McDonald’s Raises Menu Prices as U.S. Worker Wages Climb

Average wage increases at McDonald’s U.S. restaurants have continued from the company’s second quarter, when executives reported they were up around 5% domestically during the period. Higher wages, including an average 15% increase this year at company-owned U.S. restaurants, is helping, but not as much as anticipated, executives said.

“Certainly I was hoping and expecting that we were going to see the situation improve maybe a little bit more quickly than what’s materialized,” chief executive Chris Kempczinski told investors Wednesday.

The Big Mac maker is also paying more for paper, food and other supplies, executives said. McDonald’s expects its commodity costs for the year to rise by 3.5% to 4%, up from the 2% they grew earlier in 2021, executives said.

Those higher costs are making their way to consumers, as McDonald’s executives said they expect U.S. prices to be up about 6% this year compared to last year.

Companies across the globe are raising consumer prices in response to growing costs spanning distribution and freight to fuel and food. U.S. inflation in September remained at its highest rate in more than a decade, Labor Department data showed.

Many restaurants are raising menu prices to offset higher wages for cooks and servers and rising costs for meat, packaging, vegetable oil and other commodities. Chipotle Mexican Grill Inc., Del Taco Restaurants Inc. and Chili’s owner Brinker International Inc. are among the chains that told investors in recent weeks that they have increased prices to help cover costs.

McDonald’s said Wednesday that global same-store sales in the quarter ended Sept. 30 increased 10.2% compared with the same period before the pandemic. U.S. same-store sales were up 14.6% compared with the equivalent 2019 period.

McDonald’s said that bigger order sizes and higher prices increased its revenue in the U.S., as did its new crispy chicken sandwich and celebrity-endorsed meals. Diners are placing more to-go orders and buying for larger groups than prior to the pandemic, contributing to higher sales per customer, executives said.

“We are still selling more sandwiches, we’re still selling more fries,” Mr. Kempczinski said.

McDonald’s reported quarterly net income climbed 22% from the same quarter a year earlier, rising to $2.15 billion. Sales totaling $6.2 billion increased 14% from the previous year’s period. Adjusting for one-time items, McDonald’s said it earned $2.76 a share.

The company’s sales and earnings topped analysts’ expectations. McDonald’s shares rose 2.2% to $241.57 in morning trading.

McDonald’s slightly increased its projected sales across its restaurants for 2021. It also anticipates opening more restaurants globally, mainly in China and other international markets. In the U.S., supply-chain backlogs for kitchen equipment and permitting delays are postponing some new restaurant openings until next year, the company said.

McDonald’s, the world’s biggest burger chain, said that it had fewer Covid-19-related restaurant closures over the past quarter in major markets such as Canada, France and Germany, helping McDonald’s sales in those countries. Still, vaccine health pass requirements in France and quarantine orders in Australia, for example, made operations more challenging, the company said.

In the U.S., roughly 3,000 McDonald’s dining rooms remain closed in areas with high Covid-19 infection rates, or roughly 20% of locations. U.S. sales remain elevated at drive-throughs, online and through delivery, even after reopening a location’s dining room, executives said.

McDonald’s acquired a string of technology startups prior to the pandemic to develop systems such as voice-recognition ordering at drive-throughs. The company said Wednesday it was selling a technology lab it developed in the Bay Area to International Business Machines Corp. IBM -1.16% to better advance that work.

Write to Heather Haddon at [email protected]