Fast food used to be a cheap meal option. Why has that changed?

Fast-food restaurants, once the first stop for Americans looking to get at least one meal in before a long workday, are fighting to win back customers.

Breakfast sales across the fast-food sector have seen declines, the leaders of McDonald's and Wendy's said in earnings calls in early August. Families are reevaluating whether the quick trip to the drive-through is worth the price, too, experts told USA TODAY.

In response, some chains are adjusting prices. But, with Americans once again feeling the effects of inflation, it's unclear whether the moves will be enough to bring back customers anytime soon.

What is happening with fast-food restaurants and prices?

Some value equations no longer balance because of inflation, said Neil Saunders, a retail analyst at the research and analytics firm GlobalData.

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"McDonald’s, for example, is supposed to be an inexpensive treat or a cheap fast-food fix. It is now a relatively expensive purchase, especially for a family," Saunders told USA TODAY. "Many don’t think it’s worth the money, so they cut back on dining there."

Restaurants are responding by offering deals. Pizza Hut recently ended a $2 Tuesday personal pan pizza deal, which became so popular during its original promotion in July that it was extended until Aug. 26.

McDonald's announced a series of pricing changes Sept. 2, including adding limited-time Extra Value Meals. Those offerings include a $5 Sausage McMuffin meal deal. The price decreases, reported earlier by The Wall Street Journal, follow weeks of discussions between McDonald's corporate officers and restaurant franchise operators, including the company offering financial support if franchisees would agree to drop prices, the Journal reported.

Nationwide, 95% of McDonald's restaurants are run by franchise owners, who ultimately make the pricing decisions for their locations after McDonald's offers suggestions. But franchisees can vote on certain price points or national campaigns, said Peter Saleh, managing director for research for BTIG.

Why have prices gone up for fast-food restaurants?

Costs for restaurants, especially since the COVID-19 pandemic, have put stresses on the operators, said Saleh, who examines restaurants and food distribution. Plus, fast-food franchisees have dealt with increases in royalty rates and rents on new units, he said.

Inflation and increased labor costs, especially when there was a push to increase minimum wage to $15 and above in many states, has meant higher costs, he said. Those get passed on to consumers, he said.

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"From 2019 to 2023, McDonald's had to raise prices by 40% to offset inflation," Saleh told USA TODAY. "Over a five-year period, they typically would have taken 2% to 2.5% or maybe 10% to 12% (due to COVID-19). They needed to take 40%. Chipotle took 35%."

If leaders in the industry had to raise their prices that much, Saleh said, other competitors did the same.

However, Saleh said, in the casual-dining space, where customers have more of a sit-down meal, many restaurants increased prices only 20% to 25%.

"So what happened?" Saleh asked. "The value for your money at casual dining improved relative to the quick-service space."

Quick service, or fast-food operators, are more dependent on hourly labor than casual dining, where there are more tipped employees making a smaller base rate, he said.

An open letter from Joe Erlinger, president of McDonald's USA, said in May 2024 that the costs of salaries, food and paper had increased about 40% in the past five years, and the average price of McDonald's menu items rose 40% during that same time.

Will reducing the price of combo meals help drive up sales?

"Cutting prices helps to solve the problem of McDonald’s being seen as too expensive," Saunders said. "The question is whether the price cuts are enough. Prices are still very elevated over where they once were, and it is spooking the consumer."

Before the pandemic, McDonald's sales off their Value Meal menu was somewhere between 10% and 12%, Saleh said. Today, the $5 McDonald's value meal, McDonald's buy-one-get-one offerings and all the discounts you can get through the app are more than 30% of its sales, Saleh said.

"I think they would want it much lower than that," Saleh said.

Why are breakfast foods at McDonald's and Wendy's not doing well?

Saunders and Saleh echoed the same sentiments the leaders of McDonald's and Wendy's shared about slumping breakfast sales.

"Breakfast is a relatively easy sacrifice, as people can fix themselves something at home and save some money," Saunders said.

Also, coming out of the pandemic, fewer people are traveling to work every day, Saleh said.

McDonald's CEO Chris Kemczynski acknowledged the hit to breakfast sales in an earnings call Aug. 6 after reporting overall sales had improved after a sluggish start to the year.

"You're seeing people either skip occasions, so they're skipping a day part like breakfast, or they're trading down either within our menu or they're trading down to eating at home," he said. (A "day part" is an industry term for a meal during the day.)

Ken Cook, Wendy's interim CEO and CFO, also said in an earnings call Aug. 8 that "when consumer uncertainty increases and consumers choose to eat another meal at home, breakfast is often the first place they do that with, so yes, breakfast continues to perform worse than the rest of the day."

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Are McDonald's changes meant to target a specific demographic?

"Reengaging the low-income consumer is critical as they typically visit our restaurants more frequently than middle- and high-income consumers," Kemczynski said in the earnings call.

Saleh said McDonald's is "definitely targeting the lower-income consumer."

"There is a lot of anxiety and unease with that low-income consumer. I think we could all speculate the reasons for that: probably tariffs and the impact that that might have and questions around employment," he said.

Visits by lower-income consumers to quick-service restaurants were down double digits in the second quarter, Ian Borden, McDonald's chief financial officer, said in the earnings call. Middle-income consumer traffic was "marginally positive" compared with the first quarter, and visits by higher-income consumers continue to grow, he said.

Saunders said, however, that "the price cuts are not really aimed at any one demographic, as the feelings of prices being too high is widespread. However, family diners may benefit most, as they are bringing multiple people, so their checks are much higher."

What can fast-food operators do to regain consumers?

Cutting prices and offering value meals and deals are key ways of making fast food more appealing to people's budgets, Saunders said. But beyond that, menu innovation with exciting new options is another way to drive traffic, he said.

The restaurants that offer the best deals "call it 'everyday value' and are known for that," Saleh said. He pointed to Domino's mix-and-match offers in which you can get two medium two-topping pizzas for $6.99 each or $7.99 large-pizza specials.

"For like 20 bucks, if you really wanted to at Domino's, you can feed a family of four. You can't really do that in other segments," Saleh said. "You can't do that at McDonald's or casual dining. So the ones that have that deep value I think do extraordinarily well and seem to be winning."