When you pull up to your favorite fast-food restaurant these days, it’s not uncommon to pay prices that are significantly higher than they were 20 years ago. For example, in 2002, you could purchase a Big Mac at McDonald’s for a mere $2.39.
However, today, depending on location, you could pay over 50% more for the iconic burger or closer to $5. And that’s just for the burger — no fries or drink included. At Taco Bell in 2002, you could pick up a Grilled Steak Taco for $1.49, but now you could pay $1 more. And just look at this legendarily preserved Taco Bell receipt from 1999. You aren’t going to find those prices now.
To gain insight into what’s changed regarding fast food prices over the last two decades, GOBankingRates interviewed a consumer analyst and an assistant professor of economics. Here’s what they had to say about the high cost of fast food.
What Drives up the Cost of Fast Food?
It’s not just one thing; several factors can drive up the cost of fast food. Here’s some insight into a few of them.
“If a fast-food restaurant introduces a lot of different menu items, that can mean more ingredients so that prices will increase more than if they had a simplified menu,” said consumer analyst Julie Ramhold with DealNews. “However, the opposite can also be true — if a restaurant only offers chicken prepared a few different ways and the price of chicken goes up, then everything is going to go up.”
“Relative to many industries, inflation and rising wages are acutely felt by the fast-food industry,” said Dr. Krieg Tidemann, assistant professor of economics at Niagara University. “While inflation captures changes in prices across several types of goods, food prices have actually risen faster than the average for all goods. Additionally, fast-food restaurants are participating in a sector of the economy with some of the strongest wage growth in the pandemic recovery period. Per Current Population Survey data, median wages in hospitality and tourism grew by 5.1% in the past year compared to an all-sector average growth rate of 4.5%.”
“When ingredients are hard to come by, the prices will increase, and restaurants usually pass that cost on to the customers,” said Ramhold. “That means if there’s a shortage in something like beef because of an e.coli outbreak, and good beef becomes harder to find, restaurants may temporarily increase the price of dishes that use it. In some cases, restaurants will cut an item from their menu altogether if it’s too hard to source, but with fast food often burgers and fried chicken are mainstays, so it’s harder for them to eliminate those than say, a salad because of listeria in romaine.”
What Happened to Fast-Food Dollar and Value Menus?
While these were especially popular with college crowds who wanted to eat on the cheap, sometimes the items on these menus involved ingredients that the restaurants didn’t use elsewhere. For instance, maybe the dollar menu chicken sandwich used a patty with fillers, while the regular sandwich on the menu used a chicken breast with zero fillers. On the surface, those patties may seem like a good purchase but if they aren’t selling enough of those on the dollar menu to make up for it, and they aren’t using the patty in any other preparations, then restaurants decided it wasn’t worth the cost.
It could also be a time issue. Fast-food restaurants have to move quickly and while they can prepare some things ahead of time, not all of them do, which means they need a menu that’s easy and quick to cook up. The more that’s on the menu, the more workers have to learn and the faster they have to move in order to fill orders.
If a dollar menu isn’t making a restaurant that much money overall, it’s easy to see why they’d scrap that in an effort to simplify things and boost their bottom line.
Why Do Dollar Menus Have so Few Items on Them if Offered?
There are some restaurants that still offer dollar menus, but many of them have scaled them back. For example, McDonald’s offers a $1, $2 and $3 Dollar Menu, but most of the items are beverages. Here are a couple of reasons why fast food eateries might be scaling back on these offerings.
Ingredients Are Too Expensive
Ramhold said, “The odds are good that ingredients are just too expensive to really have a dollar menu now, and for those that do exist, cost is primarily the reason why there aren’t as many items on the menu. When a restaurant gets to the point where the cheapest thing they can offer isn’t likely to appeal to someone because of its simplicity, it’s better to just scrap it and focus on the core menu instead.”
She added, “For example, the items that will cost $1 now are either very tiny, so you have to buy more of them, or have like two ingredients. And while that’s totally fine, if a customer feels like they can just make something that simple at home, they’re less likely to head to the restaurant, even if the item is super cheap.”
Online Ordering Is Becoming More Popular
“Online ordering has surged in popularity and while it’s really convenient for the customer, it can mean running a restaurant staff kind of ragged,” Ramhold said. “When only in-person ordering was available, there was basically a limit to the number of customers that could order at a counter or in a drive-thru in a certain period of time. With online ordering, though, several customers can be placing orders at once. Add to that having to deal with the in-person traffic, and restaurants can easily get overwhelmed. This is another reason why simplifying the menu can make a huge difference to the restaurant while disappointing the customer.”
Will Fast Food Prices Ever Decrease Again?
“At this point it’s unlikely. [It’s] mostly due to inflation, but once things increase in price, we rarely see them drop again. If anything, we may see examples of ‘shrinkflation’ where customers pay the same price but receive less than before because of package sizes shrinking,” said Ramhold. “If we do see prices drop a little because scarce ingredients are easier to come by, it’s important to note that they won’t return to prices we saw 20 years ago or anything like that — those days are long gone.”
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