Inflation is a very serious issue for companies and McDonald’s is not an exception. The company’s former CEO made interesting comments about inflation and its impact on the company. He currently serves as an executive consultant to the chain’s franchise system.
Ed Rensi said that inflation is driving every restaurant in the country “absolutely crazy”. According to Ed Rensi, it has a huge impact on McDonald’s.
He also noted that every small business in America was suffering “terribly from this federal inflation”. Rensi, who was CEO of McDonald’s US until 1997 also made a comment about the company’s menu. Ed Rensi stated that “portion sizes are shrinking”. The company’s former CEO also mentioned that “prices are going up”.
Inflation and McDonald’s
Inflation in the last month of 2021 was the strongest in almost four decades. The Consumer Price Index rose 7% year-over-year. Notably, the pace reflects the strongest inflation since 1982.
The company’s former CEO said McDonald’s recommended “somewhere around 6, 6.5% increase next year” in prices to franchises, who run around 90% of McDonald’s outlets.
However, Rensi added that outlets would have the opportunity to decide their own prices “based on community need”. The world’s one of the most famous fast-food chains allowed franchise operators to sell sodas for higher prices.
Fast-food chains are struggling to cope with problems. They are trying to adjust to the new reality by eliminating deals and promoting more profitable items as well as combo deals.
Nevertheless, during its fourth-quarter earnings call in January, the company’s CFO talked about one interesting fact. Kevin Ozan said its US franchise restaurants reached record average cash flows of more than $500,000 per unit – a growth of 50% over the past three years.
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