McDonald’s Still Declining because Food Overpriced: Raise Minimum Wage?

McDonald’s tried to ditch their dollar menu but customers are finding the food overpriced.

Mark Horne has written about the problem facing McDonald’s before. It is also a problem for advocates of raising the minimum wage. A recent report shows the problem is still weighing McDonald’s down.

According to CNBC, “McDonald’s is losing fierce fast-food fight.”

Last week, McDonald’s reported its global comparable sales fell again, dropping 0.7 percent in the second quarter. Meanwhile, comps at Burger King rose 6.7 percent in constant currency while Arby’s comps rose 7.6 percent during the second quarter. Several other large restaurants are also showing positive growth.

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In its domestic unit, McDonald’s comps have lagged its fast-food sandwich peers (a group that includes Arby’s, Burger King, Carl’s Jr., Jack in the Box, Wendy’s, Sonic and Subway) each month since October 2013, according to data that its investor-relations team provides to analysts using data from The NPD Group.

Since McDonald’s is much bigger than those other companies, a slight decline in sales means much greater sales for the other fast food companies.

And the problem seems to be that McDonald’s has been trying to raise prices.

At the center of this underperformance has been McDonald’s value perception in the U.S.

Following McDonald’s decision to move away from the dollar menu and emphasize other value platforms like the “dollar menu & more” menu, which includes items costing more than a dollar, and “extra value meals,” it has struggled with its pitch to customers.

“The bottom line is McDonald’s has increasingly been losing share over the last three years. The biggest reason is they walked away from one of their core-brand equities: value,” Palmer said.

Customers don’t want to pay more than a dollar.

So how could they ever raise the wages of their employees if the customers refuse to pay more for food, even perhaps better food?

They couldn’t.

The real reason McDonald’s doesn’t pay more is because customers won’t let them.