Business
McDonald’s is losing its low-income customers. Economists call it a symptom of the stark wealth divide
In the early 2000s, after a severe slump, McDonald’s orchestrated a major turnaround, with the introduction of its Dollar Menu.
The menu, where all items cost $1, illustrated just how important it was to market to low-income consumers — who value getting the most bang for their buck.
Coming at a time of flagging growth, tumbling stock and the company’s first report of a quarterly loss, the Dollar Menu reversed the fast food giant’s bad fortune. It paved the way for three years of sales growth at stores open at least a year and ballooned revenue by 33%, news outlets reported at the time.
But no longer.
Prices have risen so high at the iconic fast food chain that traffic from one of its core customer bases, low-income households, has dropped by double digits, McDonald’s chief executive Christopher Kempczinski told investors last week. Meanwhile, traffic from higher-earners increased by nearly as much, he said.
The struggle of the Golden Arches — long synonymous with cheap food for the masses — reflects a larger trend upending the consumer economy and making “affordability” a hot policy topic.
McDonald’s executives say the higher costs of restaurant essentials, such as beef and salaries, have pushed food prices up and driven away lower-income customers who are already being squeezed by the rising cost of groceries, clothes, rent and child care.
With prices for everything rising, consumer companies concerned about the pressures on low-income Americans include food, automotive and airline businesses, among others, said analyst Adam Josephson. “The list goes on and on,” he said.
“Happy Meals at McDonald’s are prohibitively expensive for some people, because there’s been so much inflation,” Josephson said.
Josephson and other economists say the shrinking traffic of low-income consumers is emblematic of a larger trend of Americans diverging in their spending, with wealthier customers flexing their purchasing power and lower-income shoppers pulling back — what some call a “K-shaped economy.”
A recent earnings report from Delta offers yet another illustration. While Delta’s main cabin revenue fell 5% for the June quarter compared to a year ago, premium ticket sales rose 5%, highlighting the divide between affluent customers and those forced to be more economical.
At hotel chains, luxury brands are holding up better than low budget options. Revenue at brands including Four Seasons, Ritz-Carlton and St. Regis is up 2.9% so far this year, while economy hotels saw a 3.1% decline for the same period, according to industry tracker CoStar.
“There are examples everywhere you look,” Josephson said.
Consumer credit delinquency rates show just how much low-income households are hurting, with households that make less than $45,000 annually seeing “huge year-over-year increases,” even as delinquency rates for high- and middle-income households have flattened and stabilized, said Rikard Bandebo, chief strategy officer and chief economist at VantageScore.
After COVID-19-related stimulus programs ended, these households were the first to see dramatically increased delinquency rates, and haven’t seen a dip in delinquencies since 2022, according to data from VantageScore on 60-day past-due delinquencies from January 2020 to September 2025. And although inflation has come down from its peak in 2022, people are still struggling with relatively higher prices and “astronomical” rent increases, Bandebo said.
A report released this year by researchers with Joint Center for Housing Studies at Harvard University found that half of all renters, 22.6 million people, were cost-burdened in 2023, meaning they spent more than 30% of their income on housing and utilities, up 3.2 percentage points since 2019 and 9 percentage points since 2001. Twenty-seven percent of renters are severely burdened, spending more than 50% of their income on housing.
As rents have grown, the amount families have left over after paying for housing and utilities has fallen to record lows. In 2023, renters with annual household incomes under $30,000 had a median of just $250 per month in residual income to spend on other needs, an amount that’s fallen 55% since 2001, with the steepest declines since the pandemic, according to the Harvard study.
“It’s getting tougher and tougher every month for low-income households to make ends meet,” Bandebo said.
Prices at limited-service restaurants, which include fast-food restaurants, are up 3.2% year over year, at a rate higher than inflation “and that’s climbing” said Marisa DiNatale, an economist at Moody’s Analytics.
On top of that, price increases due to tariffs disproportionately affect lower-income households, because they spend a greater portion of their income on goods rather than services, which are not directly impacted by tariffs. Wages too, are stagnating more for these households compared to higher- and middle-income households, DiNatale said.
“It has always been the case that more well-off people have done better. But a lot of the economic and policy headwinds are disproportionately affecting lower-income households, and [McDonald’s losing low-income customers] is a reflection of that,” DiNatale said.
It makes sense, then, that any price increases would hit these consumers hard.
According to a corporate fact sheet, from 2019 to 2024, the average cost of a McDonald’s menu item rose 40%. The average price of a Big Mac in 2019, for example, was $4.39, rising in 2024 to $5.29, according to the company. A 10-piece McNuggets Meal rose from $7.19 to $9.19 in the same time period.
