- Fast-food and fast-casual chains say diners should expect smaller price increases this year.
- Shake Shack, for example, plans to put restaurant prices up by about 2.5% in 2024.
- Customers are looking for ways to get cheaper meals by searching their apps and choosing value menus.
Chains like McDonald’s, Shake Shack, and Taco Bell say they’re only planning small price increases in 2024 as inflation cools.
Chains across the US put prices up drastically during the pandemic because of factors including higher wages, more expensive food and packaging costs, and supply-chain disruptions.
From January 2021 to January 2022, prices at limited-service restaurants went up 8.0%, according to unadjusted data from the Bureau of Labor Statistics. The next year, they increased 6.7%.
But in the year to January 2024, prices at limited-service restaurants rose just 5.8%, per BLS data.
Inflation may be cooling, but the series of recent price hikes is still putting a sour taste in some customers’ mouths.
Martin Jennings, a 51-year-old truck driver from Florida, told Business Insider that his family was being deterred by higher prices at fast-food chains.
“Most of the time it’s just so expensive that we try to avoid it,” he said. “It’s gotten kind of outrageous, and so we’ve really scaled back.”
Ben Heyworth, an account executive from Orlando, told BI that he rarely eats at home but had pivoted from dining in at fast-food chains like Subway, Burger King, and McDonald’s in favor of fast-casual restaurants that are designed for sit-down meals. He said the food, service, and atmosphere are all better and they generally charge a similar price.
Shake Shack executives told investors on Thursday that the company expected to put in-store prices up by about 2.5% in 2024. Pricing action will be more in line with what the chain did pre-pandemic, executives said.
Wendy’s executives said on Thursday that the chain planned to put prices up in the low-single-digits throughout 2024, with a small increase planned for the middle of the year. The company said that it had put prices up by about 4.5% in 2023, but that customers didn’t place smaller orders as a result.
Both McDonald’s and Taco Bell said last week that customers should expect less dramatic price hikes this year. McDonald’s put US prices up by about 10% in 2022 and again in 2023, and CFO Ian Borden said that diners are now more cautious of price increases.
Customers are looking for app deals and choosing value menus
Customers are looking for ways to get cheaper meals at fast-food chains. Jennings told BI that his family has apps for “pretty much every” fast-food restaurant out there to find deals. They choose to order “whatever’s the cheapest,” he said.
David Gibbs, CEO of Taco Bell parent company Yum! Brands, said that sales of the chain’s revamped $3-and-under value menu have been stronger than expected.
McDonald’s CEO Kempczinski said he expects low-income diners to be more attracted to the lowest-priced items on its menu, like its D123 platform, which prices some items at $1, $2, and $3, rather than multi-buy promotions.
In their recent batch of earnings calls, fast-food executives generally said that they were optimistic for the year ahead as inflation cools and employment levels are high.
“The consumer should start to see net disposable income coming up slightly, feel a little bit richer,” and want to treat themselves by visiting restaurants more often, Wendy’s CFO Gunther Plosch told investors.
Prices in California are set to go up, though
While the picture in most of America should improve for fast food customers, diners in California should expect to face bigger price increases in 2024. Minimum wages for California fast-food workers will increase to $20 an hour in April, and their employers are planning to hike menu prices to offset this.
Chipotle said it’s eyeing a price increase in the mid-single digits, depending on consumer sentiment and actions taken by other fast-food chains.
People who order for delivery generally face higher menu prices, too. Shake Shack CFO Katie Fogertey said that the chain had recently increased the premium charged to customers who place orders digitally.
Fast-food chains are finding other ways to get diners to pay more, such as rolling out more digital order kiosks, which typically push diners to place bigger orders and spend more on customizations.
Do you think fast food is too expensive? Email this reporter at gdean@insider.com.
