potatoes, it all tastes like salt.
Gee Walley…do you think the meat that has the taste and texture of cardboard (where’s the beef?) or the dirty-looking, tattooed up people that serve you (which makes you doubt sanitation) could be a factor in McDonald’s demise? Chik-Fil-A is still doing OK and their food isn’t soybean laden, their facility and staff don’t look like the dregs of society, and their food costs more. However, in truth, CFA is also going downhill since the father died. And they are going to get hammered, too, if the useless son doesn’t shut his mouth…his woke talk has ticked off many customers…some I know personally who are already quietly boycotting CFA because they see the downward trend of shirtsleeves to shirtsleeves in one incompetent generation. Go woke, go broke….buddy. CFA is not immune.
McDonalds has the same problem most big companies have, they are only in business for $$$, not to provide a valuable service or product.
When ‘profit’ is more important than the service you provide, the public will take notice and vote with their feet.
Couldn’t disagree more with your conclusion and your initial proposition that all McDonald’s problems are pricing related. They are not. Is In and Out struggling? Do you think people that go to In and Out will stop going if prices for a combo go up by a buck? If not, why? Quality. McDonald’s has none. In fact there is so little of what we refer to as good in their meals that I don’t know that what they serve can legitimately be called Food any longer. Have you seen the 20 year old McDonald’s Burger that one man still has in its original wrapper? It still looks edible. McDonald’s is dying because they have been killing their brand for years with inferior “food” and a complete lack of taste. Have you tried their eggs recently? The texture is strange and it doesn’t taste like an egg. No McDonald’s is dying by suicide.
Eight something plus tax for a ten piece nugget. Nuggets are definitely not worth a buck each. I get eight piece fried chicken and four rolls for 7.99.