McDonald’s CEO responds to outrage over high prices todayheadline

A few months ago, my son and I were at Bradley Airport outside of Hartford, Conn. We wanted lunch at different places, so I gave him a $20 bill, thinking that should be enough for anything he wants to eat at a McDonald’s.

Sadly, $20 did not cover his 10-piece Chicken McNuggets meal. That combination, which came with fries and a drink, was a few pennies over $20, so he opted for the 6-piece combo.

Now, everyone knows that airport restaurants face higher costs, but this markup seemed excessive. The same combo, ordered through Uber Eats (which often costs more than an in-store order), cost $10.49 in Port St. Lucie, Fla.

The airport price was nearly double the cost, which does not reflect well on McDonald’s and make you wonder whether the chain should offer some sort or standard pricing nationwide.

That’s something analyst John Ivankoe asked about during McDonald’s (MCD) first-quarter earnings call.

“It’s fairly apparent looking around the country, the amount of core menu pricing difference that you have. And, obviously, I understand all the different economic and competitive reasons for that. But the reality is that there’s not a lot of price certainty specifically around the core menu. So, do you think that, that is an opportunity? Is it a risk?” he asked.

Some McDonald’s locations have much higher prices.

Image source&colon; Eugene Gologursky/Getty Images

McDonald’s CEO shares key pricing info

McDonald’s restaurants are operated by franchisees, and the chain does not set minimum or maximum pricing. That’s something CEO Chris Kempczinski talked about during the earnings call.

“Well, at the end of the day, pricing is an inherently local decision, and it’s informed by the trading area that exists around each of our individual restaurants. And our commitment and the focus is, we need to make sure that relative to the trading area that we’re competing in that we’re offering strong value, and that’s what shows up on both the menu board and that also shows up with the promotions and digital offers that we’re running,” he added.

Kempczinski aggressively pushed back at the the idea of uniform pricing.

“So, I think about it less as around having predictability across the country around a common menu, and it’s more about we need to be competitive within the trading areas that we’re competing. I think if you look at what’s been going on with menu prices right now, because the inflation has come down and we’re not nearly seeing as inflationary environment as we saw certainly last year and into — in 2023, they’re not seeing the big moves on core menu that you saw previously,” he added.

Kempczinski did acknowledge that inflation in the food space, at least for McDonald’s, has slowed down. He believes franchisees understand that offering value-based pricing is important.

“I think our franchisees also recognize how important it is for us to stay disciplined on this, and we look at pass-through rates, as I described earlier, to make sure that we understand the consumers’ willingness to accept any pricing. So, that would be my comment on that,” he shared.

McDonald’s sees the value of a value menu

McDonald’s global sales fell by 1%.

Kempczinski wasn’t surprised by that, but had admitted that some numbers were worse than he had planned for.

“We expected global QSR industry traffic would be down in the first quarter, actual industry traffic fell more than we anticipated in several of our large markets, including the U.S. In the U.S., overall QSR industry traffic from the low-income consumer cohort was down nearly double-digits versus the prior year quarter,” he said.

The CEO also noted that McDonald’s saw a weakness in another customer group.

“Unlike a few months ago, QSR traffic from middle-income consumers fell nearly as much, a clear indication that the economic pressure on traffic has broadened. However, traffic growth from the high-income cohort remains solid, illustrating the divided U.S. economy, where low- and middle-income consumers in particular are being weighed down by the cumulative impact of inflation, and heightened anxiety about the economic outlook,” he added.

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The answer to that, he believes, is value.

“We know that leadership in value and affordability is paramount in an environment like this, and we have been expanding and refining our value proposition to meet the needs of our consumers, especially our low- and middle-income cohorts, as well as families internationally. Building upon the actions we began to take in 2024, we now have everyday affordable price menus, or EDAP, and entry-level meal bundles in each of our big five international operated markets,” he shared.

What’s next?: McDonald’s CEO says affordability is back in focus as inflation cools, but still weighs heavily on consumer decisions.