McDonald's is experiencing a significant decline in low-income customers, with double-digit drops in traffic from this demographic. This shift is attributed to substantial price increases across the menu, making the fast-food chain increasingly unaffordable for those on tighter budgets.
While low-income customers are departing, the company reports an increase in customers from higher-income brackets. This trend reflects broader economic pressures on lower-income households, who are grappling with rising costs for essentials such as housing, clothing, and childcare.
These combined economic headwinds mean that even items previously considered budget-friendly, like a Happy Meal, are becoming prohibitively expensive for some. Economists view McDonald's situation as a symptom of a widening wealth and spending divide in the U.S.
economy, often described as a "K-shaped economy." This divergence is evident across various sectors, including airlines and hotels, where premium services are performing better than budget options. Data on consumer credit delinquency rates further support this, showing significant year-over-year increases for households earning less than $45,000 annually.
The increase in McDonald's prices is driven by higher operational costs, including beef and labor. Beef prices have surged due to a shrinking cattle herd and trade policies, while labor costs have also risen.
These increased expenses have led to a roughly 40% rise in the average cost of a McDonald's menu item between 2019 and 2024. While McDonald's has attempted to reintroduce value deals, they have not fully counteracted the loss of its core low-income customer base, though overall sales have seen some recent modest gains.
