Three Democratic senators have questioned McDonald’s about recent menu price increases, arguing that the increases are higher than they should be despite inflation and higher operating costs.
In a letter sent Monday afternoon, Sens. Elizabeth Warren of Massachusetts, Bob Casey of Pennsylvania, and Ron Wyden of Oregon wrote that McDonald’s President and CEO Chris Kempczinski was asked to explain the chain’s pricing decisions.
“McDonald’s own reports indicate that the company’s price increases may be outpacing inflation,” the letter, first shared with NBC News, says.
According to the letter, McDonald’s operating expenses increased by 16.5% from 2020 to 2023, and its net profit margin increased from approximately 26% to 32% over the same period.
“As a result, McDonald’s net annual revenue increased by more than 79% from 2020 to 2023, reaching nearly $8.5 billion,” the report states.
McDonald’s did not immediately respond to a request for comment on the letter, but it said prices at fast food restaurants have become unaffordable for some low-income households, leading them to choose to eat at home instead. The reason behind this is what happened.
Fast food chains are aware that their prices are perceived negatively. McDonald’s brought back its $5 value menu over the summer to entice customers, then extended the promotion through December. Other popular fast food chains are holding similar sales.
The letter acknowledged that prices have increased significantly at many popular restaurant chains since the pandemic. The senators wrote that they singled out McDonald’s because of its status as the largest fast food chain in the United States and because of inconsistencies in McDonald’s financial statements.
“Earlier this year, McDonald’s U.S. President Joe Erlinger attempted to blame inflationary pressures and ingredient costs for the company’s menu price increases, but the data tells a different story,” the letter states, adding that progress A March analysis by President Roosevelt think tank added: According to the institute, McDonald’s markup (the difference between manufacturing costs and what consumers pay) last year was 85%.
“McDonald’s operating margin for the same year was 52%, the highest of the 10 publicly traded fast food companies,” the letter said.
McDonald’s prices are raising eyebrows. A post on X purportedly featured a Big Mac combo dish being sold at a rest stop in Connecticut for nearly $18.
In a letter to customers in May, Erlinger said “viral social posts and poorly sourced reports that McDonald’s has significantly increased prices above the rate of inflation” are inaccurate. He said the average price of a Big Mac in the U.S. was $5.29, up 21% from $4.39 in 2019.
Erlinger added that the average price across menus has increased by about 40% since 2019, which is consistent with a roughly 40% increase in input costs such as employee salaries, materials and paper. Ta.
Months later, McDonald’s executives announced they were taking a “forensic approach” to examining prices to ensure they were offering fair value.
The senators said they welcomed the valuation results, but also noted that “at the same time McDonald’s raised prices, McDonald’s paid nearly $4 billion in stock buybacks in 2022 and more than $3 billion in 2023.” did.
“Corporate profits should not come at the expense of people’s ability to put food on the table,” the letter said.
The letter alleges that Warren and Pennsylvania state Rep. Madeleine Dean are accusing General Mills, Coca-Cola and PepsiCo of “a pattern of profiteering” through shrinkflation (reducing the size of a product while charging a fee). It was sent a few weeks after he accused him of being involved in “. same or more price.
In a statement to NBC News, Mr. Casey called McDonald’s actions “textbook greedy inflation,” while Mr. Warren said that McDonald’s “squeezed its customers for huge profits and gave millions to its wealthy shareholders.” “They paid a billion dollars and then turned around and blamed the high costs on inflation.”
“Fast food should be about making Americans’ lives easier, not about making quick profits for McDonald’s executives and Wall Street,” she says.
McDonald’s franchisees own and operate more than 95% of all chain restaurants in the United States, the company said. The senators’ letter asks CEO Kempczinski whether McDonald’s provides pricing guidance to its franchisees and the pricing of menu items other than $5 meal deals. I asked if they were lowering it.
It also asked whether McDonald’s executives received bonuses or other incentive-based compensation from 2020 to 2024, and whether the incentives were based on executives’ ability to increase profits per customer.
In a statement to NBC News, Wyden said large companies “have an obligation to be transparent with consumers when it comes to raising menu prices.”
“McDonald’s is not a happy place if your family is getting the price of a Happy Meal jacked up,” he says. “Fast food chains like McDonald’s are making profits, but families are struggling to afford the meals they should be eating.”
