How 5 QSR giants are tackling menu pricing, strategy

Even though supply chain costs have largely moderated early this year, pricing will continue to be a tool for restaurant chains to improve profitability.

Many expect pricing to rise in 2023, but at a slower pace, likely averaging 5% compared to 8% in 2022, Paul Westra, managing director of restaurant investment research at Capital One, previously told Restaurant Dive. This assessment aligns with several chains, that expect mid-single digit upticks in pricing this year.

Check out how chains addressed pricing in the last quarter.

Domino’s

Price increase in 2022: 5.4%

Pricing for 2022 was 5.4%, Domino’s CFO Sandeep Reddy told investors during Domino's February earnings call.

During the fourth quarter, U.S. same-stores sales were driven by increased ticket size, which included a 6.3% price increase, Reddy said. EBITDA in 2023 should improve this year given the pricing changes taken at the end of 2022, he said, and the decreased pressure of food basket and costs anticipated in 2023.

McDonald’s

Average price increase in 2022: 10%

The Golden Arches described its menu simplification, a 10% average menu price increase for 2022 and higher average checks as partial drivers of U.S. comp sales growth, which increased over 10% for the period, CFO Ian Borden said on the chain’s Q4 2022 earnings call. Menu simplification also raised operating income 8% and net income 16%, Neil Saunders, managing director of GlobalData, wrote in an emailed statement.

“In this environment, we must maintain our disciplined approach to pricing. We need to balance passing through our pricing on our menus while maintaining our strong position on value with our customers,” CEO Chris Kempczinski said on the call.

Kempczinski said that franchisees have been comfortable with the pace of price increases, and that the chain hasn’t seen “any big resistance” from diners so far.

An image of three bowls that contain various food items like pepperoni, meats and vegetables — Permission granted by Papa Johns

Papa Johns

Price increase in Q4 2022: 7% to 9%

Pricing action was key to Papa Johns’ sales growth, former CFO Ann Gugino said on the Q4 2022 earnings call.

“The key factors that drove the comp sales growth in the fourth quarter were new menu innovations, strategic pricing actions, and our enhanced value platform popup pairings,” Gugino said.

“For the fourth quarter menu, prices were approximately [7%] to 9% higher compared with a year ago, primarily due to strategic pricing actions taken during the first half of 2022,” Gugino said. Those actions drove down transactions, but the declines were within Papa Johns’ expectations. The brand expects sales growth in 2023 to come from ticket and transaction growth.

CEO Rob Lynch said the brand’s menu innovations, like its bowls, Papadias and new Crispy Parm Pizza, are drawing new customers.

“We're already seeing traffic improvements,” Lynch said. “A lot of it also has to do with some of the innovation we've already launched. Papadias and Crispy Parm Pizza have done extremely well. They're bringing in new customers, they're driving trial of the brand.” Lynch said premium menu items like the Crispy Parm Pizza are driving increased check sizes in addition to new traffic. Papa Bites, which customers often add to existing pizza orders, are another check size booster.

Starbucks

Price increase in 2022: roughly 6%

Starbucks took “strategic pricing actions” in 2022, Chief Marketing Officer Brady Brewer said on the company’s Q1 2023 earnings call. The coffee giant said Q1 increases in its North American comp sales were largely driven by ticket increases.

“Average ticket for both the North America segment and the U.S. market grew 9%, primarily driven by strategic pricing,” Starbucks reported in its 10-Q.

On the earnings call, CFO Rachel Ruggeri said the chain doesn’t expect to take much pricing in the rest of 2023. During the chain’s Q4 2022 earnings call, former CEO Howard Schultz said the company had taken around 6% pricing for the year.

“We don't have expectations that we'll have to further that pricing increase. And instead, what we'll see is, we'll start to see pricing normalize to more historical levels by the back half of the year,” she said.

Wendy’s

Price increase in 2022: 6%

The chain’s global pricing increase is near 10%, Wendy’s CFO Gunther Plosch said on the restaurant’s Q4 2022 earnings call. But price increases in the U.S. have been more restrained, at around 6%, and much of that was carryover from increases earlier in the year.

Plosch said he expects inflation to moderate this year.

“I think we have very little new pricing in 2023 in our outlook, which we think is positive. If we are wrong and inflation is becoming a little bit hotter, we think we still have pricing power left to manage the P&L accordingly,” Plosch said. “We don't see ... any visible pushback from consumers on the pricing that we have taken so far, evidenced by the fact that we were holding or growing dollar and traffic shares.”

Menu innovation played a role in Wendy’s 2022 performance as well, with new French toast sticks helping to improve its breakfast daypart, according to CEO Todd Penegor.

“We peaked at over $3,000 [in breakfast sales] per week per restaurant, and we expect to continue to build on that momentum this year and into the future,” Penegor said.