McDonald’s and other fast food chains have raised their prices due to the increases in the minimum wage in California and the higher cost of living. While this boosts their profits, fast food is less affordable for many Americans. Consequently, McDonald’s might leave California.
In April 2024, the minimum wage for fast food workers in California went up to $20, but some workers are pushing for $30. Workers are happy because this helps with the high cost of living, but customers are affected as companies increase prices and cut jobs to manage the wage hike.
McDonald’s Refills Have Been Scrapped
One of McDonald’s key perks was free refills, which allowed customers to refill their drinks as much as they wanted for free. However, the fast-food chain is now removing its self-serve drink stations to cut costs. Customers will need to ask at the counter for refills. Many customers are upset, saying free refills should be the last thing to go.
Fast food used to be quick, cheap, and simple, but that’s changed. Fast food prices have gone up significantly. For example, an Egg McMuffin meal with coffee and hash browns now costs $17.63, whereas it used to be under $10.
McDonald’s Increasing Prices
Between 2014 and 2024, McDonald’s prices increased by about 65%. This is a big increase quickly, but not surprisingly, since fast food inflation rose by 4.8% last year. In the same period, the price of goods only increased by 31%, leading many to wonder why McDonald’s prices increased so much more. McDonald’s isn’t the only chain that has raised prices significantly. Almost every fast-food chain has done the same to cover higher operating costs and stay profitable.
Chipotle has also raised prices and might do so again. They say they need to keep up with inflation and cover higher costs for materials like avocados. Chipotle has been offering smaller portions at higher prices to maintain their profit margins, leading to many customer complaints online.
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Public Outcry
Customers complain online about Chipotle’s portion sizes and filming servers to ensure they get enough food. Fast-food chains reducing portions to cut costs should expect similar backlash. Rising inflation has caused fast food prices to increase, making 80% of Americans feel they can no longer afford it. Consequently, people are changing their eating habits.
62% of Americans are eating out less because of higher prices, with half of those earning under $30,000 per year viewing fast food as a luxury. More people are cooking at home to save money. McDonald’s has noticed fewer customers and introduced a $5 meal deal to attract them.
High Cost of Living
People can no longer afford to eat at fast-food restaurants, so they find other ways to get their meals. Many are now eating only at home and not dining out at all. Those who can afford to eat out are choosing traditional sit-down restaurants instead. Fast food restaurants are now competing not only with each other but also with these sit-down places. The entire restaurant industry faces challenges as customers become more careful with their spending due to inflation and high menu prices.
The industry may also still be feeling the effects of the pandemic. After the pandemic, food industry brands were happy to reopen and welcome customers, but not everyone was eager to return. Older people were more cautious and visited restaurants less often. This has impacted restaurants with older clientele, like Cracker Barrel and Olive Garden, and likely affected chains like McDonald’s.
Will McDonald’s Leave California?
In early June 2024, there were rumors that McDonald’s might leave California due to rising minimum wages and fewer customers. However, no evidence exists that McDonald’s plans to leave the state.
With 1,200 restaurants in California, the fast-food giant will unlikely close them all. Since the news didn’t come from an official source, we can assume McDonald’s isn’t planning to leave California. The rumor might have started because other restaurant chains have left the state. For example, Blaze Pizza, which began in California, has done so.
California’s Fast-Food Issue
In California, there has been a noticeable drop in the number of people eating at fast-food restaurants. This is mainly because of the new law signed by Governor Gavin Newsom last year.
The law raised the minimum wage for fast-food workers to $20 per hour. As a result, many restaurant chains in the state are struggling with higher costs and are looking for ways to stay profitable. This often affects customers. For example, In-N-Out Burger has increased its menu prices across California due to the wage hike.
Preparing for the Impact
Rumors about McDonald’s leaving California might be linked to actions restaurants were planning to take before the wage increase started to lessen its impact. A McDonald’s franchisee with 18 outlets in the state thought about reducing store hours and delaying renovations due to rising costs. This could lead to the closing of locations entirely in California.
Moving out of California completely might seem extreme, but it makes more sense when you consider the current fast-food business environment in the state. For instance, Rubio’s Coastal Grill, a popular Mexican chain, filed for Chapter 11 bankruptcy and closed 48 California locations.
ALSO READ: Ex-McDonald’s Chef Gives Recommendations of Food To Either Try or Avoid at Its Restaurants
McDonald’s Sales Decline
While the rumors about McDonald’s leaving California were false, they don’t seem so unrealistic, given the challenges facing the fast-food industry in California.
In the first three months of 2024, McDonald’s sales were lower than expected, indicating that the company needs to make some changes. With fast food places targeting lower-income people who now can’t afford to eat there, there is hope these companies will lower their prices to attract customers back.
Running Loyalty Programs
To encourage customers to return to fast-food restaurants, there is something they can do. Offering loyalty programs and points for every in-store or online purchase can be effective.
Although some restaurants have seen some growth from these programs, it’s still not as much as they hoped. This shows that fast-food chains like McDonald’s need to do more to boost their customer numbers.
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