Tuesday, June 25, 2024
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Chipotle vs McDonald’s: Fast Food Pricing Amid Inflation

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Chipotle vs McDonald’s: Fast Food Pricing Amid Inflation
Source: Pinterest

Chipotle vs McDonald’s: Fast Food Pricing Amid Inflation

Source: Pinterest

As the country continues to face the issue of inflation, fast-food chains are feeling the impact. However, some have been able to keep their prices constant, while others are seeing a huge surge.

What Caused the Difference?

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Food prices at Chipotle and McDonald’s have been increasing thanks to the general inflation rate in America. However, while Chipotle’s prices are increasing at a steady and reasonable rate, McDonald’s prices have been rising drastically.. The reason for this is the difference in the strategies they use, their different modes of operation, and the prices of the ingredients they use in their menus.

Labor Costs Are Rising

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All fast food chains are also feeling the impact of the increased labor costs across the country. For example, the Californian government has increased the minimum wage to 20 per hour, which has now affected these businesses’ usual employee budgets. Therefore, McDonald’s took the route of increasing the prices of its food to meet up with the new costs, while Chipotle is trying to increase efficiency to attract more customers and income.

Higher Ingredients Means Higher Prices

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Another reason McDonald’s has increased its food prices significantly is thanks to the recent surge in beef prices. As most of its products include beef, the increase in price left them with no other option but to increase theirs as well. However, Chipotle does not have this problem as avocado is one of its main ingredients, and its price has reduced significantly over time.

Chipotle’s Alternative Approach

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Rather than hiking its prices, Chipotle has taken an alternative approach to making more money for the company. The fast food chain has prioritized its operational efficiency and strategies to increase order accuracy, speed, and total customer satisfaction. When customers are happy, they buy more, and when their operations are smoother, they can serve more people, thereby increasing their sales.

Increasing Efficiency and Output

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Chipotle’s strategic approach to focusing on increasing the number of customers and daily production has helped greatly. This has drawn more customers to their branches, as people now know them for fast and efficient service. This way, they have extra revenue to afford only slightly increasing their prices and keeping them regulated and affordable for their consumers.

Avocado Prices Playing A Role

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Since 2023, the prices of avocados have been dropping considerably. This has lifted Chipotle’s financial burden, making them spend less on this key ingredient. This is also a huge advantage over competitor McDonald’s, as they do not use avocados as much as Chipotle. Furthermore, the company has been able to use most of the revenue that would have gone toward buying avocados to increase its efficiency.

McDonald's Price Surge

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Over the past three years, McDonald’s has increased its prices by a staggering 30%. Without a doubt, this is a business decision that can have a negative impact soon. Sara Senatore, a Bank of America analyst, spoke to CNBC, stating that the price increase was justified to maintain profits even though customers would bear the high cost.

Brand Loyalty at Stake

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Another significant risk that McDonald’s is taking is the possible loss of customer loyalty to the brand. Usually, the fast food company caters to many lower-income customers, and this huge spike is disappointing as they cannot afford it. “This is going to be a tough year,” Senatore warns, but this can already be seen as McDonald’s first-quarter earnings were less than expected.

Irregular Pricing

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Another frustrating and confusing thing the McDonald’s team is doing is irregular prices. The brand gives each branch autonomy over its prices and this has caused a huge difference between the prices of some locations. As the prices are inconsistent, customers are drawn away from buying from them, while Chipotle’s constant prices are preferable to people who like to budget.

Wall Street Watches

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While McDonald’s is facing disappointing quarter earnings, Chipotle has been experiencing all-time highs in its stock price. Wall Street has been watching both fast food chains, and the difference is quite clear. Therefore, McDonald’s is facing backlash for its increased pricing and has to come up with a suitable solution soon to boost its earnings for the second quarter of the year.

Constant Change Is Expected

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As the economy continues to change, these fast food chains also have no other choice but to change with it. In fact, consumers also have to change their expectations for the future. While each company’s pricing strategy can change at any time, the best approach is to keep consumers in mind, using options like reducing portion sizes or adding new, cheaper items to the menu.

Understanding Is Key

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As a consumer, it is better for you to know and understand the dynamics of the fast food industry and pricing. This can help you save money and get better deals. Therefore, having this information can help you to plan your fast food trips and not spend excessively when you don’t want to. As the economic conditions change constantly, a good knowledge of will save you from breaking the bank.