Another Sad Watershed in Fast Food Pricing
By Anthony Gregory • Thursday March 29, 2012 9:37 AM PDT • 14 Comments
We might define our time in economic history by the prices of various fast food items. When I was growing up, $5 could get you a feast at McDonald’s or any similar establishment—deluxe burger, fries, soda, maybe an apple pie or some fried chicken bits. I saw $5 as the upper limit of what was needed to go crazy at one of these venues.
At some point in my 20s, I noticed that this had shifted dramatically. The meal deals had broken through the $5 mark. Eventually, $10 was closer to what was needed to truly pig out. What’s more, the lack of price stability has likely added to the confusion wherein customers can’t quickly determine whether the Value Meals are a value at all.
The main culprits behind this were, of course, governmental: Primarily, we could blame inflation. The Fed created the Nasdaq bubble, the housing bubble, and the rising cost of Kentucky Fried Chicken. Regulation, taxes, and other state impositions have increased the cost of doing business as well.
Much of the state’s effect on fast food has been hidden, I believe. Merchants hate raising prices in a competitive environment and so they often cut corners in quality. Most of these changes are gradual so as to be barely detectable. But once in a while there is a cataclysm that shakes the entire fast food world, a disruption of one menu item that embodies the underlying movement of prices and rocks the entire industry. Such an event occurred in late 2008, when McDonald’s replaced the Double Cheeseburger on its Dollar Menu with the McDouble—purging an entire slice of cheese from the burger to cut costs. In 2010, Burger King followed suit, emasculating its own double cheeseburger.
Through all this madness, one institution has attempted to hold the line. It is a chain that has now overtaken the Golden Arches as the largest of its kind in the world. It is a place where, last time I checked, you could eat a reasonable and not completely unhealthful lunch for four dollars. And it’s a place that has upheld that great figure—five bucks—as a price worthy of all the nostalgia I attach to it.
Subway was not able to sustain the for-$5-eat-like-a-king-and-wash-it-down-with-something-sweet standard that characterized my coming of age. But for that same amount, it was able to put something on the menu that would satisfy the most hungry patron, so long as he was fine with drinking water: The $5 foot-long sandwich.
I rarely ordered it myself. I always found six inches to be almost enough and twelve inches to be too much bread. But I knew plenty who did order it. Like a relic from times more rugged yet more comforting, this $5 sandwich screamed to the world—to the millions of customers visiting the nearly 30,000 establishments residing in the United States alone—that Subway still remembers. Subway still cares. Subway knows how we feel.
It’s all over, in San Francisco at least. Which means it’s the beginning of the end nationwide. As goes California, so goes the rest of pop culture and food culture too, for good or for evil. Due to the burgeoning price of doing business, the proximate cause being the high minimum wage in the area, Subways in San Francisco have retired the $5 foot-long sandwich.
There are worse consequences of minimum wage laws. These laws are a horrendous attack on the liberty of employees, in particular, and destroy economic opportunities for all who cannot price their labor at or above the legally mandated minimum. They are one of the state’s key weapons in its war on the poor. Usually middle class people hardly feel the pain of these laws. Perhaps now they’ll take notice.
Yet it was not minimum wage alone that brought us to this sad point. Decades of relentless regulation, litigation, taxation, and inflation culminated in this sad day, when the $5 mark so heroically fortified and defended by Subway was finally broken through by the forces of state planning. Yes, I am well aware that government props up these businesses as well, that many laws conspire to artificially push prices down even as other policies add pressure upward. Today the policies pushing upward on price have won. And all of San Francisco, likely to be followed by all the world, has lost.
Tags: American History, Economics, Food, Free Market, Inflation, Nanny State, The State 
When I was grown, (showing my age here) McD’s advertized a burger, coke and fries and change back for a dollar, in a TV commercial. And yes they had TV back then.:-)
Bill in Louisiana | Mar 29, 2012 | Reply
Anthony,
Really, the government is the only entity responsible for the rising cost of fast food? So the rising cost of energy (fuel to transport, electricity for the restaurants, and gas for cooking) has no impact on prices?
The rising value of property?
What about the ever rising costs of health care, notably the ever upward spiraling cost for health insurance (some of which is directly related to eating too much fast food)?
Finally, where does executive compensation fit into the equation, or the need for quarterly cost cutting to satisfy the short-term investment strategies of the institutional investors?
Also, have you investigated what a Subway employee actually makes? Is it at or above minimum wage? and why when the same minimum wage laws were in place prior to starting the campaign, are they not being scapegoated as the reason for it ending?
While taxes and regulations certainly have an impact on the consumer prices, they are not the only impact. In fact the $5 dollar foot-long campaign is not that old, and many of the regulations and taxes in play in California (SF in particular) were already in place prior to starting the campaign. So if the regulatory environment and tax environment was already in play prior to starting the campaign, then shouldn’t the analysis of the end of the campaign be broader and consider other aspects beyond just “its the government’s fault”?
