Fast-food restaurants struggle to retain customers as food and wage costs rise – The Epoch Times

Over the past five years, restaurant dining has increased by 30%. According to the Bureau of Labor Statistics, eating out has increased by 30%. In the past year alone, the cost of a meal at a fast food restaurant has increased more than that of a meal at a full-service restaurant.

In the Consumer Price Index, the limited-service meals category (meals ordered at the counter and carried out) increased by 4.3% in July compared to a year earlier. In comparison, full-service meals (restaurants with table service) increased by 3.8% during the same period.

McDonald’s was recently stung by reports that it was charging $18 for a Big Mac, prompting the company’s chairman to issue an open letter in May.

“I can tell you that it frustrates and concerns me and many of our franchisees when I hear of an $18 Big Mac meal being sold, even if it’s just one of more than 13,700 locations in the United States,” wrote Joe Erlinger, president of McDonald’s USA, noting that the average price of a Big Mac across all U.S. franchises has increased 21% since 2019, from $4.39 to $5.29 today.

According to a McDonald’s “myths and facts” sheet, the company has increased average menu prices by about 40% over the past five years, which is consistent with the company’s rising costs. Employee wages have increased 40% since 2019, and food and paper costs have increased 35% over the same period, the company said.

At some point, however, customers will question the value of fast food, compared with alternatives such as full-service restaurants or dining at home, industry experts say.

“People love going to Subway for lunch. It’s cheap, it’s fast, it’s easy, it’s good. But they’re wondering whether they want to pay $12.99 or $14.99 for a meal that used to be $8.99,” Gary Pryor, a restaurant and food production company owner and business consultant with Waters Business Consulting Group, told The Epoch Times.

“The last thing they want to do is raise menu prices more than they have in recent years. But ultimately, they’re going to have to make some painful choices.”

The most obvious options for fast food restaurants are higher prices, smaller portions or fewer staff, which often means longer lines and a less enjoyable dining experience, he said.

The industry is currently struggling to find a solution to the current situation.

McDonald’s Chief Financial Officer Ian Borden said on the company’s April 30 conference call that “everybody is fighting to have fewer customers or customers who are certainly coming in less frequently.”

“We have to make sure we have that street fighting mentality to win,” he said.

The industry is at a “crossroads,” according to Michael Podolsky, CEO and co-founder of an online review platform and consumer advocacy group.

“While these brands remain strong players, ongoing issues with customer service, food quality and pricing are causing consumer dissatisfaction,” Podolsky told The Epoch Times. “Addressing these concerns will be critical to remaining strong in the marketplace, or consumers may move on to a higher-quality dining experience at similar or slightly higher prices.”

Additionally, 15 states now have a minimum wage above $14 an hour, roughly double the federal rate. Seven states—Alabama, Georgia, Louisiana, Mississippi, South Carolina, Tennessee, and Wyoming—do not have a state-level minimum wage, although in those states the federal minimum wage applies.

Many restaurants, unable to pass these costs on to their customers, simply close.

“Employers are going to be hesitant to hire an unskilled employee and bear the cost of learning a skill,” Savidge said. “They’re going to be less willing to take risks with these new, inexperienced employees who are looking to gain work experience and enter the workforce.”

Although the rate of inflation growth has slowed over the past year, price pressures remain across the food industry, which is now also facing an increasingly price-conscious consumer.

“They spend money on vacations or other things, but eating fast food is not an attractive proposition for a family of five when it costs $100,” Pryor said.

And beyond the struggle to keep menu prices low, there’s pressure on fast-food restaurants to deliver meals with the same speed and efficiency, even as they try to deal with staffing issues.

“Costs don’t always translate into menu prices,” Savidge said. “Sometimes the cost is waiting 20 minutes in a very long line at the drive-thru just to pick up your order.”

“That in itself represents a cost: the value of your time.”