McDonald's CEO explains why the company benefits from a 'difficult' economy

The CEO of McDonald’s, Chris Kempczinski, finds that an economy with a lack of affordability means success for the fast-food chain, according to a recent third-quarter earnings call.

“Between inflation remaining high, the elevated cost of fuel, interest rates, housing affordability pressures and more, consumers all over the world are having to pay more and more for everyday goods and services, proving time and time again in difficult economic times, the McDonald’s brand and our positioning on value is an opportunity for us,” he said on the call.

During the earnings call, which took place on Oct. 30, he highlighted the success of McDonald’s affordable menu options as the result of consumers seeking meals that are more reasonably priced during difficult economic times.

“Take Germany, for example. The team has delivered remarkable results with the launch of the McSmart menu earlier this year, offering smaller, more affordable meals,” he said. “It’s an incredible example of remaining agile and listening to our customers.”

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In the third quarter of 2022, prices at the fast-food chain increased by about 10% compared to the previous year, and they still continue to be on the rise due to inflation. Customers have even pushed back against McDonald's price increases by adding less menu items to their orders. Regardless of some resistance from customers, sales at the fast-food chain have been a success.

McDonald’s recently reported an 8.1% increase in sales in the U.S. during its third-quarter earnings report, beating previous estimates. The company cites menu price increases, effective marketing campaigns and a growth of digital orders and delivery as some of the main factors of this improvement.

Despite the rise in sales amid recent price hikes, Kempczinski acknowledged in the earnings call that the company has seen a dip in low-income customers, with an annual salary of $45,000 and under, saying that there was “a slight dip in traffic.”

Company executives during the earnings call said that they expect prices at the fast-food chain to increase to over 10% by the end of the year, but hinted at later cooling off on price hikes.

“We expect pricing to come down kind of in line with how inflation is coming down,” said Ian Borden, executive vice president and chief financial officer of McDonald’s, during the call.