AUS Inspectors watching McDonald’s low-income pricing

February 26, 2009
CEO Catriona Noble,

CEO Catriona Noble,

FranchiseFool broke into North America this story, earlier today: McDonald’s: Lovin’ the Profits while Targetin’ the Poor.

Leaked confidential papers (confirmed by an anonymous franchisee) indicates that McDonald’s will increase their food prices, disproportionally in lower-income communities.

It seems their research shows that the poorer someone is, the less likely they’ll complain or switch to other quick service restaurants.

ABC News reports in Inspectors to watch McDonalds pricing that at least one state government does not appreciate the use of so-called demand-based pricing by the multinational:

The South Australian Government has fast food chain McDonald’s in its sights over news of a new pricing structure.

It says the food chain must reveal whether it plans to raise prices at selected restaurants, especially those in some lower-income areas.

In the accompanying audio clip, SA Consumers Minister Gail Gago is quoted as saying, if the reports are true, McDonald’s is behaving in an “incredibly appalling and disappointing” manner and she suggests consumers may want to communicate directly with McDonald’s on this matter.

In another article, McDonald’s CEO, Catriona Noble seems to be saying that income levels relate to restaurants and not to citizens and that somehow increasing prices, increases consumer choice:

…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.”

I know of no other metric other than mean household income for price sensitivity.

Ms. Noble could have cleared this confusion up by simply stating that household income is not used for marketing purposes by this corporation. But that may have created a certain legal vulnerability.

McDonald’s: Lovin’ the Profits while Targetin’ the Poor

February 26, 2009

mcdlogoInflation is, what, at near 0 %, if not projected to go negative in 2009?

A world-wide economic recession lasting one to two years is the most optimistic outlook.

And how do the masters of franchising, globalization, and supply efficiencies respond?

They not only identify those they’ve identified to be least able to resist (ie. the poor) but increase prices to those communities.

Some could be consider this a blatant opportunistic  predatory pricing scheme by a brand bully.

Kudos to and  Frances Stewart in Australia for an article called McDonald’s to charge more in poorer suburbs.

McDONALD’S is lifting prices in poorer suburbs where it believes consumers are more likely to accept higher charges without complaint.

Costs were previously based on restaurant overheads and ingredient prices.

But the multi-national fast-food chain is using socio-economic factors to determine charges under a new “demand-based pricing” scheme.

I love Australian franchisees because you know where you stand:

A McDonald’s franchisee, who asked to remain anonymous, said the biggest price rises were concentrated in low-income areas.

“In general, the poorer suburbs will pay more,” the franchisee said.

An accompanying television clip (see McDonald’s rip-off) says that McHappy meals will increase by 16.5%.

And how is this affecting McDonald’s USA where the profits eventually go? Here’s a sample of headlines about Oakbrook’s 2008 results:

I wonder what role “socio-economic factors” and “demand-based pricing schemes” have played in differential within North American communities?

In Canada, 1 in 5 children live in poverty.

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