The president of McDonald’s USA, Joe Erlinger, pushed back on “inaccurate” reports this week that said the chain had more than doubled its prices on some items over the last decade. But his retort wasn’t exactly reassuring: The average price of a Big Mac is up 21 percent from 2019.

Erlinger’s rebuttal underlines the heat that some companies are facing as the news media, politicians and consumers focus on steadily rising prices. Whether persistent price increases reflect price gouging, or simply companies’ own rising costs, is a matter of fierce debate. Either way, one thing is clear: Consumers are becoming fed up.

McDonald’s first-quarter earnings fell short of analyst expectations on sales, as “consumers continue to be even more discriminating” with their dollars, the chain’s chief executive, Chris Kempczinski said. Starbucks, Target and Yum Brands, the parent company of Pizza Hut and KFC, also reported earnings misses, each acknowledging increasingly cautious customers among other factors like the war in the Middle East.

Consumer spending remained surprisingly resilient in the face of stubbornly fast inflation, but now savings from the coronavirus pandemic have dried up, economic growth has slowed and many companies are working to counteract the belief that their prices have gotten out of control.

As one banker told DealBook: “The consumer was a fat pig — now there’s nothing left, and they need to feed the pig again.”

The message: Consumers have hit their limit. During periods of rapid inflation, companies tend to push to see how far they can raise prices. “We’re taking smaller, more frequent price increases because it gives us the flexibility to be able to see how consumers are reacting and then adjust if or when necessary,” Kevin Ozan, the chief financial officer of McDonald’s, told analysts in 2022.

But now some businesses, particularly those that primarily serve low- and middle-income customers, are seeing pushback against those increases, according to the Federal Reserve’s Beige Book, a summary of economic activity across 12 districts that was released on Wednesday. Consumers’ resistance to higher prices “led to smaller profit margins as input prices rose on average,” the report noted.

If retailers and restaurants can’t profit by raising prices, they need to get more people in the door.

Enter a new round of the discount wars. In recent weeks, McDonald’s, Burger King and Wendy’s announced new value meals, while Target, Walmart, Walgreens and Amazon Fresh said they would cut prices on thousands of items. Other companies are becoming more creative: Domino’s will offer $3 coupons to customers who tip their driver at least $3, and in February, Applebee’s launched a “date night pass” that gave couples a chance to eat $1,500 worth of food for $200.

“They’re losing customers to some extent, and this is trying to get customers to come back,” said Jeremy Horpedahl, an assistant professor of economics at the University of Central Arkansas. He added that “part of it is they have to do it if their competitors are doing it.”

For some, it’s already working: Dine Brands, the parent company of Applebee’s, said 28 percent of the restaurant’s sales were tied to a limited-time promotion this past quarter, a jump from 19 percent in the previous quarter.

Will the discounts stick around? Many are simply aimed at getting shoppers to buy higher-margin items. And businesses will ultimately stick with whatever best helps their bottom line.

“Companies play around with it to see where the break points are, where the sensitivities are, for the consumer,” said Bea Chiem, a director at S&P Global Ratings who leads a team that covers companies that deal in consumer packaged goods and durables.

But if the battle for customers does lead to a broad-based pricing war, that could have a lasting impact: A battle between Walmart and Albertsons helped set up a period of widespread grocery deflation beginning in 2016. Grocery prices are already falling: Average grocery prices, which rose at a peak rate of about 11 percent in 2022, were down in April.

Some retailers have also chosen to go in the opposite direction. Cracker Barrel, whose chief executive recently described the restaurant chain as no longer as relevant as it once was, is raising prices in certain areas after a sales drop. — Lauren Hirsch and Sarah Kessler

IN CASE YOU MISSED IT

Donald Trump is found guilty on all counts in his hush-money trial. Becoming the first former or sitting president to be convicted in a criminal trial, he was found guilty of falsifying business records to cover up payments to Stormy Daniels, a porn star, after an affair. The verdict didn’t stop Wall Street and Silicon Valley executives from donating to his re-election campaign.

ConocoPhillips buys Marathon Oil for $22.5 billion. The deal between the Texas energy companies was the latest in a wave of M.&A. in the sector, as the United States has become the world’s leading oil producer. Hess shareholders also backed Chevron’s $53 billion takeover this week.

