Theory for post-2021 Fast Food Price Inflation

Over the past few months, readers might have come across social media posts and news reports about very large increases in the price of fast-food in USA during the past 2-3 years. These reports have, thus far, resulted in a set of predictable responses ranging from some hoping that this will result in more people eating home-cooked food, others blame this on supply chain issues while still point the finger at shadowy globalist conspiracies. In other words, almost everyone wants to indulge their favorite beliefs while ignoring the central question- why and how did things reach this point? Some will bring up the idea that huge government cash infusions during the first two years of the over-hyped COVID “pandemic” somehow lead to this inflation. Others want to blame it on recent increases in minimum wage. There is however a far better explanation which can not only account for fast-food price inflation but also similar large increases in rents, house prices, car prices etc. But before we get there, let us go through some peculiar aspects of the price inflation seen in past 2-3 years, which most people seem, or want, to overlook.

While the price of groceries (in aggregate) has gone up by about 20-30% over past 2-3 years, the rise in fast-food prices has been much steeper. For practical purposes, the increase in prices at many fast-food chains over the same period exceeds 100%. In other words, fast-food items (esp common meal combos) now cost about twice what they used to cost in early 2021. The increase is even higher for so-called “specialty” items to a point where prices have reached levels typically seen in restaurants. In other words, fast-food inflation is about 3x the rise in food prices over the same period. Let us now tackle the bullshit about how minimum wage increases as the cause of this inflation, starting with the observation that prices of food in family-run restaurants has increased at about the same rate of general food inflation rather than the much higher rates seen in fast-food chains. Unless you want to believe that these family-run restaurants and outlets are running at a loss for past 2-3 years, it becomes apparent that something else is behind the recent and unprecedented fast-food price inflation.

And this brings us to quarterly and annual profits reported by large fast-food chains over the same time period. The very short version is that these chains made high, and in some-cases record, profits over the time-span in question. It is only in the past two quarters that we are finally seeing the first signs of a downturn in their profits. In other words, a lot of the extra money collected by increased fast-food prices went to the senior executives and large stock-holders of these corporations. This is also why the price increases at smaller chains and family-run restaurants has been in line with general rates of inflation while large fast chains have increased their prices by a much larger percentage during the same period. To make matters more interesting, many large fast-food chains also introduced over-priced “premium” offerings and started charging extra for even minor extras and customization. This has been accompanied by industry-wide decreases in the quality of fast-food as documented by many include famous YouTubers such as Reviewbrah (Clip 1, Clip 2). To be fair fast food quality has been on a downward trajectory for the past couple of decades, but the decline in past 2-3 years has been large and hard to overlook.

Some attribute the most recent round of quality declines and increased costs to residual effects of the over-hyped COVID “pandemic”. They invoke issues such as supply chain disruptions and government policies in 2020 and early 2021 to explain the current state of the fast-food industry. However this is 2024, and almost everyone is now past the alleged “pandemic” and yet these problems have only gotten worse. But there is a different and much better theory for how government responses in 2020/2021 set off a chain of events which caused the current situation in fast-food industry. It starts with how governments (esp in USA, Canada, UK etc) preferentially shut down small business, including non-chain and family-owned restaurants, while allowing corporate chains to remain open in their ineffectual attempts to stop the “pandemic”. Consequently, many small restaurants closed thus temporarily increasing the volume of customers who ended up at fast food outlets. Then the parasites, aka MBAs, running these chains realized that they could fleece their customers out of more money by offering delivery through services such as UberEats and DoorDash. It was these conditions (temporarily reduced competition and rise of delivery apps) which allowed the MBAs running fast-food chains to start the process of jacking up their prices.

To summarize, the current runway inflation in fast food prices has everything to do with dumb government decisions creating an opening for perpetually greedy MBAs to jack up prices while letting quality to slip even further. There is also the issue of how large fast-food chains (esp in USA) have become state-backed oligopolies with little real competition, especially outside larger cities, majority ethnic or relatively affluent neighborhoods. This is oddly reminiscent of how the quality and availability of cars and consumer appliances in pre-1991 East European countries was noticeably inferior to what was available in the West due to lack of real competition. It seem that the financialized form of capitalism ends up delivering that same outcome as can be seen in the quality and prices of everything from the small and mundane such as printers, laptops and smartphones to big ticket items such as houses, cars etc. In an upcoming post, I will go into the main functional differences between traditional capitalism versus financialized capitalism- specifically how financialization of the economy creates a whole new set of perverse incentives which feed the endless appetites of the parasitic managerial class.

What do you think? Comments?