It has been a common complaint of late that McDonald’s is no longer a cheap food option.

After all, some items on its “dollar menu” cost more than $5.

Now the fast food giant is under fire for hiking prices too fast, and losing revenue for the first time since 2020, with the company’s chairman vowing to “fix that with pace”.

McDonald’s chairman, president and CEO Chris Kempczinski said that “consumers still recognise us as the value leader versus our key competitors”.

“It’s clear that our value leadership gap has recently shrunk,” he said.

“We are working to fix that with pace.”

He added McDonald’s would undergo a “comprehensive rethink” of prices.

McDonald’s Australia reported to ASIC in May that it lifted its sales by seven per cent in the 2023 fiscal year and announced it planned to spend $1 billion on new stores and refurbishing.

Mitchell Taylor, a partner at Simon-Kucher who specialises in consumer goods and retail practice, said the bottom line for the quick-service restaurant (QSR) industry in Australia may look OK, but “if you bring that back to same-store growth or growth before price, they’re actually in decline”.

“Effectively, they are protecting revenue with price, which likewise is pushing customers away and reducing demand,” he told The New Daily.

“It’s a tactic that they can’t use anymore.”

He said that to win back customers, large QSRs like McDonald’s need to “focus on what you’ve lost”.

“A lot of the majors have been looking at really deep discounts in the last six months for so, but that’s not effective in the long run and it doesn’t equate to long-term customer loyalty or value,” he said.

“It’s not about major shifts in what they do operationally, it is about targeting areas that they’ve either lost out or where they’ve got growth.”

Challenging climate

Fast food restaurants are operating in a difficult climate after being major beneficiaries of the Covid-19 pandemic in which revenue soared.

Uber Eats, DoorDash and Menulog drove high profits during the Covid-19 pandemic. Photo: Getty

Gary Mortimer, professor of Marketing and Consumer Behaviour at the QUT Business School, said that the fast food giants, like any retail business, are now “facing a perfect storm”.

“The increasing cost of living is impacting Australian families and reducing their spend every week in that sector,” he said.

“On top of that you’ve got the supply side. They’re also faced with increasing wage and operational costs.”

He said that larger players like Domino’s, KFC, McDonald’s and Hungry Jack’s are better placed to weather the economic storm.

“It’s probably more of a concern for the smaller players and we’ve seen today Carl’s Jr go into administration,” Mortimer said.

“If you’re a smaller player, you’ve got less access to revenue and you may struggle to move through these challenging economic times.”

Carl’s Jr this week announced it will close 49 stores, ending any hope of the brand’s initial plan to open as many as 300 stores.

Taylor said the United States is experiencing similar, albeit more extreme, challenges.

“If you went to the USA five years ago, a QSR meal would be sub $10. Now people are paying upward of $20 for a Big Mac large meal,” he said.

“I think it has gotten to the point where it is too far and they’ve hit a nerve with local customers.”