Fast food struggles with a loss of low-income patrons

In the early 2000s — amid slowing sales growth and tumbling stock prices — McDonald's orchestrated a major turnaround with the introduction of its Dollar Menu.

- BY SUHAUNA HUSSAIN

ROBERT GAUTHIER Los Angeles Times THE AVERAGE COST of a McDonald's menu item rose 40% from 2019 to 2024.

By marketing primarily to low-income consumers who valued getting the most bang for their buck, the fast-food giant saw a 33% increase in revenue.

With the economic uncertainty now gripping a wide swath of America, however, that strategy may no longer be a winning one.

Industrywide, fast-food restaurants have seen traffic from low-income households — a core customer base — drop by double digits, McDonald's Chief Executive Christopher Kempczinski told investors last week.

The struggle of the Golden Arches in particular — long synonymous with cheap food for the masses — reflects a larger trend upending the consumer economy and makes “affordability” a hot policy topic, experts say.

McDonald's executives say that the higher costs of restaurant essentials, such as beef, and rising employee salaries have forced the company to increase its prices, driving away customers who are being squeezed by the cost of groceries, clothes, rent and child care.

With prices for seemingly everything going up, companies in the food, automotive and airline sectors, among others, are concerned about the pressures on low-income Americans, analyst Adam Josephson said.

“The list goes on and on,” he said. “Happy Meals at McDonald's are prohibitively expensive for some people, because there’s been so much inflation.”

Although inflation has come down from its peak in 2022, people still are struggling with relatively higher prices and “astronomical” rent increases, said Rikard Bandebo, chief economist at VantageScore.