McDonald’s disputes allegations of targeting poor for price rises

Posted by Daniel Palmer on 26th February 2009

Plans by fast-food giant McDonald’s to raise prices on its menu have been under fire, with the company forced to refute allegations that poorer suburbs – where consumers are more willing to pay more – will receive the bulk of price hikes.

News Limited newspaper reports suggested the fast food restaurant chain would make the biggest changes to menu item prices based on socio-economic factors.

“In general, the poorer suburbs will pay more,” a McDonald’s franchisee was quoted as saying in the The Advertiser, with a leaked franchisee document reportedly indicating some stores had an “opportunity to introduce more aggressive price increases”.

McDonald’s CEO, Catriona Noble, has today sought to clarify the price hikes, which are considered in February each year. She told radio station 2GB that prices were not based on socio-economic factors but rather on a restaurant-by-restaurant basis, with customer price sensitivity measured at different outlets.

“We really let the customer speak,” she said. “And that’s exactly what customers have the right to do. (They can say) ‘hey, that price increase is too much for me to handle and I’m going to come to you less often.”

On average, prices would rise 1.7%, although Ms Noble added that franchisees were not forced to implement the recommended price changes.

South Australian Consumer Affairs Minister Gail Gago noted that it is not against the law for outlets to charge different prices, but told ABC radio that she hopes that is not McDonalds’ plan and will ensure inspectors will closely monitor the situation.

“I’m … putting McDonalds on notice that inspectors will be out and are monitoring pricing structures over the next couple of months,” she said. “If their advertising is misleading across outlets and they’re breaking the law then action will be taken.”