The company says these increases are in line with the costs of running a restaurant — including soaring labor costs and high prices of beef and other goods.
Beef prices have skyrocketed, with inventory of the U.S. cattle herd at the lowest in 75 years due to the toll of drought and parasites. And exports of beef bound to the U.S. are down because of Trump’s trade war and tariffs. As a result, the prices of ground beef sold in supermarkets is up 13% in September, year over year.
McDonald’s has also placed blame on the meat-packing industry, accusing it of maneuvering to artificially inflate prices in a lawsuit filed last year against the industry’s “Big Four” companies — Tyson, JBS, Cargill and the National Beef Packing Company.
The companies have denied wrongdoing, and paid tens of millions of dollars to settle multiple lawsuits alleging price-fixing.
However, McDonald’s chief financial officer Ian Borden said on the recent earnings call that the company has managed to keep expenses from getting out of control.
“I think the strength of our supply chain means our beef costs are, I think, certainly up less than most,” he said.
McDonald’s did not disclose how the company gauges the income levels of their customers but businesses often analyze the market area they serve by estimating the background of their customers based on where they are shopping and what they are buying.
In California, the debate around fast food prices has centered on labor costs, with legislation going into effect last year raising the minimum wage for fast-food workers at chains with more than 60 locations nationwide.
But more than a year after fast-food wages were boosted, the impact is still being debated, with economists divided and the fast-food industry and unions sparring over its impact.
Fast-food restaurant owners as well as trade associations like the International Franchise Assn., which spearheaded an effort to block the minimum wage boost, have said businesses have been forced to trim employee hours, institute hiring freezes or lay people off to offset the cost of higher wages.
Meanwhile, an analysis by researchers at UC Berkeley’s Center on Wage and Employment Dynamics of some 2,000 restaurants found the $20 wage did not reduce fast-food employment, and “led to minimal menu price increases” of about 8 cents on a $4 burger.”
Labor groups have also argued that minimum wage increases give workers more purchasing power, helping to stimulate the economy.
McDonald’s said last year that spending by the company on restaurant worker salaries had grown around 40% since 2019, while costs for food, paper and other goods were up 35%.
The success of its Dollar Menu in the early 2000s was remarkable because it had come amid complaints of the chain’s highly processed, high-calorie and high-fat products, food safety concerns and worker exploitation.
As the company marketed the Dollar Menu, which included the double cheeseburger, the McChicken sandwich, french fries, a hot fudge sundae and a 16-ounce soda, it also added healthier options to its regular menu, including salads and fruit.
But the healthier menu items did not drive the turnaround. The $1 double cheeseburgers brought in far more revenue than salads or the chicken sandwiches, which were priced in the $3 to $4.50 range.
“The Dollar Menu appeals to lower-income, ethnic consumers,” said Steve Levigne, vice president for United States business research at McDonald’s, told the New York Times in 2006. “It’s people who don’t always have $6 in their pocket.”
The Dollar Menu eventually became unsustainable, however. With inflation driving up prices, McDonald’s stores, particularly franchisee locations, struggled to afford it, and by November 2013 rebranded it as the “Dollar Menu & More” with prices up to $5.
Last year, McDonald’s took a stab at appealing to cash-stretched customers with a $5 deal for a McDouble or McChicken sandwich, small fries, small soft drink and four-piece McNuggets. And in January it rolled out a deal offering a $1 menu item alongside an item bought for full price, with an ad starring John Cena, and launched Extra Value Meals in early September — offering combos costing 15% less than ordering each of the items separately.
The marketing didn’t seem to immediately cut through to customers, with McDonald’s in May reporting U.S. same-store sales in the recent quarter declined 3.6% from the year before. However, in its recent third-quarter earnings, the company reported a 2.4% lift in sales, even as its chief executive sounded the alarm about the increasingly two-tiered economy.
That other businesses, too, are reviving deals is a sign of the times. San Francisco-based burger chain Super Duper promoted its “recession combo” on social media. For $10, customers get fries, a drink and a “recession burger” at one of the chain’s 19 California locations.
What’s clear is companies are wary of passing along higher costs to customers, said DiNatale, of Moody’s Analytics.
“A lot of businesses are saying, we just don’t think consumers will stand for this,” DiNatale said. “[Consumers] have been through years of higher prices, and there’s just very little tolerance for higher prices going forward.”
Business
Commentary: A leading roboticist punctures the hype about self-driving cars, AI chatbots and humanoid robots
It may come to your attention that we are inundated with technological hype. Self-driving cars, human-like robots and AI chatbots all have been the subject of sometimes outlandishly exaggerated predictions and promises.
