McDonald's Food Prices Rise -- in California

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Most retailers must be unhappy with a new law that brings the minimum wage up to $20. McDonald’s Corp. (NYSE: MCD) plans to offset that with higher menu prices. It is too early to say whether any customers will decide McDonald’s food prices have increased too much. (These are the 30 longest-running restaurant chains in America.)

Management at the huge fast-food company says the hike in McDonald’s food prices will be in the mid to high single digits. CNBC points out these price increases are brought on by higher prices of ingredients and now labor prices. Management also commented that people with annual incomes below $45,000 often find these jumps too expensive.

For some odd reason, McDonald’s CEO Chris Kempczinski said, “We believe we’re in a better position than our competitors to weather this, so let’s use this as an opportunity to actually accelerate our growth in California.” That supposes the $20 per hour pay will hurt other fast-food companies more than the Golden Arches.

McDonald’s is large enough to swallow the higher costs without a major hit to its financials. In the most recently announced quarter, its revenue was $6.7 billion. Its net income was $2.1 billion. “With global Systemwide sales growth of 11%, our third quarter results reflect our position of strength as the industry leader,” Kempczinski said.

The California wage problem is not a problem. That is, if it does not spread more widely.

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