McDonald's Just Revealed How Much It's Raising Its Prices This Year

McDonald's customers should get used to the higher prices at McDonald's this year. The chain has been increasing its menu prices over the last year in order to keep pace with increasing costs of labor and supply and has recently confirmed that the increases from earlier in the year are will carry through the end of 2021.

In the second quarter, McDonald's said its prices were up by 6% compared to 2020. In the latest earnings call, executives confirmed they anticipate the increase to stay at that level for the rest of the year.

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"We are still seeing [6% increases] and that's pretty much the level we expect for the full-year 2021 over 2020… And that's really to cover both labor cost pressures and commodity cost pressures," said CEO Chris Kempczinski, in response to an investor question about menu prices.

Employee wages at McDonald's have been steadily increasing this year, with an initial bump earlier in 2021 of 5%. In the time since, they have grown again, for a total increase of about 10% so far in 2021. Employees have it even better at company-owned stores, where wages have shot up a full 15%.

The wage hikes come in response to widespread labor shortages: McDonald's is having trouble fully staffing its restaurants and has been increasing wages in the hopes of attracting new employees. The strategy has been partially successful, but not to the extent anticipated.

Operational cost increases aside, however, McDonald's has had a successful third quarter, with same-store sales up by 14.6% compared to 2019, and the company beating market expectations with substantial increases in both its net income and overall sales.

McDonald's offered a few explanations for the sales growth. According to the company, customers are placing larger orders and buying for larger groups. They are also placing more to-go orders. Growth was also driven by increases in menu prices, as well as menu development, including McDonald's crispy chicken sandwich (which debuted in February), and its hugely successful "Famous Orders" line, which has not only generated sales but helped to steer customers onto the quickly growing McDonald's app. The BTS meal alone is estimated to have grown the app's user base by 23%.

Make no mistake, though: however successful McDonald's latest quarter may have been, the company is ready to protect its margins. So expect to dig a bit deeper in your pockets next time you make a McDonald's run.

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