A few months ago on our forum, J. David Blackstone mentioned the following:
I was musing that McDonald’s and Wendy’s keep their prices stable for a long time. (Wendy’s just finally raised the price of the 99 cent Jr. bacon cheeseburger, which I have been enjoying at that price for at least a decade.)
We have a Wendy’s right across the street from our subdivision, and when we’re in a rush it is a regular stop for fast food. I’m the no-bun no-ketchup kind of guy, so the doublestacks for 99 cents were always a decent deal (I’d order 4 and toss the buns). A few months back, though, the 99 cent menu was changed to the value menu, and many prices went up to $1.19 or $1.29. I had been wondering how Wendy’s was keeping up with inflation (especially in some meat, dairy and vegetable prices) over the years, but a 30% rise in prices in a year seemed about right to me. Remember, Wendy’s also has to pay extra for gas prices when delivering, and they’re also paying more for energy costs in keeping their restaurants lit and air conditioned. A 99 cent 1/4 lb burger with veggies and a wrapper is a mighty fine deal, and even at $1.29 it wasn’t bad.
Yet a few weeks ago I noticed the 99 cent menu was back, across the board. I was wondering if Wendy’s might have received some negative feedback for the price hike — not from me, I’m fully aware of the government’s intrusion into our savings by destroying wealth through money supply inflation.
It seems that the powers-that-be at Wendy’s were not aware of the problems with inflation, though, as is shown in an article at Fool.com: Wendy’s Credit Pickle.1 Wendy’s credit rating is tanking yet again, this time nearing junk bond status. Even worse, they’re spinning off their own profitable venture, Tim Hortons, which may lead them to show a negative return in the next year if their numbers don’t change. While I’m sure they’re not looking at their 99 cent menu as their profit leaders (and probably use them as a loss leader to sell overpriced fried potatoes and an overpriced soda), it could be time to really pay more attention to where fast food in general is heading.
In my financial experience, inflation hurts the poorest markets the most. When you don’t have enough money to invest in higher yield accounts, and utilize savings accounts that depreciate quickly due to the value lost through legal counterfeit of the Fed, you never get ahead. In my retail experience, items sold as value items are the ones that are the quickest to fall apart when inflation hurts the bottom line. BMWs and Porsches can keep going up in price — the wealthy are quick to respond to inflation with a variety of investments (and the ability to raise their billing rates quicker). Lower end Fords and Chevy cars are much harder to raise the prices on.
My local steakhouse has raised prices 3 times in 3 years — significantly enough for me to notice a difference. In one popular item the price has gone up over 40% in 3 years. Wendy’s, though, can’t show value in a $1.49 menu if the average consumer is not aware of inflation, the worst spectre that government brings into our lives.
Have you seen companies harmed by inflation due to their pricing structures that we’re all familiar with and almost come to expect? Discuss it at the gold investment forum.
