("Free market" at work in Australia)

McDonald’s to charge more in poorer suburbs
Article from: The Courier-Mail
Frances Stewart
February 25, 2009 11:00pm

McDONALD’S is lifting prices in poorer suburbs where it believes consumers are more likely to accept higher charges without complaint.

Costs were previously based on restaurant overheads and ingredient prices.

But the multi-national fast-food chain is using socio-economic factors to determine charges under a new “demand-based pricing” scheme.

Corporate documents obtained by The Courier-Mail show McDonald’s Australia has identified an “opportunity to introduce more aggressive price increases” in 73 Queensland outlets.

Some of the stores include Logan Central, Loganholme, Arana Hills, Gympie, Ipswich City, Labrador, Morayfield and Inala Plaza.

McDonald’s, which yesterday confirmed the pricing strategy, says the price “refinement takes into consideration individual factors that relate to each store … “.

A McDonald’s franchisee, who asked to remain anonymous, said the biggest price rises were concentrated in low-income areas.

“In general, the poorer suburbs will pay more,” the franchisee said.

The document says the system’s objective is for individual stores “to maximise the potential for a price rise” while minimising the risk consumers will go elsewhere or choose a cheaper meal. The biggest price rise will be for children’s Happy Meals, which will increase by 16.5 per cent from $4.25 to $4.95, at all locations.

Other items will rise in two stages by between 1.8 per cent and 3.3 per cent, depending on the location of the restaurant.

The first stage has already been implemented, while the second stage will occur in May.

McDonald’s corporate communications manager Bronwyn Stubbs said the company developed prices according to “established research techniques” and these were recommended for company-owned restaurants. The most recent “refinement”, which considered price factors relating to each store, was to align with the company’s “global practice”.

Choice spokesman Christopher Zinn said he was surprised McDonald’s would raise prices during tough times.

Mr Zinn said families looking for cheap meals should consider alternatives to fast food.

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