Fast-food restaurant chains, McDonald’s (NYSE:MCD), Chipotle Mexican Grill (NYSE:CMG), and Jack in the Box (NASDAQ:JACK), are expected to increase their menu prices in California, as per the Wall Street Journal’s report. The move comes in response to an increase in minimum wages for the state’s fast-food workers to $20 per hour from $16, effective April 1.
Among these companies, CMG expects to compensate for higher labor costs by raising prices by 5% to 9%. It is worth mentioning that the latest price hike would mark the fifth increase by the company in the past two years.
Furthermore, some of MCD’s franchisees estimate that the required wage increase will result in higher annual wage costs for the restaurants. As a result, they are exploring ways to offset these cost increases. During an earnings call in November, JACK also said that it expects to raise prices by 6% to 8% to address increased wage expenses stemming from the California law.
What is the Best Food Stock to Buy Right Now?
On comparing all three stocks – MCD, CMG, and JACK – analysts are most enthusiastic about MCD stock. It has a Strong Buy consensus rating based on 21 Buys and seven Holds. Also, the average MCD stock price target of $326.30 implies 9.85% upside potential. Shares of MCD have gained 13.4% over the past year.
Investors should note that MCD is scheduled to release its fourth-quarter earnings before the market opens today. Also, Chipotle is slated to report Q4 results tomorrow.
