McDonald’s Is Flourishing Despite Higher Prices — What’s Drawing Customers In?

McDonald’s Is Flourishing Despite Higher Prices — What’s Drawing Customers In?

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Inflation accelerated to a four-decade high in September as the overall CPI increased 8.2%. But higher rates of inflation, particularly concerning food, haven’t discouraged McDonald’s customers.

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In the third quarter, McDonald’s raised its U.S. prices by 10% year-over-year on average, CNN reported. CFO Ian Borden noted during an Oct. 27 analyst call that the company is gaining share among its lower-income customers. 

McDonald’s is “positioned as the leading brand in terms of value for money and affordability,” said Borden, as reported by CNN. Customers have also opted for value items over purchasing meals. It seems likely that McDonald’s customers still see the golden arches as a place to grab a tasty bite at an affordable price point.

CNN reported that many companies are finding ways to make customers feel like they’re getting a good deal, such as offering additional serving sizes and focusing on value. According to the fast-food giant’s third-quarter 2022 results, sales at U.S. stores open for at least 13 months increased by 6.1%, and the company noted that sales benefited from “strategic menu price increases and positive guest counts.”

CEO Chris Kempczinski said during the same analyst call that the company expects “a mild to moderate recession in the U.S.,” but also that McDonald’s has a history of resilience during tough economic times, per CNN.

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However, consumers may be at their breaking point. A recent industry trends report from Revenue Management Solutions indicated that customers are starting to cut back on their spending. According to a survey of 750 U.S. consumers in Q2, two in five reported spending less of their disposable income on restaurants. Of those spending less, 34% still visited restaurants but chose cheaper items, while 46% ordered less frequently.

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