As fast-food workers of the world unite under a common banner of "higher minimum 'livabale' wages", one can't help but reflect on the terrible jobs data this morning and the potential inability of workers to get anything but a low-skill 'part-time' job flipping burgers. But most importantly, these workers may soon not be able to afford the product they manufacture. Concerns over rising wage costs can be put aside for now as it is the soaring costs of beef (as we discussed here previously [5]) that are causing "Dollar Menu" items to be adjusted upwards. "You can't sell a burger for $1 anymore because the cost of beef has gone up so much," and sure enough, as Bloomberg reports [6], McDonalds is testing a new version, dubbed 'Dollar Menu and More', that includes items selling for as much as $5. As one analyst notes, the industry's "definition of value has moved up from the Dollar Menu to $1.50 or $2.”
Via Bloomberg, [6]
McDonald’s Corp.’s Dollar Menu is primed for inflation.
The burger chain is testing a new version, dubbed Dollar Menu and More, that includes items selling for as much as $5. The new lineup is being tested in five markets in the U.S., Ofelia Casillas, a spokeswoman for the Oak Brook, Illinois-based company, said in an e-mail. One test includes $1, $2 and $5 fare; another has $1, $1.79 and $4.99 items.
“It just sounds like they’ll be raising prices,” Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. The industry’s “definition of value has moved up from the Dollar Menu to $1.50 or $2.”
McDonald’s earnings have trailed analysts’ estimates for the past two quarters amid shaky consumer confidence and more competition from rivals introducing new food. The chain also is facing a franchisee revolt. One point of tension is the increasingly difficult economics of the Dollar Menu, according to a document obtained by Bloomberg News recapping an April franchisee meeting. Store operators also have met to discuss rising costs, including higher rents, as well as how an increasingly complex menu slows down service.
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Restaurants including McDonald’s have faced higher beef prices after a drought last year made it more expensive for farmers to feed cattle.
“You can’t sell a burger for $1 anymore because the cost of beef has gone up so much,” Saleh said.
Is this like the opposite of 7-Minute Abs?