Burgernomics - McDonald's raises cheeseburger prices by 20%

McDonald's is raising the price of their cheeseburgers for the first time in 14 years.

It is becoming a familiar story as businesses across the economy face rising cost pressures and face difficult decisions about how much can be passed onto consumers through higher prices.

The price of a standard cheeseburger will climb from 99 pence to £1.19

Other products will see price rises of between 10p and 20p although prices will continue to vary by store

Whenever there are significant price rises - and this one will hit home for millions - consider the likely price elasticity of demand. There is significant competition in the UK fast food sector which hints at a relatively high coefficient for price elasticity of demand. But factor in residual brand loyalty and the extent to which eating at McDonald's is a relatively low or high percentage of a family's disposable income.

McDonald's is largely run as a franchise operator so many of the increasing variable costs such as wages, food ingredients, paper and so on are borne by the franchisee. You can read a commentary on their latest financials here.

Last week, McDonald's launched a new rewards scheme that will earn customers 100 points for every £1 they spend via the company's app. The business has been spending heavily on revamping major stores, and investing in new drive-through capacity. The business took a financial hit of more than $1 billion in June 2022 when it decided to end their operations in Russia.

In 2021, the number of McDonald's restaurants operating worldwide rose above 40,000 for the first time. The business recorded a net profit of 7.55 billion U.S. dollars in 2021.