why does food prices in grocery stores rise but fast food prices stay relatively the same?



why does food prices in grocery stores rise but fast food prices stay relatively the same?

In: Economics

Because fast food restaurants buy ingredients in such enormous quantities (often at a contracted price) that cost increases are negligible.

So you buy apples for $10 a dozen. McDonalds buys them at $1 a dozen, because they buy a gazillion dozens.

If the price of apples goes up 10%, you now have to pay $11. But McDonalds has already agreed on a $1 per dozen price, so their prices don’t change.

And when the contract comes up for renegotiation, that 10% price increase means apples are now $1.10 per dozen, which means the margins don’t change too much if they keep prices the same.

The moral of this story? Buy in bulk, and buy in advance.

It’s about who adsorbs the inflation. Most of the time it is the final consumer.

But in the case of mcdonald’s, they may chose to adsorbs it or use their massive buying power to force it on the producer or distributor.

Fast food prices have definitely not stayed relatively the same. Depending on the area and item, stuff’s gone up by 15-35% or more over the last few years.

McDonalds burritos for instance, used to be $2.78 before tax for two, and is now around like, $4 something. This has been sometime between now and like oh… 2014 or something. Looking at the annual US inflation rate which has ranged around .5-2.5%, that’s a higher increase rate than inflation on average.

However that’s just really rough napkin math so might not hold up exactly, but prices definitely do increase, often by decent chunks. Combo meal prices just went up around $.40 where I work.

I’m only vaguely aware of this because I like McDonalds burritos and am bitter the price keeps going up so much. XD

They don’t, fast food prices are going up as well. It’s crazy expensive today compared to 10 years ago.