McDonald’s is turning up the heat on just about everybody. | Photo courtesy of McDonald’s.
McDonald’s early last week intensified the restaurant value wars by reintroducing its Extra Value Meals, coupled with lower prices that we estimate will be cut by about 50 cents, on average.
But that’s not the only way that the fast-food giant turned up the heat on the restaurant industry. CEO Chris Kempczinski went off on the tip credit in an interview with CNBC on Tuesday. And the company then rescinded its membership in the National Restaurant Association over the issue.
That the world’s largest restaurant chain would leave the industry’s biggest trade group is, obviously, notable. Said chain is doing this over one of the trade group’s signature issues, which may well weaken the association in its argument against the credit.
Then again, as the Working Lunch podcast pointed out on Friday, McDonald’s has achieved remarkably little legislatively for a company of its size. That it couldn’t push the association to budge on an issue such as the tip credit shows just how weak its political standing really is.
Take both of these issues together and you have McDonald’s flexing its muscles in a way we have not seen in a long time.
This week’s financial news
This is an odd restaurant economy. On one hand, we have a plurality of consumers saying they’re cutting back, which is revealing itself in weak fast-food traffic numbers. And yet marketing efforts really seem to be working now, such as the record sales generated by Starbucks’ Pumpkin Spice Latte.
Speaking of Starbucks, the company is adding a new AI function, which helps managers count inventory.
Speaking of the economy, it’s looking more to me like we’re headed to a recession, despite some data, such as international travel, that would say otherwise. Just look at the newest job numbers.
Black Rock Coffee Bar is going to be an interesting test of the restaurant chain IPO market. If it does well, don’t be surprised if other companies jump in. That is if we don’t hit a recession.
Freddy’s has been sold. The chain has been on the market all year, and franchises like this can always find buyers.
Noodles & Company may also be on the market. That chain has come a long way from the days when it was considered the “next Chipotle.”
Number of the week
McDonald’s says there’s a two-tiered economy. But this graphic from Technomic may suggest otherwise.
Quote of the week
“Everybody should be paying the same minimum wage.” -Kempczinski, on CNBC, making a statement on the tip credit.
On the blog
I wrote about the economy, McDonald’s extra value meals, consumers cutting back, mergers and how pizza chains can save their delivery business. Check out all my blog posts on The Bottom Line.
On the podcast
On A Deeper Dive I spoke with Todd Penegor and then National Restaurant Association Chief Economist Chad Moutray. On The Week in Restaurants we talked about Cracker Barrel.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.
