Transcription
According to the National Restaurant Association, menu prices are estimated to rise an additional 30% in 2026, with fast food prices having already increased by nearly 50% over the last decade. But with restaurants like McDonald's raising prices at nearly triple the national rate of inflation, how did the restaurant experience become just another way to fatten shareholders' pockets?
While France is often credited for the origins of the restaurant as an elegant allocart experience, the dining out culture that most of us recognize today was shaped by the American prioritization of a quick and affordable alternative for the working class. Where McDonald's famously celebrated that a family of four could be served in under a minute for less than a dollar, establishing the foundation for an industry built on value, convenience, and consistency. But as decades of consolidation and price engineering pushed the industry away from that foundation, locally owned restaurants have struggled to survive under tightening margins, allowing the largest chains to exploit the lack of competition by increasingly raising prices.
"I I think there's absolutely greed involved in this and I I I think it probably took place a few years ago. You know, people were getting, you know, checks in the mail from the government, you know, to help subsidize through COVID. And I think a lot of restaurants took the opportunity to jack their prices up at that point and cash in on that."
This is Patrick Terry, founder and CEO of Pete's, an Austin-based hamburger chain now celebrating its 20th year anniversary with 37 locations and over 1300 employees, where he discusses the repercussions the restaurant industry is now facing after corporate food chains have continuously prioritized profits over people.
"The corporations in this country really are running this country and and they really are sucking it dry. Um and they really are leaving a lot of people um with less and affecting a lot of lives."
And the effects of this consolidation cannot be more evident than the rise and collapse of America's value menus. As McDonald's experienced historic growth throughout the '60s and '70s, strategic additions like the 63-cent Egg McMuffin in 1975, nearly 91% cheaper when adjusted for inflation compared to some locations today, allowed McDonald's to officially capture the morning customer. While the $1 Happy Meal turned itself into the most affordable choice for working families, fundamentally placing an enormous cost pressure that locally owned restaurants just couldn't compete with.
Where throughout the late '80s and '90s, McDonald's, Burger King, and Wendy's all participated in a race to the bottom with their value menus, ultimately turning the entire industry towards a business model that eroded profit margins and forced labor reductions, blurring the line between affordability and cheapness, while cementing the perception of fast food as low-quality meals served by underpaid staff.
By the early 2000s, fast food had consolidated far beyond independent competition. McDonald's operated nearly 30,000 locations worldwide, almost three times larger than Burger King's roughly 11 to 12,000 restaurants and five times larger than the size of Wendy's 6,000 unit footprint. And this expansion wasn't just limited to burgers. Chains across every category accelerated their growth. Denny's surpassed 1500 units by 2005. Waffle House operated roughly 400 restaurants nationwide. IHOP reached about 1,200 units and Subway exploded from roughly 13,000 restaurants in 2000 to more than 20,000 by 2005. And as these chains multiplied, traditional American diners, once the cornerstone of working-class life, were priced out of operation, falling from roughly 6,000 locations in the mid-20th century to around 2500 by the mid-2000s.
And as the endless pursuit of competitive value menus and cheap alternatives gutted margins even further, franchise owners across the country were forced to raise prices while the industry as a whole leaned further into understaffed kitchens and underpaid labor, creating a model that failed to account for rising expenses or changing consumer behavior, ultimately abandoning affordability for the working class in order to preserve corporate profitability. And while independently owned restaurants still make up the majority of establishments today, these corporate chains now capture well over 60% of all restaurant profit nationwide.
"You take McDonald's as an example is um they got out over their skis and now they have to bring back a value menu because they lost that lower income customer that's not going to go in and drop $65 for a Big Mac. They're just not because now their their meal is going to be $12 and that's not what they're there for. And so they quickly realized and I don't know how frankly they didn't see this coming because they know how many how many meals they sell at a value price. Um, they've got to know who their customer is at that level and why they thought taking that menu away would lead to that same customer going in and buying uh a higher price product is beyond me. Um, I mean, I could have told him that that wasn't going to happen. You've you've actually trained your customer to to pay that price and now you just take it away from them. It doesn't work that way."
And one of the most overlooked drivers behind the rising cost of eating out today is the level of consolidation inside America's food system. The top four firms, Tyson, JBS, Cargill, and National Beef now control roughly 85% of US beef processing, up from just 36% in 1980. Price-fixing allegations in these consolidated sectors have shown companies intentionally coordinating supply cuts, adding hundreds of dollars per year to the average family's cost of chicken with similar patterns in pork and beef, enabling higher wholesale prices and allowing corporations to widen margins even as restaurants raise menu prices to simply remain viable.
