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Rising Food Prices are Pushing People to McDonald's

Overall restaurant traffic fell 7.6% in July and 13.7% in August.

While the rising cost of of eating out is pushing many to forgo a restaurant dinner, one food establishment that is yet to feel the burn is the Golden Arches.

Despite raising the price of items on its menu by an average of 6% earlier this year, McDonald's  (MCD) - Get Free Report is still seeing a steadily rising inflow of traffic.

The latest recent report from Placer.ai found that, while overall restaurant visits fell 7.6% and 13.7% in August, McDonald's traffic rose by a respective 4.7% and 3.1%.

Even the fast-food industry, which for many lower-income people see is an affordable way to get a filling meal, saw declines 0.2% in July and 6.9% in August.

McDonald's Is Still The Cheapest Food Option For Many

McDonald's visits, meanwhile, has been seeing its traffic increase each month since April. 

Placer.ai found similar increases for discount stores like Dollar General  (DG) - Get Free Report and Five Below  (FIVE) - Get Free Report, which sell many popular snack and grocery foods at discounted prices.

In July, traffic at the two discount stores rose by a respective 34.5% and 42.4%.

"Companies that offer lower-cost alternatives to traditional dining and retail are seeing a visit boost," write the study's authors. "Brands such as McDonald's, which can welcome diners trading down from full-service restaurants, or Citi Trends  (CTRN) - Get Free Report, which can attract shoppers trading down in the apparel space, are particularly well positioned in the current climate."

When it comes to McDonald's, the time that people are coming into its locations has also changing. Between January and August, the number of visits that take place during the breakfast hours of 5 a.m. to 11 a.m. jumped from 16.2% to 17.7%. 

Placer.ai attributes this rise to the rising costs of many foods that are commonly associated with breakfast. Between the summer of 2021 and 2022, egg prices rose by 46.8% across the country while some estimate a pound bacon of bacon now costs 30% more than last year.

Such steep hikes are, inevitably, cutting into what many people earning modest incomes can buy.

A recent study from Omaha-based insurance company Breeze found that  73% of U.S. households have cut back on restaurants and takeout, 57% did so with groceries while 44% spent less on gas to combat inflation.

Is Fast Food Truly the Cheapest Option?

Depending on whether one lives alone or in a household, how often one cooks and the exact cost of eggs in one's area, a $3 breakfast sandwich may even be more affordable than buying all the ingredients and making similar foods oneself.

"The rising retail costs of breakfast foods may be driving more consumers to McDonald's for the most important meal of the day," the Placer.ai report authors write.

Even when they raise prices, many popular fast-food chains remain the most affordable way to eat out — some may rely on it to feed a family while others may miss eating out and seek out more affordable options than they once did.

In more bad news for those already seeking out cheaper options to make ends meet, "cheaper" or "discount" versions of foods have been hit the hardest by inflation.

Earlier data broken down by research company Numerator found that food costs at dollar stores rose by 14.3% from 2021 and 22.5% from 2020 while online grocery store prices rose by only 12.4% from 2020.