So we should be thankful for Rodney Brooks, an Australian-born technologist who has made it one of his missions in life to deflate the hyperbole about these and other supposedly world-changing technologies offered by promoters, marketers and true believers.
As I’ve written before, Brooks is nothing like a Luddite. Quite the contrary: He was a co-founder of IRobot, the maker of the Roomba robotic vacuum cleaner, though he stepped down as the company’s chief technology officer in 2008 and left its board in 2011. He’s a co-founder and chief technology officer of RobustAI, which makes robots for factories and warehouses, and former director of computer science and artificial intelligence labs at Massachusetts Institute of Technology.
Having ideas is easy. Turning them into reality is hard. Turning them into being deployed at scale is even harder.
— Rodney Brooks
In 2018, Brooks published a post of dated predictions about the course of major technologies and promised to revisit them annually for 32 years, when he would be 95. He focused on technologies that were then — and still are — the cynosures of public discussion, including self-driving cars, human space travel, AI bots and humanoid robots.
“Having ideas is easy,” he wrote in that introductory post. “Turning them into reality is hard. Turning them into being deployed at scale is even harder.”
Brooks slotted his predictions into three pigeonholes: NIML, for “not in my lifetime,” NET, for “no earlier than” some specified date, and “by some [specified] date.”
On Jan. 1 he published his eighth annual predictions scorecard. He found that over the years “my predictions held up pretty well, though overall I was a little too optimistic.”
For example in 2018 he predicted “a robot that can provide physical assistance to the elderly over multiple tasks [e.g., getting into and out of bed, washing, using the toilet, etc.]” wouldn’t appear earlier than 2028; as of New Year’s Day, he writes, “no general purpose solution is in sight.”
The first “permanent” human colony on Mars would come no earlier than 2036, he wrote then, which he now calls “way too optimistic.” He now envisions a human landing on Mars no earlier than 2040, and the settlement no earlier than 2050.
A robot that seems “as intelligent, as attentive, and as faithful, as a dog” — no earlier than 2048, he conjectured in 2018. “This is so much harder than most people imagine it to be,” he writes now. “Many think we are already there; I say we are not at all there.” His verdict on a robot that has “any real idea about its own existence, or the existence of humans in the way that a 6-year-old understands humans” — “Not in my lifetime.”
Brooks points out that one way high-tech promoters finesse their exaggerated promises is through subtle redefinition. That has been the case with “self-driving cars,” he writes. Originally the term referred to “any sort of car that could operate without a driver on board, and without a remote driver offering control inputs … where no person needed to drive, but simply communicated to the car where it should take them.”
Waymo, the largest purveyor of self-driven transport, says on its website that its robotaxis are “the embodiment of fully autonomous technology that is always in control from pickup to destination.” Passengers “can sit in the back seat, relax, and enjoy the ride with the Waymo Driver getting them to their destination safely.”
Brooks challenges this claim. One hole in the fabric of full autonomy, he observes, became clear Dec. 20, when a power blackout blanketing San Francisco stranded much of Waymo’s robotaxi fleet on the streets. Waymos, which can read traffic lights, clogged intersections because traffic lights went dark.
The company later acknowledged its vehicles occasionally “require a confirmation check” from humans when they encounter blacked-out traffic signals or other confounding situations. The Dec. 20 blackout, Waymo said, “created a concentrated spike in these requests,” resulting in “a backlog that, in some cases, led to response delays contributing to congestion on already-overwhelmed streets.”
It’s also known that Waymo pays humans to physically deal with vehicles immobilized by — for example — a passenger’s failure to fully close a car door when exiting. They can be summoned via the third-party app Honk, which chiefly is used by tow truck operators to find stranded customers.
“Current generation Waymos need a lot of human help to operate as they do, from people in the remote operations center to intervene and provide human advice for when something goes wrong, to Honk gig workers scampering around the city,” Brooks observes.
Waymo told me its claim of “fully autonomous” operation is based on the fact that the onboard technology is always in control of its vehicles. In confusing situations the car will call on Waymo’s “fleet response” team of humans, asking them to choose which of several optional paths is the best one. “Control of the vehicle is always with the Waymo Driver” — that is, the onboard technology, spokesman Mark Lewis told me. “A human cannot tele-operate a Waymo vehicle.”
As a pioneering robot designer, Brooks is particularly skeptical about the tech industry’s fascination with humanoid robots. He writes from experience: In 1998 he was building humanoid robots with his graduate students at MIT. Back then he asserted that people would be naturally comfortable with “robots with humanoid form that act like humans; the interface is hardwired in our brains,” and that “humans and robots can cooperate on tasks in close quarters in ways heretofore imaginable only in science fiction.”
