Forget value meals: These fast-food chains are the most overpriced
A new study shows which fast food giant consumers consider to be the most overpriced.
When McDonald's customers think prices are too high, that's a red flag for every brand.
Chief Executive Chris Kempczinski addressed the issue during the chain's second-quarter-earnings call.
“Beginning last year, we warned of a more discriminating consumer, particularly among lower-income households. And as this year progressed, those pressures have deepened and broadened," he said.
"The [quick-service-restaurant] sector has meaningfully slowed in the majority of our markets and industry traffic has declined in major markets like the U.S., Australia, Canada and Germany."
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To address that issue, McDonald's has renewed its focus on value.
"We recognize that in several large markets, including the U.S., we have an opportunity to improve our value execution," Kempczinski said during the call.
The CEO said McDonald's needed to do more in the age of Wendy's (WEN) $5 Biggie Bags and Burger King's (QSR) value deals.
"Consumers still recognize us as the value leader versus our key competitors, but it's clear that our value leadership gap has recently shrunk," he said. "We are working to fix that with pace. Over the last several years our system has sustained significant inflationary cost increases ranging from 20% to 40% depending on the market." Image source: Shutterstock
Americans are being more price conscious with fast food
Value is not the same as price. Two chains can offer a burger, a side of fries, and a drink and consimers can see one as a good value while finding the other overpriced.
In fact, value is a relative thing when it comes to food. Chipotle (CMG) has generally been one of the higher-priced fast-food meals, but consumers have been willing to pay. That's largely because between portion size and food quality, consumers still see the brand as a value.
Americans have been conscious of the price increases.
Three in four Americans typically eat fast food at least once a week, but 62% say they’re eating it less due to rising prices, according to data from Lending Tree,
"Seventy-eight percent of consumers view fast food as a luxury because it’s become increasingly expensive," the study says.
"Additionally, half of Americans say they view fast food as a luxury because they’re struggling financially. This is especially true among Americans who make less than $30,000 a year (71%), parents with young children (58%), Gen Zers (58%) and women (53%)."
And Americans see some brands as the most overpriced in the fast-food space.
New study shows which fast-food brands are overpriced
The brands that show up on the overpriced list are big names that generally do have higher prices than those at McDonald's, Wendy's, Burger King, and Yum's (YUM) Taco Bell.
A relatively small, but growing chain, Shake Shack (SHAK) , topped the survey as the most overpriced fast-food chain.
"Shake Shack’s prices vary from one location to the next. But customers across America are crying 'overpriced,'" according to Readers Digest.
"The cost of a single hamburger, or ShackBurger as it’s called, typically falls between $6.99 and $7.99, depending on the region. Want fries to go with that? An order will run you around $4.49, bringing your grand total to at least $11.48, and that’s not including one of its namesake shakes or other beverage."
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Five Guys and Carl's Jr. came in second and third respectively on the list. In the case of Shake Shack and Five Guys, the higher costs are definitely reflected in the chains using higher-quality ingredieints than the traditional fast-food players use.
The study, which was created by Preply, analyzed 57,245 Google reviews of more than 10,000 restaurant outlets.