At the same time, these companies have systematically acquired or pushed out smaller regional packers, forcing remaining producers into contract factory farming arrangements or out of business entirely. Since 1980, the number of hog farmers has fallen from roughly 667,000 to about 60,000, while average herd size has surged. And as corporations continue to post record profits, 99% of farmed animals in the United States are now raised in cruel factory farming environments, despite three-quarters of the public opposing these conditions.
And this is why I use FarmKind. FarmKind empowers people to transform our food system for animals, people, and the planet. They identify organizations with proven effectiveness in pushing corporations to improve animal welfare within industrial farming like reducing overcrowding and ending painful procedures without anesthetic. For instance, a recommended charity convinced McDonald's, Walmart, and Nestle to phase out caged eggs, making it easier for smaller humane farmers to compete. And instead of leaving impact to chance, FarmKind evaluates charities on measurable outcomes, cost efficiency, and verified track records, pinpointing where each dollar can produce the greatest measurable improvement. Their platform demonstrates the impact of contributions, showing that $15 a month can help almost 350 animals a year. And because FarmKind is grant-funded, 100% of donations go directly to these efforts. So if you want to support work focused on the structural issues behind rising food costs and the conditions that underpin them, use the link in the description or scan the QR code and use code Damon to apply a 50% boost from larger donors. Thank you FarmKind, for supporting this video.
"So we don't use either any of those four. We use a family-owned um processing plant uh here in Texas. And but yeah, that it reverberates. It it's a it's a national scam. It's a national tragedy. Uh and you know, uh everyone loses except the corporations that own and operate those. The the rancher certainly loses. I mean, he's not getting his fair price for beef. They they're controlling that. And uh and it's heavy-handed. It it's it's really it's really bad. Uh and they shouldn't they should be broken up. They shouldn't let them have that power. Uh and yes, of course, it's passed on to the consumer and and of and of course the numbers aren't aren't are inflated as a result. Um and yes, it's it's added to it."
One of the largest impacts behind both the consolidation of the meatpacking industry and the rise of mega fast-food chains is how dramatically it has lowered the quality of food in most restaurants. Tyson alone supplies chicken to nearly every major brand chain, including KFC, Taco Bell, McDonald's, Burger King, and tens of thousands of local restaurants across the country, giving a single corporation unmatched influence over the cost and quality of the nation's protein supply.
Ironically, before White Castle opened in Wichita, Kansas in 1921, most Americans believed that hamburgers were made from slaughterhouse scraps or spoiled meat, thanks to low-quality patties served at fairs, lunch counters, and roadside carts. Which is exactly why White Castle built their kitchens in full view of the customer, hoping transparency would rebuild public trust. But a century later, despite paying record high prices, the quality of restaurant food in America is once again a mystery.
A 2018 study comparing chain restaurants in the US and UK found that American menu items contained significantly more calories, fat, sugar, and sodium, especially children's meals, with over 95% of items in both countries exceeding recommended nutrient limits. With the majority of fast-food chains and local restaurants actually relying on factory-processed tenders and fillers that bear no resemblance to what consumers assume that they were paying for.
And to just prove that most of this simply boils down to greed and cost-cutting measures, I compared the chicken that you're receiving at some of the most popular restaurants. And for full transparency, because Pete's is included on this list, I have not received a single dollar, discount, anything of the sort from Pete's. This is Mr. Terry's third time on the channel, and I'm simply just using this to highlight that a company can prioritize quality over squeezing every last cent out of the customer.
When we compare the Tyson-supplied McNuggets, the I am absolutely not insinuating that Tyson supplies Chick-fil-A's nuggets, nor am I pointing out the strange timing of Chick-fil-A dropping its antibiotic-free pledge just 8 months after Tyson did. I would never suggest such a thing. Chick-fil-A's nuggets and the Pete's Chicken Bites, which I have seen be trimmed of excess fat and breaded in their kitchen with my own eyes, the difference becomes obvious. An 8-count from McDonald's has 386 calories, fat on fat on fat, and 20 grams of protein with a long list of ingredients. All for between $5.99 and $6.49 here in Austin. Chick-fil-A's 8-count is 250 calories, 11g of fat, and 27g of protein with an even longer list of ingredients for $8.85 here in Austin. Pete's 8-count chicken bites come in at 300 calories, 13 grams of fat, and 42 grams of protein made from 100% all-natural antibiotic-free ground chicken breast with a very short ingredient list. All for exactly $5.
