Despite wage increases for workers, higher production costs and a hike in menu prices, McDonald’s yearly earnings actually beat analysts’ estimates.
On a call with investors, Kevin M. Ozan, the fast-food giant’s chief financial officer and executive vice president, said prices and cost pressures were a bigger focus during the last few quarters this year than they had been previously, but they expect the same price increase they see year-after-year.
“Last quarter, I think I talked about how we were seeing roughly a 6% increase year-over-year in the U.S. We’re still seeing that and that’s pretty much the level we expect for the full year 2021 over 2020, right around that 6%,” Ozan said. “We haven’t seen, I’ll say, any more resistance to our price increases than we’ve seen historically, so that the 6% have been pretty well received by customers.”
McDonald’s said U.S. sales increased by 9.6% in the third quarter of the year when compared to the same time in 2020, but they are up 14.6% on a two-year basis. Systemwide sales (all restaurants, whether corporate-owned or operated by franchisees) increased 16%.
McDonald’s has credited the price increase, plus bigger order sizes, new menu items and celebrity-curated meals as the reasons for their increase in revenues. The chain also launched a loyalty program, which Ozan said exceeded expectations, with 21 million members enrolled in just a few months.
“The big bets we’ve made during the pandemic are paying dividends across the business and enabling us to maintain our [fast-food sector] leadership,” he said. “Menu and marketing efforts with products like the Crispy Chicken Sandwich and successful Famous Orders like The Saweetie Meal have elevated our brand and helped drive underlying sales growth across the business.”
Following the sales announcement, McDonald’s also issued a joint statement with IBM, which will be developing and deploying Automated Order Taking technology, which aims to increase the presence of automated drive-thrus.
Prices are increasing elsewhere as well, including at Chipotle, which also reported a revenue increase in the third quarter despite raising wages for its employees and hiking its prices.
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