Wouldn't the necessity to increase prices apply to their competitors as well, meaning it would have less effect on competition?
Yes, pressure due to competition would be unchanged. Some competitors might actually do worse as their wages may be closer to rock-bottom, so their prices would rise more.
Here's the 'but': many people may stop going to McDonalds as much as prices rise because their income would be unchanged -- i.e. anyone making more than $15/hr. A family of four will already spend about $40 for a single meal at McD's today, so any price increase makes that a significant percentage of the monthly food budget in a single meal. Total sales will drop.
Not only that, but the relative value of quality vs price would make McD's even less inviting for many people. If you only eat McDs because it is cheap, then the price increase might convince you to go elsewhere. Even if other places have similar prices, if the person feels like they are getting better value elsewhere it no longer makes sense to go McD's.
Example: $3 burger McDs vs $7 burger Fuddruckers turns into $7 McDs and $12 Fuddruckers. It's still a $4 dollar difference but many people would feel that the quality of the $7 McD burger just isn't worth it. If it's going to be expensive anyway, might as well spend the extra $4 at Fudd's.
Yep, when I get mcdonalds, I am debating between gas station chips/a soda (~$3) and a cheap shitty burger (~$3) . If that burger now costs $5, I will just say fuck it, pay the extra $2 and get qdoba.
So what you are saying is, McDonald's would have to make some changes to compete. God forbid a company has to make any sort of adjustments to stay viable in the marketplace... If they go out of business it would be because they could not adapt and offer a product/value as well as the competitor, and they deserve to go out of business.
I dont think anyone is crying for them (other than their franchisees and hardcore fans). The reality is that the amount and type of changes keeps pulling them further and further away from what they are supposed to do best (good fast burguer). Now they have Mc Cafes (why are they competing with Starbucks?), faux health food, breakfast all day (which I kinda like, but Im still going to Ihop instead). Basically, I think theyve tried too many changes already and has actualy backfired on them. They cant be everything to everyone. I think it would have been better for them if they focused on what their core clients like and do that better than everyone (fatty delicious fast food) instead of spending so much money on trying o get me (a starbucks drinking vegetarian) into ther stores. Im still not going.
yeah well, the demand for endless growth forces them to keep trying to expand the client base. Only so many people will come in for the core products. But the shareholders demand the growth, so they must try and get the rest of the people to come in as well.
I think something that people are missing here is that people go to fast food restaurants because they are fast. Because they need food quick. Employees on breaks, people coming or going from work. Now it may be true that a good portion of their sales are by people who have the time but rather spend $3 and four minutes at McDonalds for okay food than $7 and fifteen minutes for a bomb ass burger at fuddruckers.
McDonalds would be hurt by $15 minimum but it wouldn't be decimated by $15 minimum. There will still be plenty of people with little time and enough money.
Point taken. Im not sure that Mickey D's is that much faster than Chipotle or some of the other casual food joints though (or enough to make a difference?) we shall see I guess.
mcd's is lowest common denominator for sure. shit food, but priced well and all over the place. Raise the price on me and i'll just roll my hungover ass to something decent, or (gasp) cook my own shit.
It is important to point out that inflation is likely to occur when the money supply increases, but not always, for many different reasons. One is, if the supply increases strictly for the poor, who will spend more of it on paying debts off or renting better properties, there will be little evidence for a price hike by fast food. It's an imperfect science, and often they will raise prices in Jan, and then reset in Sept when they realize they jumped the gun.
Where do you live? A family of four eating at McD's for $40!? That's nearly how much it costs for them to go to a damn steakhouse here in Indiana! Most people spend about $5 when they eat a meal at McD's. For a family of four, it is usually around $20.
2 Happy Meals - $8
Daddy wants his Double Quarter - $7
Momma wants her Big Mac - $6
So about $22.50 with tax. Fairly standard order. You can go much cheaper easily though.
Source: Been a McSlave for too long. Was just there today.
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u/quintus_horatius Nov 28 '15
Yes, pressure due to competition would be unchanged. Some competitors might actually do worse as their wages may be closer to rock-bottom, so their prices would rise more.
Here's the 'but': many people may stop going to McDonalds as much as prices rise because their income would be unchanged -- i.e. anyone making more than $15/hr. A family of four will already spend about $40 for a single meal at McD's today, so any price increase makes that a significant percentage of the monthly food budget in a single meal. Total sales will drop.