And when we move to Fast Casual, the gap in value gets even clearer. Chipotle, which claims to source their chicken from humane producers, and I suggest you look into what is actually happening, sells a chicken bowl at 510 calories, 12g of fat, and 44g of protein for $10.40. The closest equivalent bowl I can make at Sweetgreen comes in at 500 calories, 27g of fat, and 27g of protein for $13.60. Proving that while these food giants continue blaming every price increase on inflation, tariffs, or the economic ills of minimum wage, their refusal to plan for worsening conditions and their reliance on low-quality factory-processed supply chains is now being priced entirely onto the consumer.
"We determined that we were we were going to accept uh lower margins. We weren't going to make we weren't going to make as much money uh per customer as we once did. That things had changed and and we were in this business for the long term and that we would count on selling more food to more people and making it up that way. And so, um, that's what's happened is is it's it's the the playbook. And and again, I go back to guys in their ivory tower and VCs and companies that are publicly traded that are working off a spreadsheet and nothing else."
And while the average CEO is making over 300 times more than a typical employee, the imbalance becomes even more absurd at the top of the restaurant industry. The Starbucks CEO now earns nearly now earns nearly 7,000 times more than the median worker. And this is the same executive who, when he was running Chipotle, made nearly 3,000 times more than the average worker, where instead of using that wealth to build sustainable wages or fix an industry drowning in rising costs, these companies leaned on customers to subsidize labor through ever-increasing tipping prompts.
And even with everything we've discussed today prompting many customers to return to local or casual dining, with places like Chili's seeing massive surges, the National Restaurant Association is still predicting that menu prices will need to rise another 30% throughout 2026 just to maintain a 5% profit margin. But unlike the mega chains, which can slash labor costs or automate entire roles, with the CEO of Burger King's parent company openly stating that Burger King plans to keep installing kiosks until the business is 100% digital as a part of a $400 million "Reclaim the Flame" branding re-effort that prioritizes everything from advertising to store renovations.
Many local and casual dining restaurants are still trying to recover from lockdown losses, record food prices, and supply disruptions, forcing the more affordable sit-down options to either substantially raise prices or become almost fully dependent on their customers to subsidize wages through tipping, with the average tip percentage hovering around 20%, far surpassing every other category in the restaurant industry and increasingly pricing out millions of Americans who are already living paycheck to paycheck.
"We never say, 'Wow, I wonder what we could get for this.' And when you So when you approach it from that standpoint, 'Wow, I bet we could get X.' This is so good. I bet we could get X.' When menus are created that way, then prices will surely be higher. So what we say is, okay, we've created a really good sandwich. We worked really hard to keep our costs down to create this sandwich and we want to sell as many as we can to as many people as we can. And and so what's the price that that will drive all of that? And so when you look at it from that standpoint that that yeah, we could always go up on our prices. Yes, we could. we, you know, we know that that's that's not a shock to us. But when you're saying, okay, yeah, but I want to feed everybody because in those first two or three years that that we ran Pete's that my wife and I were in the store, we also got to know our customers. And what we saw, and it's no different today than it was then, is we saw customers scrambling through their ashtray looking for loose change trying to make the get to the number that they owed us. Um, we saw plenty of plenty of customers pull out their credit card and not worry about it, but we saw plenty that that, you know, uh, their car was in somewhat disrepair. um they didn't have a lot of money that this was a treat. You know, one of my most memorable moments was was a a father and he had two boys. I can see him right now. This was 18, 19 years ago. And I looked up. It was a Saturday afternoon. All of a sudden, I saw them in the window at the at the walk-up window. And I realized that I hadn't seen them in a while. I used to see them every week. And um and I said, 'My gosh, where you guys been?' And before the father could speak, one of the little boys said, 'Well, dad's had a tough time.' Um So if you look at your customers as individuals and you look at at what they may or may not be going through and that you're still trying to be there for them, you just run your business differently. You just do.
