Hilary Russ & Uday Sampath, Kumar

(Reuters) – Rising menu prices may be slowing U.S. customers to McDonald’s. The company reports its fourth quarter earnings Thursday. This is due to rampant inflation in the United States and staff shortages as a result of Omicron.

U.S. restaurant prices broadly rose 6% over the past 12 months – driven by wage increases and higher costs for everything from meat to kitchen equipment – leading analysts to caution that weary customers may begin to trim fast-food spending.

Franchisees have the ability to set their prices. Prices can vary depending on where they are located. A Big Mac, Soft Drink, and Large Fries cost nearly $10 in New York City.

McDonald’s Corp (NYSE) is one of the first major restaurants to release fourth quarter results. It expects to report an increase of 6.9% in comparable U.S. sales growth. This slightly lower than estimates of 7% just two weeks ago. The third quarter saw 9.6% growth.

According to Gordon Haskett analysts, the U.S. menu price has increased by 2.7% in the past three months. Independent analyst Mark Kalinowski’s Monday survey found that McDonald’s franchisees believe more costly sandwiches have a negative impact on foot traffic and sales.

Is there a point when customers decide it is not worth spending $9.50 on a burrito and $7 on a hamburger? said Morningstar analyst Sean Dunlop.

According to Placer.ai which monitors cell phone locations, weekly visits to fast food restaurants has been declining in recent weeks. The analytics firm stated that McDonald’s began to see a drop in visits in December, and it fell by 12.6% during the week ending Jan. 10, compared to 2019.

According to Wedbush Securities, fast food prices may rise another 6 to 8 percent to $8 in 2022.

Consumers had a lot of pent up spending power, even though they were able to save money during the pandemic as well as later receiving cash injections from the government. There were many chains like Chipotle Mexican Grill Inc (NYSE 🙂 Popeyes’ parent restaurant brand Restaurant Brands International Inc (NYSE 🙂 Inc reported that they have not been able to resist higher menu prices.

Jose Cil, CEO of Restaurant Brands said Monday that there has been no resistance to the 2021 price. He spoke at an investor conference. The key to not getting ahead of the customer is “the key.”

Multiple pressures are faced by restaurants, including COVID-related staff shortages and limited seating. This is on top of the bad winter weather and slow January sales.

McDonald’s will likely use the new digital rewards program it has to capture market share from its smaller competitors, such as Restaurant Brands’ Burger King.

Dunlop stated that McDonald’s large scale allows it to “defray real heavy investments in technology across a huge sales base and swallow these costs better than many smaller peers.”