Since then it has become clear that general-purpose robots that look and act like humans are chimerical. In fact in many contexts they’re dangerous. Among the unsolved problems in robot design is that no one has created a robot with “human-like dexterity,” he writes. Robotics companies promoting their designs haven’t shown that their proposed products have “multi-fingered dexterity where humans can and do grasp things that are unseen, and grasp and simultaneously manipulate multiple small objects with one hand.”
Two-legged robots have a tendency to fall over and “need human intervention to get back up,” like tortoises fallen on their backs. Because they’re heavy and unstable, they are “currently unsafe for humans to be close to when they are walking.”
(Brooks doesn’t mention this, but even in the 1960s the creators of “The Jetsons” understood that domestic robots wouldn’t rely on legs — their robot maid, Rosie, tooled around their household on wheels, a perception that came as second nature to animators 60 years ago but seems to have been forgotten by today’s engineers.)
As Brooks observes, “even children aged 3 or 4 can navigate around cluttered houses without damaging them. … By age 4 they can open doors with door handles and mechanisms they have never seen before, and safely close those doors behind them. They can do this when they enter a particular house for the first time. They can wander around and up and down and find their way.
“But wait, you say, ‘I’ve seen them dance and somersault, and even bounce off walls.’ Yes, you have seen humanoid robot theater. “
Brooks’ experience with artificial intelligence gives him important insights into the shortcomings of today’s crop of large language models — that’s the technology underlying contemporary chatbots — what they can and can’t do, and why.
“The underlying mechanism for Large Language Models does not answer questions directly,” he writes. “Instead, it gives something that sounds like an answer to the question. That is very different from saying something that is accurate. What they have learned is not facts about the world but instead a probability distribution of what word is most likely to come next given the question and the words so far produced in response. Thus the results of using them, uncaged, is lots and lots of confabulations that sound like real things, whether they are or not.”
The solution is not to “train” LLM bots with more and more data, in the hope that eventually they will have databases large enough to make their fabrications unnecessary. Brooks thinks this is the wrong approach. The better option is to purpose-build LLMs to fulfill specific needs in specific fields. Bots specialized for software coding, for instance, or hardware design.
“We need guardrails around LLMs to make them useful, and that is where there will be lot of action over the next 10 years,” he writes. “They cannot be simply released into the wild as they come straight from training. … More training doesn’t make things better necessarily. Boxing things in does.”
Brooks’ all-encompassing theme is that we tend to overestimate what new technologies can do and underestimate how long it takes for any new technology to scale up to usefulness. The hardest problems are almost always the last ones to be solved; people tend to think that new technologies will continue to develop at the speed that they did in their earliest stages.
That’s why the march to full self-driving cars has stalled. It’s one thing to equip cars with lane-change warnings or cruise control that can adjust to the presence of a slower car in front; the road to Level 5 autonomy as defined by the Society of Automotive Engineers — in which the vehicle can drive itself in all conditions without a human ever required to take the wheel — may be decades away at least. No Level 5 vehicles are in general use today.
Believing the claims of technology promoters that one or another nirvana is just around the corner is a mug’s game. “It always takes longer than you think,” Brooks wrote in his original prediction post. “It just does.”
Business
Versant launches, Comcast spins off E!, CNBC and MS NOW
Comcast has officially spun off its cable channels, including CNBC and MS NOW, into a separate company, Versant Media Group.
The transaction was completed late Friday. On Monday, Versant took a major tumble in its stock market debut — providing a key test of investors’ willingness to hold on to legacy cable channels.
The initial outlook wasn’t pretty, providing awkward moments for CNBC anchors reporting the story.
Versant fell 13% to $40.57 a share on its inaugural trading day. The stock opened Monday on Nasdaq at $45.17 per share.
Comcast opted to cast off the still-profitable cable channels, except for the perennially popular Bravo, as Wall Street has soured on the business, which has been contracting amid a consumer shift to streaming.
Versant’s market performance will be closely watched as Warner Bros. Discovery attempts to separate its cable channels, including CNN, TBS and Food Network, from Warner Bros. studios and HBO later this year. Warner Chief Executive David Zaslav’s plan, which is scheduled to take place in the summer, is being contested by the Ellison family’s Paramount, which has launched a hostile bid for all of Warner Bros. Discovery.
Warner Bros. Discovery has agreed to sell itself to Netflix in an $82.7-billion deal.
The market’s distaste for cable channels has been playing out in recent years. Paramount found itself on the auction block two years ago, in part because of the weight of its struggling cable channels, including Nickelodeon, Comedy Central and MTV.