It seems the need to scapegoat government for all problems has the same dulling effect on economic analysis on the right, as the scapegoating of the “1%” has on the conversation on the left.
Frank | Mar 29, 2012 | Reply
Energy and healthcare prices, and most of the rest, are also made much worse because of the government. Taxes and regulation drive up the cost of energy. And healthcare — the state’s many intrusions that have drive up demand (subsidies) and reduced supply (licensing, cartelization, taxes, etc.) are the main villain.
Anthony Gregory | Mar 29, 2012 | Reply
LOL! I can’t believe anyone took the time the write about this. If you eat this fast food garbage (Subway included), you should save your pennies for the quadruple bypass you’re going to have later. How about we stop eating a bunch of garbage??? Hell No! We NEED our slop burgers. You people are too funny!
Johnathan | Mar 29, 2012 | Reply
Frank, the irony in your comment is over-bearing. Everything you mentioned, from fuel costs to property values rising are suffering from the exact same thing the entire article is discussing- inflation of the currency.
Everything is going up in price due to government devaluing the money. Things do not “naturally” get more expensive over time. I guarantee if everything were still priced in gold, it would not take twice as much gold to buy the same amount of food.
jeremy | Mar 29, 2012 | Reply
@ Anthony–was amazed at your opinion on costs.Every aspect that you mentioned in your column IS Government. Who do you think controls the costs of electricity, gas, housing, food, taxes, everything? No, it’s not the State’s–Who do you think governs the States?? The GOVERNMENT! From Senators right down to your local Mayor is Government controlled, and they dare not make a move before checking with Washington! America starts at the top-Washington D.C.–they govern everything-even the patents for your hair dryer so, you’re wrong. Government controls America–that’s why we are in the pitiful shape we’re in!!
Joyce McCraw | Mar 29, 2012 | Reply
I don’t necessarily disagree, but I think the analysis and the decision-making is far more complex than you have portrayed. I also tend to think the minimum wage laws are the least of the problem, as a reality here in California is that the vast majority of businesses pay well over the minimum, and those business that do not, generally focus on part time employment, or transition employment. This also true of the fast food business, which has seen a shift from the “teenager” jobs of the past (i.e. back in the day when you or I were in High School, to either senior citizens augmenting the SS checks, and immigrants. IN either case you can generally earn over minimum wage, as the higher pay is needed to get people who can actually function effectively within the business.
I would go so far to argue that the entitlement sense of our current society has raised the expectation of the young (i.e. teenager who are not inclined to make fries to subsidize their used car), so that some fast food business now must pay wages over minimum wage to just attract the people they need to run the store, use the cash register, and provide decent customer service.
Thus, I think the wage issue is a complex one. Especially since, in my opinion and based on my observations, you can maintain a standard of living equal to a minimum wage job without actually having to work, due to the welfare state, which requires employers at the low end pay more, but also puts downward pressure – due to increasing social costs – on the middle and upper end salaries. Thus, squeezing those of us in the middle.
Frank | Mar 29, 2012 | Reply
Minimum wages laws steal from poor and young workers by taking away the most powerful (and in many cases the only) bargaining chip they have, which is the willingness to work for lower wages. Minimum wage laws don’t help at all. They only harm.
shemsky | Mar 29, 2012 | Reply
Shemsky,
I’d like to see some real data on that. As minimum wage still puts the annual income around the poverty level, it appears that there is no incentive for the “poor” to work, when they can “earn” about the same by collecting on the various welfare entitlements available.
I would rather see the welfare entitlements removed to incentivize working first, otherwise the whole minimum wage argument is moot.
As mentioned above. In my experience the types of businesses that would hire unskilled laborers, generally have to pay wages higher than minimum in order to get people to actually work. I.e. Our local supermarkets pays almost $2 over minimum wage to be able to get someone to stock shelves and collect carts in the parking lot.
I think the bigger issue is the downward pressure the high cost of entitlements puts on middle income skilled jobs, making it increasingly difficult to maintain an existing standard of living, or to move one’s standard of living higher.
Frank | Mar 29, 2012 | Reply
Well, minimum wage is the reason Subway has given for canceling the sandwich deal.
Anthony Gregory | Mar 29, 2012 | Reply
Frank,
Just look at an employment rate table that shows the rates for different age groupings. Unemployment rates for those in their late teens and early twenties are many times the rate for older workers.
Let’s get rid of welfare entitlements AND minimum wage laws. They are both harmful to society.
shemsky | Mar 29, 2012 | Reply
Bill, I recall those TV ads in the late ’60s and early ’70s: a burger, fries, and a Coke, plus you’d get change for your dollar. It’s hard to believe that we used to be able to buy something with a dollar.
Kevin G | Apr 2, 2012 | Reply
In my experience, by far the best fast food value (quality and price) is KFC. The fantastic chicken breast is amasingly good tasting, no cheap “fillers” and less than $4.
ron carpenter | Apr 2, 2012 | Reply