Before Co-Vid 19, popular food chains such as Mc Donald’s, Wendy’s and Chipotle may have increased their prices as high as 12 percent according to the national survey; this is no longer the case. Lone Star Economics Professor and Economist, Hank Lewis says there are several variables contributing to the price increase.
The national report also showed quick service, or fast-food operators are more dependent on hourly labor than casual dining. Tipped employees make a smaller base rate.
“Higher labor costs are a contributing cause to it, but it is not the only reason. The issue here at hand is multiple resource costs have gone up and stayed up since the pandemic, so this gets passed on in the form of higher prices.” Lewis said.
In addition, electricity surcharges and the cost of corporate mandated paper goods, tariffs, and labor shortages in the beef and produce industry are also contributing factors.
“It is not inexpensive like it use to be. The fast-food industry needs to figure out ways to source their material cheaper, something to drive the volume higher with thinner margins to get the customers back in the door. “Lewis said.
Nationwide 95% of Mc Donald’s restaurants are owned by franchise owners. The owners make the pricing decisions for their locations after Mc Donald’s offers suggestions. They are mandated to buy the paper and plastic goods and do not have any wiggle room to save on these costs.
“Some more flexibility and allowing some competition amongst suppliers may actually drive some of the sourcing of the material down.” He spoke.
The national report indicated restaurants are responding by offering meal deals and extra-value menus.
Lewis said the franchise owners can have their licenses revoked if they do not stick to the menu and corporate guidelines. The economist said if the corporations would allow the franchisees to outsource but with comparable quality it could help lower the operational costs in turn by passing a long break in cost to the customer.