You’re Not Crazy: Fast Food Prices Are Out Of Control

While they’re all down over the last month, check out the approximate six-month, YTD, one-year and five-year returns of the fast food stocks financial professionals have been searching for most across the platforms of our 100+ financial media partners. 

We put negative returns in bold just to highlight Wendy’s poor performance over the years and McDonald’s recent struggles. 

Though, one of The Juice’s partners, BarChart, thinks investors should take a look at McDonald’s:

To keep its business growing, McDonald’s announced an expansion plan in December 2023, targeting 50,000 restaurants by 2027 (8,000-plus restaurants compared to now). 

McDonald’s is also a huge player in the coffee business, selling nearly 8 million cups of coffee per day – making it the second-largest player in the category, behind only Starbucks (SBUX) …

Further, the company’s decision to expand its partnership with doughnut giant Krispy Creme (DNUT) will allow McDonald’s to enhance its popular breakfast offerings …

And in the current environment, McDonald’s is catering to cost-conscious consumers with the launch of new value offerings, too.

The Juice agrees with BarChart. 

As we have said all along, if you’re going to buy fast food stocks (or broad restaurant stocks, for that matter), go with the leaders. Don’t mess with the secondary players:

While it might be fun to say you own 100 shares of Jack in the Box, we don’t see much point in it. Not in a stock market with a zillion other options. We mean the stock’s not just down 14% over the last year, it’s down by about the same amount over the last five years. 

Why bother when you can enjoy McDonald’s (up 68% over five years), Starbucks (also up 68%), Chipotle (up 315%!) and Domino’s (up 34%).

Those numbers are from that previous installment of The Juice, which was published in September 2023. 

We stand by our rationale. 

We beat our chest frequently when we look at how well our top 2023 and 2024 stock picks have performed. Names such as DoorDash (DASH) and Uber (UBER). So, we’re not too proud to admit that, yeah, we missed the boat on, say, Shake Shack. However, it’s not a ship we wanted to sail on in the first place. 

We love DASH and UBER because of the ecosystems they’re building to touch the consumer multiple times a week, if not daily. In the fast food business, you need to be big and special to be sustainable. So, we’ll happily gobble up shares of MCD and Starbucks (SBUX) as they experience  weakness. If you’re a long-term investor, we think this approach will pay dividends — literally — over time. 

Here’s the other thing about sustainability. MCD and SBUX have pricing power with the consumer. You want coffee in the morning and you don’t have a local place, you’re freaking going to Starbucks. You’re on a road trip and want some fast food, you’re not looking for freaking Burger King, you’re finding the golden arches. 

Focusing on fast food, MCD and others will need pricing power. Even as we start to see the return of actual value in what have become value menus, only in name, prices remain super high on fast food. So high that it’s causing Americans to cut back. 

According to a LendingTree study, 75% of people say they eat fast food at least once a week. However, about 62% report cutting back because of the cost. Roughly two-thirds of Americans say they “have been shocked” by the cost of fast food this year. It has gotten so bad that 78% of people now consider fast food a “luxury.” 

Sounds crazy, but a quick glance at the cost of fast food explains this sentiment. 

• In 2019, a medium order of fries at MCD cost $1.79. In 2024, it climbed to $4.79. 
• A Big Mac Meal (combo deal) went from $5.99 to $12.69 over the same period. 

And it’s not just at McDonald’s:

• At CMG, the price of a chicken burrito soared from $6.50 to $10.70 between 2019 and 2024. (Don’t even ask about adding guacamole!)
• At Subway, a BLT foot long that set you back $5.50 in 2019 now goes for $8.49. 

Insanity. 

The upside is that maybe it’s stopping people from eating such unhealthy food so frequently. (By the way, The Juice is guilty as charged!). Although, it’s not like taking matters into your own hands at the grocery store is a bargain these days anyway. 

The Bottom Line: It’s pretty straightforward, even if disheartening. Everything is more expensive these days. And, despite a value meal here and there, it feels like a new baseline has been set on prices. Whether it’s on still relatively small expenditures such as fast food or more expensive buys such as urban real estate.

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