McDonald’s profits as UK restaurants flounder

American fast food chain McDonald’s recently announced plans to increase the price of some items on their UK menu.

In a carefully-worded statement, McDonald’s U.K. and Ireland CEO, Alistair Macrow claimed that: “Just like you, our company, our franchisees who own and operate our restaurants, and our suppliers are all feeling the impact of rising inflation.

“Some prices remain unaffected, and some will continue to vary across our restaurants. We understand that any price increases are not good news, but we have delayed and minimised these changes for as long as we could.”

Initially, the decision and Macrow’s announcement seem reasonable considering the lacklustre state of the economy and record levels of inflation.

UK restaurants failing

However, the company’s true motives are perhaps slightly more ambiguous when you consider their price hike came just hours after:

  • McDonald’s reported a quarterly global sales increase of 9.7%
  • Experts revealed the number of UK restaurants falling into insolvency had risen 64%

Apparently, McDonald’s celebrates post-pandemic success and prepares to raise cheeseburger prices 20% while the British restaurant industry spirals into insolvency.   

Le Caprice, The Ledbury, Percy Ingle Bakery and many other famous eateries have been forced to close since 2020. Meanwhile, popular restaurants such Gourmet Burger Kitchen and Italian chains Carluccio’s and Strada have been forced to restructure and downsize.

Restaurant insolvency

Research by accountants UHY Hacker Young found that in the year up to June 2022:

  • 1,406 restaurants closed their doors permanently (an increase of 64% on the previous year)
  • The top 100 restaurant groups had risen to more than £800m

Around 30% of these closures have taken place since March 2022, following the expiration of government protection against landlords. According to Peter Kubik, a partner at UHY Hacker Young, larger restaurants are more likely to survive economic turbulence.

He said: “Smaller restaurants are suffering the most from a shortage of EU staff post-Brexit. Many are finding that they simply cannot hire enough staff to serve the number of covers they need to stay profitable. That’s one of the reasons for the raft of closures we’re seeing.”

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