Wall Street analyst explains why McDonald's has hiked prices by 30% compared to Chipotle's 'low single digit' increases

The cost of fast food has soared in recent years but some restaurants have raised prices much faster than others.

Sara Senatore, a Bank of America analyst, said on Monday that increasing labor costs had affected all chains - especially in California where there is now a $20 hourly minimum wage.

But she said there were differing fortunes between chains on their ingredient costs - McDonald's was badly hit by high beef prices but Chipotle had benefitted from cheaper avocados.

Over the last decade, fast food prices have outpaced official inflation rates at every single fast-food restaurant, according to Finance Buzz. It found that McDonald's was  the worst - with prices doubling.

In just the past three years, Senatore - who specializes in burger, pizza and coffee chains - said McDonald's menu prices are up 30 percent.

'Anybody with exposure to beef was in a particularly difficult situation,' she told CNBC.

Sara Senatore, a securities analyst for Bank of America, told CNBC that some restaurant chains are hiking prices faster than others

Over the last decade, McDonald's has hiked prices faster than any other fast food chain. Pictured is a customer collecting drinks from a drive-through in California in 2003

Over the last decade, the average cost of an assortment of typical menu items at McDonald's has doubled. Pictured are items to have increased in price the most

She called the hikes 'justified,' however, and noted that profit margins at individual restaurants have remained relatively flat. 

'If you look at franchisee's restaurant level margins, they're not really elevated at this point,' she added.

But she also warned that such aggressive rising of prices is risky because McDonald's caters to many lower-income consumers. As consumers are coming under increasing financial pressure, this next year may prove trying, she said.

'They do have a lower income consumer they need to be thinking about,' she said. 'This is going to be a tough year.'

McDonald's on Tuesday morning will release its earnings for the first quarter of 2024 - when it will reveal profits and give clues about any further price rises.

Senatore said, compared to McDonald's, other restaurants like Chipotle have managed to keep prices in check.

She said recent price rises at Chipotle are in the 'low single digit' percentages.  She said it had offest inflation by becoming more efficient and increasing the number of customers it serves per hour.

The Mexican food chain has also benefited from a fall in the cost of avocados in the past  year.

Chipotle is one of the best-performing restaurant chains in the industry and last week topped Wall Street expectations after reporting strong quarterly revenue thanks to higher traffic to its restaurants.

Its share price is currently hovering around an all-time high and was up more than 40 percent year-to-date on Monday at about $3,212.

Chipotle increased the price of menu items less last year than many other chains, thanks in part to the reduced cost of avocados

Senatore said that despite Starbucks' reputation, it was 'underpricing' the rest of the industry

Similarly, Senatore said Bank of America was giving Starbucks' stock a 'buy' rating. 

She said that despite the chain's reputation for being expensive, it has recently been 'underpricing' the rest of the fast-food industry.

'People look at their latte or blended drink and they think this is expensive,' said Senatore. 

'A lot of why it's gone up so much is people are choosing to customize. either they're getting bigger sizes or they're adding syrup.'

A recent study charted the cost of Starbucks coffee around the country, and found that coffee drinkers in Maine pay on average $1.30 less per drink than those in neighboring Vermont.

Finally, Senatore pointed out that Domino's strong performance recently could be chalked up to cash-strapped consumers looking to eat on the cheap.

'In a time when people are pinching pennies, pizza is a great way to feed a family,' she said. 'You really can't do it for less than that.'

McDonald's says its prices are set by local franchises and vary by restaurant.