As the costs of production rise, a company might have to alter its course of action and change over to completely new strategies. This was noticed in the article “Why Wendy’s and McDonald’s Are Replacing the Dollar Menu“, that the famous fast food chains “McDonald’s” and “Wendy’s”are planning on cutting down their dollar menu after experiencing a hike in the employee costs. This was due to a rise in the minimum wage rate of employees which in turn increased the variable costs for the company. Fast food chains like so have an employee force that is mainly a variable cost to the company.
Hence, their new approach of making the customer pay more for a dollar meal than they did earlier is a new way of combating the costs. Such fast food chains are known for their cheap and convenient dollar meals, and now to make the customers pay more than just a dollar subconsciously would eventually result in the downfall in the demand for these meals as the customers may realize that they are not getting the quantity that they ought to. Companies can argue saying that you only get the quantity you pay for, and a dollar isn’t going to get you a wholesome meal. However, it does affect the value proposition that the companies used to give off earlier. It may lose some of its customers over time due to possible price hikes.