Management of the New York-based Versant, including longtime NBCUniversal sports and television executive Mark Lazarus, has been bullish on the company’s balance sheet and its prospects for growth. Versant also includes USA Network, Golf Channel, Oxygen, E!, Syfy, Fandango, Rotten Tomatoes, GolfNow, GolfPass and SportsEngine.
“As a standalone company, we enter the market with the scale, strategy and leadership to grow and evolve our business model,” Lazarus, who is Versant’s chief executive, said Monday in a statement.
Through the spin-off, Comcast shareholders received one share of Versant Class A common stock or Versant Class B common stock for every 25 shares of Comcast Class A common stock or Comcast Class B common stock, respectively. The Versant shares were distributed after the close of Comcast trading Friday.
Comcast gained about 3% on Monday, trading around $28.50.
Comcast Chairman Brian Roberts holds 33% of Versant’s controlling shares.
Business
Ties between California and Venezuela go back more than a century with Chevron
As a stunned world processes the U.S. government’s sudden intervention in Venezuela — debating its legality, guessing who the ultimate winners and losers will be — a company founded in California with deep ties to the Golden State could be among the prime beneficiaries.
Venezuela has the largest proven oil reserves on the planet. Chevron, the international petroleum conglomerate with a massive refinery in El Segundo and headquartered, until recently, in San Ramon, is the only foreign oil company that has continued operating there through decades of revolution.
Other major oil companies, including ConocoPhillips and Exxon Mobil, pulled out of Venezuela in 2007 when then-President Hugo Chávez required them to surrender majority ownership of their operations to the country’s state-controlled oil company, PDVSA.
But Chevron remained, playing the “long game,” according to industry analysts, hoping to someday resume reaping big profits from the investments the company started making there almost a century ago.
Looks like that bet might finally pay off.
In his news conference Saturday, after U.S. Special Forces snatched Venezuelan President Nicolás Maduro and his wife in Caracas and extradited them to face drug-trafficking charges in New York, President Trump said the U.S. would “run” Venezuela and open more of its massive oil reserves to American corporations.
“We’re going to have our very large U.S. oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” Trump said during a news conference Saturday.
While oil industry analysts temper expectations by warning it could take years to start extracting significant profits given Venezuela’s long-neglected, dilapidated infrastructure, and everyday Venezuelans worry about the proceeds flowing out of the country and into the pockets of U.S. investors, there’s one group who could be forgiven for jumping with unreserved joy: Chevron insiders who championed the decision to remain in Venezuela all these years.
But the company’s official response to the stunning turn of events has been poker-faced.
“Chevron remains focused on the safety and well-being of our employees, as well as the integrity of our assets,” spokesman Bill Turenne emailed The Times on Sunday, the same statement the company sent to news outlets all weekend. “We continue to operate in full compliance with all relevant laws and regulations.”
Turenne did not respond to questions about the possible financial rewards for the company stemming from this weekend’s U.S. military action.
Chevron, which is a direct descendant of a small oil company founded in Southern California in the 1870s, has grown into a $300-billion global corporation. It was headquartered in San Ramon, just outside of San Francisco, until executives announced in August 2024 that they were fleeing high-cost California for Houston.
Texas’ relatively low taxes and light regulation have been a beacon for many California companies, and most of Chevron’s competitors are based there.
Chevron began exploring in Venezuela in the early 1920s, according to the company’s website, and ramped up operations after discovering the massive Boscan oil field in the 1940s. Over the decades, it grew into Venezuela’s largest foreign investor.
The company held on over the decades as Venezuela’s government moved steadily to the left; it began to nationalize the oil industry by creating a state-owned petroleum company in 1976, and then demanded majority ownership of foreign oil assets in 2007, under then-President Hugo Chávez.
Venezuela has the world’s largest proven crude oil reserves — meaning they’re economical to tap — about 303 billion barrels, according to the U.S. Energy Information Administration.
But even with those massive reserves, Venezuela has been producing less than 1% of the world’s crude oil supply. Production has steadily declined from the 3.5 million barrels per day pumped in 1999 to just over 1 million barrels per day now.
Currently, Chevron’s operations in Venezuela employ about 3,000 people and produce between 250,000 and 300,000 barrels of oil per day, according to published reports.
That’s less than 10% of the roughly 3 million barrels the company produces from holdings scattered across the globe, from the Gulf of Mexico to Kazakhstan and Australia.
But some analysts are optimistic that Venezuela could double or triple its current output relatively quickly — which could lead to a windfall for Chevron.
The Associated Press contributed to this report.
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