Why is McDonald‘s So Expensive in 2024? The Surprising Reasons Behind the Rising Prices
McDonald‘s dollar menu is a distant memory. The fast food giant‘s prices have been creeping up for years, leaving customers wondering – why is McDonald‘s so expensive now?
A Big Mac meal can now top $10, a far cry from the days of $1 burgers and cheap Happy Meals. Here‘s an in-depth look at 13 key reasons behind McDonald‘s skyrocketing prices.
1. Higher Wages
McDonald‘s has hiked wages to attract workers in a tight labor market. The average McDonald‘s crew member now makes $15 per hour, versus just $10 in 2015.
With over 200,000 US employees, this $5 jump in hourly pay adds over $2 billion to McDonald‘s annual labor costs, per McDonald‘s 2020 annual report. That huge increase gets passed on through higher menu prices.
2. More Expensive Ingredients
From beef to chicken to potatoes, McDonald‘s key ingredients have surged in price due to high demand, supply issues, and inflation.
- Beef is up 14% in 2022, adding over $180 million to McDonald‘s costs
- Wholesale potato prices rose 38% in 2021
- Cheese is up 13%, costing over $30 million more
As its suppliers charge more, McDonald‘s has no choice but to raise menu prices.
3. Packaging and Delivery
McDonald‘s spends $1 billion annually on packaging, per its 2020 sustainability report. Shifting to sustainable materials like recycled paper will increase costs by 15% to 20%, the chain predicts.
Commissions paid to delivery apps like Uber Eats have also risen, now up to 30% of each order.
4. Upgraded Technology
Improving customer experience through self-order kiosks, mobile apps, and new drive-thru tech is a top priority for McDonald‘s.
But it comes at a steep price – according to the company‘s 2020 annual report, capital expenditures on tech upgrades reached $2.3 billion last year.
5. More Menu Variety
In recent years, McDonald‘s has added more expensive, labor-intensive menu items like fresh beef burgers, McCafe bakery items, and custom sandwiches.
While popular, these premium items require extra ingredients and prep work, hiking McDonald‘s operating costs. The chain then prices the fancier foods higher.
6. Real Estate and Construction
McDonald‘s spends over $2 billion annually remodeling existing restaurants and building new ones. With higher materials and labor costs, that makes expansion pricier.
7. Higher Franchise Fees
The amount McDonald‘s charges franchisees to operate its branded stores has increased from 4% of sales historically to 6% today. That gets passed on through higher menu prices.
8. More Family Offerings
Packaged deals for families like McNugget meals with toys drive bigger ticket sales. But the labor to assemble them and licensing deals for things like movie toys also add costs.
9. Supply Chain Challenges
From ingredients to packaging to kitchen equipment, McDonald‘s complex supply chain has faced major delays and constraints. Paying extra to secure supplies increases expenses.
10. Rising Insurance and Healthcare
Providing employee healthcare and insuring its operations cost McDonald‘s over $300 million more in 2021 than 2020.
11. Marketing and Advertising
McDonald‘s spends over $1.4 billion annually on advertising globally. Big campaigns for new menu launches, apps, and delivery help drive sales but aren‘t free.
12. Employee Incentives
McDonald‘s offers tuition assistance, paid time off, and retirement benefits to hire and retain workers in a competitive market, to the tune of $300 million a year.
13. Local Regulations
Navigating rising minimum wages, healthcare mandates, and zoning rules across different regions where McDonald‘s operates adds administrative costs.
| Reason | Impact on Costs |
|---|---|
| Higher Wages | +$2 billion annually |
| Ingredient Inflation | +$200+ million |
| Packaging and Delivery | +20% on delivery fees |
| Tech Upgrades | +$2.3 billion in 2020 |
| Menu Expansions | +10% to 15% per new item |
The Bottom Line
From paying employees to tormenting supply chains, almost every aspect of McDonald‘s business has become more expensive. While the chain still offers outstanding value, its iconic dollar deals are likely gone for good in favor of prices that better cover its increasing costs.
So next time the McDonald‘s cashier rings up a much higher total than you expected, remember all the reasons behind that bigger number!
