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What’s going on with fast food prices?

Ruh takes the viewer on a trip to the grocery store to price out his beef burger bowl — his healthy substitute for a Quarter Pounder combo.

He picked up a pound of ground beef ($6.24), yellow onion ($0.87), a head of lettuce ($1.87) and a pack of grape tomatoes ($2.98). He added two mangoes for dessert to replace the milkshake, which totalled $3.26. The whole meal came to $15.19 — more than a dollar cheaper than the $16.25 McDonald’s meal.

“[In this] era of massive inflation, you actually don’t get more for your dollar at McDonald’s,” Ruh said. “You get more for your dollar by cooking your own food.”

Since 2014, McDonald’s menu prices have doubled — far outpacing the 31% rate of inflation during that time, according to a recent analysis by personal finance website FinanceBuzz.

That same Quarter Pounder meal that Ruh purchased cost only $5.39 in 2014. Now, it comes to $11.99.

FinanceBuzz also discovered that Taco Bell, Subway and Popeye’s increased their menu prices by more than the rate of inflation in the past decade.

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Why is this happening?

As Ruh pointed out, many consumers still think of McDonald’s as a cheap food option. But due to economic changes in the past few years — inflation, labor shortages, minimum wage increases, the cost of rent — that’s no longer true.

Shubhranshu Singh, an associate professor of marketing at Johns Hopkins, told FinanceBuzz that one of the major reasons for the high price of fast food is due to the increased labor costs since the pandemic.

A dearth of workers during that time led to fast food restaurants increasing wages to attract new talent. Once you raise wages, you can’t decrease them or else you’ll lose your workforce.

Some states mandated wage increases. Recently, California increased their minimum wage to $20 an hour (from $16/hour) — a 25% increase, according to NPR.

“The cost of preparing and serving fast food is rising faster than the inflation rate,” Singh told FinanceBuzz.

NPR added that the California wage increase for fast food workers has brought relief for many. These employees often live below the poverty line and can’t afford to buy the food they serve.

Will this ever stop?

Good news: fast food prices may stop rising later this year, University of San Diego economics professor Daniel Roccato claimed.

“The worst is behind [us] because consumers have reached a tipping point,” he told FinanceBuzz. “We won’t see prices drop but we can expect a pause.”

Roccato believes that labor costs will continue to put pressure on fast food chains’ bottom lines — which consumers will see reflected in menu prices.

But there is a way to mitigate this cost pressure, according to Marketplace’s interview with Michael Reich. The economics professor at the University of California, Berkeley, recommended that fast food executives cut their pay.

The McDonald’s CEO did this in 2022. Chris Kempczinski reduced his $20 million pay (in cash, stock and options awards) down to $17.8 million, according to a McDonald’s proxy statement by Crain’s Chicago Business.

Even with this 11.3% pay cut, Kempczinski still makes millions more than the average American worker. A full-time McDonald’s employee in California, by comparison, earns an annual salary of $41,600, before taxes — and that’s with the new $20 per hour mandate.

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About the Author

Sabina Wex

Sabina Wex

Reporter

Sabina Wex is a writer and podcast producer in Toronto. Her work has appeared in Business Insider, Fast Company, CBC and more.

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