Fast food considered 'luxury' to consumers due to increase in prices: survey

Why are fast food prices out of control?

FOX 26 Business Reporter Tom Zizka is looking into why fast food prices seem to be out of control and leading consumers to consider it a "luxury".

HOUSTON - A new LendingTree survey finds nearly 80% of consumers now consider fast food a 'luxury' because of rising prices.

A recent report by USA Today found fast food prices are up, on average, 47% in the last 10-years, which is almost double the inflation rate in the same period. Some items, however, like a McDonald's Big Mac meal are up 70%. It's a hard fact to swallow, for some.

The good news for most U.S. fast food chains is that they're making money, with nearly $400 billion in collective sales. Rising prices, though, are part of the pressure on the bottom line, as surveys show more than 60% of people say they've been shocked by a fast food bill and are going less frequently.

"I do like to go out every now, and again," says one woman, "Is it affordable? I include it in my budget."

"It's crazy," adds another, "Prices of food, restaurants, is at an all-time high, in my opinion."

Money is the Motive: Fast Food vs Restaurant prices

The convenience of fast food is becoming overshadowed by its growing costs.

In response, some chains have returned to offering value-themed meal deals, particularly from McDonalds, Burger King and Wendy's, hoping to lure customers back. Some industry experts say that marketing will squeeze profit margins that are still under pressure from inflation and supply costs. "The franchisor can say, 'We're going to give food away, or at a very low margin," says Nick Neonakis, of The Franchise Consulting Company, "But it's going to be the local franchisee, who's a small business owner, that is going to take the brunt of that."

Neonakis says food costs are just part of the problem. Rising labor costs take an equally large bite, as demands for higher wages and benefits, including a $20 and hour minimum wage for fast food workers in California, force prices ever higher.

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"That's $50 thousand to have someone working in a fast food restaurant," he says, "If you've got 30 or 40 people, you start doing the math (and) it really starts adding onto that labor inflation component."

So, what's on the menu for the future? Automation will pay a bigger role in cutting costs, which means fewer jobs, and a former fast food executive tells Fox Business that he thinks the economics of running a restaurant will force some doors to close.