Rising beef and bacon costs are creating uncertainty between the buns and on the bottom line for Arby's and Wendy's, signaling that menu prices might go up at the aligned fast food outlets -- and perhaps elsewhere.
Combined with lingering unemployment, the situation is creating a recipe that is "troublesome," Wendy's/Arby's Group chief financial officer Steve Hare warned at an investor conference. People out of work tend not to go out for lunch, Hare explained in a Vance Publishing story that was posted on cattlenetwork.com.
The fact that an executive aired his concerns so publicly and bluntly doesn't bode well for the entire industry. Now that the fast food biggies are paying more for their meat, they'll eventually have to pass on the costs somewhere else. That somewhere is often us, the burger-loving faithful. The chains already have trimmed considerable fat from their operations during the economic stink. Where else can they turn to eke out more profit?
One statistic is particularly disturbing. Wendy's/Arby's reported a second-quarter dip of 1.7% in same-store sales, according to the report. A decrease is never a good thing when pundits are crowing that the recession is over.
The news isn't any better down on the farm. The amount of domestic cattle withered to a new low this year, creating an overflow of demand on the supply. Pork bellies -- bacon-to-be on the stock market -- more than doubled to a new wholesale high of $1.57 a pound, the story said.
A Wendy's/Arby's spokesman declined to answer whether the company will hike up menu prices, adding in a published email that the chain often reviews its pricing in relation to the marketplace and competitors. Given that Wendy's/Arby's expects its commodity costs to inflate by up to 3% this year, you better enjoy that Wendy's Baconator ($3.89 in some locations) or Arby's Roast Beef Sandwich ($2.99 in some locations) at their current prices while you can. Something tell us that the next bite will be out of our wallets.
Introduction to ETFs
The basics of Exchange Traded Funds and why ETFs are hot.View Course »