On Oct. 30, the Golden Arches said it earned a total of $6.69 billion in revenue for the three-month period ending Sept. 30. That amount represents a 14 percent increase from the previous quarter's revenue and is higher than the $6.58 billion revenue projected by analysts at the financial market company Refinitiv.
Meanwhile, net income rose to $2.3 billion – $320 million higher than the $1.98 billion in the same period last year. Same-store sales in the U.S. increased by 8.1 percent, which was also attributed to price hikes of menu items. The Chicago-based fast food joint has 13,513 restaurants in the U.S. and more than 38,000 overseas locations.
During the Oct. 30 earnings call, McDonald's Chief Financial Officer Ian Borden confirmed that the company's prices in the U.S. did increase in the third quarter. While he didn't specify the exact degree, Borden said the fast food giant expects to raise its menu prices by just over 10 percent for the full year. This increase would be the second time the Golden Arches raised its prices by 10 percent.
Generally, menu prices vary between locations. The New York Post cited one branch in Darien, Connecticut that charged $18 for a Big Mac combo meal – which already includes medium fries and a medium soft drink. But one McDonald's branch at New York City's Times Square sold the same set for $13.69.
Aside from hiking menu prices, McDonald's is also hiking royalty fees it charges franchisees. In September, the Golden Arches announced a five percent increase in royalty fees new franchisees need to shell out if they plan to open new McDonald's locations in 2024. This was the first time in nearly 30 years that these so-called "service fees" were increased; before this, franchisees only paid four percent.
These royalty fees comprise a percentage of gross sales, rent and other expenses such as payments toward the company's mobile app. However, an internal message reviewed by CNBC said the hikes will only affect new franchisees, buyers of company-owned restaurants and relocated restaurants.
Existing franchisees who plan to maintain their current footprint or purchase another franchise from a separate operator won't be affected by this hike. Likewise, franchisees who rebuild existing locations or transfer their franchise to a family member will not be paying the increased fees.
While McDonald's executives are happy with the profits recorded for this quarter, their customers aren't. Many have even lamented that fast food, which used to be something that would tide them over, is no longer worth it as it has become more expensive.
One thread on the discussion site Reddit asked: "What is no longer worth it because of how expensive it has become?" Fast food became the most-rated response on the topic. Several users also weighed in on the matter.
"A 'value meal' at McDonald's now costs just as much as a meal at a lot of sit-down restaurants like Applebee's," said one user. Another reminisced about the times when two McMuffins were sold for $3. As of writing, the cheapest option is a small order of fries that could set back a customer $2.49.
Laid-off McDonald's employees also aren't loving the Golden Arches, following job cuts in April. The fast food giant rationalized the layoffs as part of an effort to speed up innovation and decision-making. (Related: NOT LOVIN' IT: McDonald's to lay off many of its 200,000 corporate employees in coming months.)
According to internal emails obtained by the Wall Street Journal, the company also slashed pay and benefits for others as part of a move to consolidate its operations into one national structure that would oversee all of McDonald’s 10 field offices. Moreover, the company also booked a restructuring charge of $180 million – amounting to 18 cents per share – during the first quarter to account for severance payments and the closure of some regional offices.
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Watch this report from the Health Ranger Mike Adams about the nasty things found inside Chicken McNuggets from McDonald's.
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