Right now where I'm sitting right here, there are nine fast-food restaurants. I can walk to nine fast-food restaurants. And all of them other than Pete's absolutely sucks. I I don't go to any of them, but they they're just the worst of the worst. There's only two locally owned restaurants. If I go there, there's not a shot I'm spending less than $45. There's just no way. And and so while they those two probably will survive because I don't know they're still somehow busy, the the reality is is that just it just it just I don't know it's just so disappointing. It is so disappointing to be a young person and to just see this uh corporatism taking over just to see how everything is being manipulated and and the monopolies and you know that nothing's going to be done about it. Not a single thing.
Something I just couldn't help but think about was how important uh say a sitcom like Seinfeld. A restaurant, at least in American culture. I I think it's it's also common of, you know, going and having coffee with a friend or things like that, but a restaurant, a diner, going and being able to sit there and talking with a friend, that was a massive part of the show. Now, imagine if they were doing that in McDonald's or Starbucks. It it's it's losing that. And I think that I I truly do think that the society is getting to that spot of 'you will own nothing and be happy.' You won't be happy, but you won't own anything. And to force you into your homes or force you away from community gathering and to glue you onto your phones or to the next consumer good or to dissociate you from life in whatever way you can or whatever way they can. And I just think that that's a real shame. And and so I I want to stress how important it is of supporting the businesses that do care, that do prioritize the customer, that do provide fair wages. Um, for me it's personally Pete's now since I was when I graduated high school I felt unbelievably lost. I wanted to provide value to people. I really care and I I've said it many times on the channel. All I have wanted to do since I was younger was to rid people of suffering. I just want people to be happy or at least at peace. That has been like my number one priority. But when I I looked at my friends, they were all going to college and they wanted to be, you know, an engineer or work in finance or a business major. And that just wasn't me. And so I went to my my favorite location, the William Cannon location. I was having a I sat at my local spot. I was having my regular meal and I ended up looking up, you know, who who is Pete's Terry's. And I read the Austin Statesman and it said, uh, Mr. Terry gave why he created the hamburger stand and what he wanted to do was to be able to provide value to customers at a fair price uh at quality food at a fair price and all that mattered to him at the end of the day was that the customer enjoyed it. And it it it was the first time in my life I had the north star that providing value to someone was okay, that I could do that, that somebody else was doing it, so so could I. And and I think that many of you guys would see throughout my channel. You know, look at us from 18 to where I am now. Um, how much of that has been intertwined into this channel. And now he's been on the channel three times. And here recently, I'll be honest, I was struggling unbelievably bad. And I I won't say that I was thinking about not making videos anymore, but I was having a really hard time. And I reached out to Mr. Terry and I said, 'Hey, do you mind if I just have a phone call with you? I just want to ask you some questions.' And uh we ended up talking for about 30 minutes. And then he said, 'I actually want you to come into the headquarters. Let's just talk about some things. Uh I think it might be better for an in-person conversation.' And then he gave me about an hour and 15 minutes of his time. And I walked away and and I am still feeling so much more confident in what it is that I'm doing. That is just one business person here in in Austin, Texas that truly cares that truly cares about providing value. That there's I I just think that if we do look hard, there are those places and and whatever that means to you, try to support them. Even if it's just going in there and just saying, 'Hey, I really appreciate what it is that you're doing. I wish I could buy something or I wish I could support in this way, but I just want to let you know that I appreciate it.' Or or or share it with other people. Just try to get the message out. I I just think that that really matters right now. Whatever piece of hope that we can get, for me, the hope comes from a burger stand, but you know, other people might be a bowling alley or a bookstore or a library or something. And I I think right now it's really crucial that we hold on to those moments and and we try to protect it in whatever way we can. I really think 2030 we're going to be seeing an entirely different economy and I unfortunately think that the majority of people will not have a say in that economy. I'm going to try to do whatever I can to at least help in whatever way I can. But I I think that it's important that we begin to recognize that. And you know, I'm just really sorry that many of you guys are having to not only not be able to go enjoy a restaurant meal once a week or whatever, but you can't even afford groceries. So, you're just missing meals entirely. And I just don't think that's right. But, you know, I hope that Mr. Terry's message was able to give you some hope that there are good people out there. And and even if you don't you don't know of those locations, you're in those fast-food deserts kind of like I am. Um, you know, if this channel can give you some hope that there is somebody that genuinely cares and just wants to do better, um, then then I would be honored to be that, too. So, anyway, I hope this was able to provide some value to you. Until next time. Bye-bye."