The cost of fast food has skyrocketed in recent years, but some restaurants have raised prices much faster than others.
Bank of America analyst Sara Senatore said Monday that rising labor costs had hit all chains, especially in California, where there is now a minimum wage of $20 an hour.
But he said there were different fortunes among the chains when it came to the costs of their ingredients: McDonald’s was hit hard by high beef prices, but Chipotle had benefited from cheaper avocados.
Over the past decade, fast food prices have exceeded official inflation rates at all fast food restaurants, according to Finance Buzz. He discovered that McDonald’s was the worst: prices doubled.
In the last three years alone, Senatore – which specializes in burger, pizza and coffee chains – said McDonald’s menu prices have risen 30 percent.
“Anyone who was exposed to beef was in a particularly difficult situation,” he said. he told CNBC.
Sara Senatore, a securities analyst at Bank of America, told CNBC that some restaurant chains are raising prices faster than others.
Over the past decade, McDonald’s has raised prices faster than any other fast food chain. Pictured is a customer picking up drinks at a drive-thru in California in 2003.
Over the past decade, the average cost of a variety of typical McDonald’s menu items has doubled. The photo shows the items that have increased the most in price.
However, he called the increases “justified” and noted that profit margins at individual restaurants have remained relatively stable.
“If you look at franchisees’ restaurant-level margins, they’re not really high right now,” he added.
But he also warned that such an aggressive price increase is risky because McDonald’s serves many low-income consumers. With consumers coming under increasing financial pressure, the coming year may be difficult, he said.
“They have a lower-income consumer they have to think about,” he said. “This is going to be a difficult year.”
McDonald’s will publish its results for the first quarter of 2024 on Tuesday morning, when it will reveal its profits and give clues about possible further price increases.
Senatore said that compared to McDonald’s, other restaurants like Chipotle have managed to keep prices in check.
He said recent price increases at Chipotle are in the “single digits” percentages. He said he had countered inflation by becoming more efficient and increasing the number of clients he served per hour.
The Mexican food chain has also benefited from a drop in the cost of avocados in the last year.
Chipotle is one of the best-performing restaurant chains in the industry and last week beat Wall Street expectations after reporting strong quarterly revenue thanks to increased traffic at its restaurants.
Its share price is currently hovering around an all-time high and on Monday was up more than 40 percent year-to-date to around $3,212.
Chipotle raised the price of menu items less last year than many other chains, thanks in part to the reduced cost of avocados.
Senatore said that despite Starbucks’ reputation, it was “undervaluing” the rest of the industry.
Similarly, Senatore said Bank of America was giving Starbucks stock a “buy” rating.
He said that despite the chain’s reputation for being expensive, it has recently been “undervaluing” the rest of the fast food industry.
“People look at their latte or their mixed drink and think it’s expensive,” Senatore said.
‘A large part of the reason it’s increased so much is because people are choosing to customize it. They’re either getting larger sizes or they’re adding syrup.’
A recent study tracked the cost of Starbucks coffee nationwide and found that coffee drinkers in Maine pay an average of $1.30 less per drink than those in neighboring Vermont.
Finally, Senatore noted that Domino’s recent strong performance could be attributed to cash-strapped consumers looking to eat cheap.
“In a time when people are scarce, pizza is a great way to feed a family,” he said. “You really can’t do it for less than that.”
McDonald’s says its prices are set by local franchises and vary by restaurant.