Elon Musk urges shareholders to support his Tesla pay deal. The electric car maker’s C.E.O. offered a personal tour of the company’s factory in Austin, Texas, in a post on X asking investors to vote in favor of his $46.5 billion remuneration package. Institutional Shareholder Services, a leading proxy adviser, recommended that investors reject the plan, calling it excessive and “outsized from the start.”

A contentious conservative effort to gut the government

It’s unclear how Trump’s conviction this week will affect the presidential election. But a $22 million conservative operation aimed at planning for his potential second term is well underway — and its organizers are collecting résumés.

Project 2025, led by the Heritage Foundation, involves more than 100 right-wing organizations that are drafting policy plans and recruiting “an army of conservatives” from “across the fruited plain” to enact them, as the project director, Paul Dans, put it to DealBook. The think tank wants to institutionalize Trumpism.

Trump and his campaign have not officially endorsed Project 2025, but it dovetails with his plans to gut the government and eradicate what he and Republicans call the “deep state” during a potential second term. The former president has vowed to reinstate an executive order known as Schedule F, which would reclassify some civil servants in a way that made them easier to fire and could allow him to potentially replace about 50,000 career government employees.

Project 2025 aims to be ready with ideologically aligned replacements. “Personnel is policy,” said Dans, who served as chief of staff of the Office of Personnel and Management in the waning days of the Trump administration.

Here’s a snapshot of the traction it’s gotten:

• 10,000 résumés had been submitted to the Project 2025 database as of May. Candidates are “vetted for alliance” with the project, trained in government process and mechanics and “schooled in the battle plan,” Dans said. The group includes “thousands of professionals, moms and people 18 to 80,” he added. He also said it had been only four years since Trump was in office, so many previous appointees were waiting in the wings to return.

• 855,000 people have downloaded the Heritage Foundation’s “Mandate for Leadership.” The 887-page plan laying out conservative goals has also had “millions of hits” online, according to Dans, and about 2,000 hard copies have been sold.

• The project has released 26 training videos. It has four certification programs with multiple courses on the group’s website to teach conservative governance, policy drafting, how to deregulate and more.

Dans argues that the project’s recruiting arm creates opportunities for many Americans who want to participate in reshaping the government, and that the effort serves “the forgotten man and woman” rather than the interests of “Big Tech or Big Law.”

Critics say it’s just a publicity stunt. A new report from the nonprofit watchdog Accountable, shared first with DealBook, argues that “its authors include a wide range of lobbyists and private-sector consultants who are using the cover of the MAGA movement to push unprecedented deregulatory policies.”

The case for putting employee ‘joy’ on a par with ‘productivity’

Debbie Lovich, a managing partner at BCG, was researching workplace flexibility when she realized a broader factor was at play in the return-to-office debate: “Most people didn’t mind going in,” she said. “What they minded was the lack of trust — all of the sudden they were being told what to do and how to do it.”

She pivoted her research to focus on what makes people enjoy their jobs, and why leaders should care about it. DealBook spoke with Lovich about setting employee joy as a business goal. The interview has been edited and condensed.

In a recent survey, you found that people who said they enjoy work are also less likely to say they want to quit. Can you say more about that?

You could say that’s not so insightful. If you enjoy work, you’re less likely to quit. But you’re half as likely to quit. In a labor constrained market, that is a really powerful value lever.

What I’m trying to do is to get organizations to really take this enjoyment, or joy, and elevate it up right at the same level as efficiency and effectiveness in their overall goals.

Do you get a lot of pushback from executives? What do you say to change their minds?

Sometimes when people hear the word “joy,” they check out a little bit. They say, oh, that’s fluff.

I just ask them where in their organization their attrition is the highest, what does that attrition cost them, and what would it be worth if I could cut it in half? I’ve had clients who have thousands of open positions and are paying $100 million a year in overtime to keep operations going.

What is the best way for employers to create more enjoyment at work?

It’s not about yoga and Ping-Pong tables. It’s about what happens every day in the work itself.

Leaders should take the same skills they use to understand customers — segment them and come up with value propositions, do design thinking and A/B testing — and turn them toward employees. What drives joy for one employee may be different than what drives joy for another employee.

Are you thinking about joy in the context of how A.I. is transforming jobs?

I’m nervous that organizations will go after A.I. for productivity alone and make things worse.

I heard one story about a call center where they had generative A.I. take over all the easy, straightforward calls so they could downsize and keep their best customer service agents. And guess what? They all started quitting. They don’t want to be yelled at by customers all day. So they had to change the technology to let some of the easy ones through.

It’s not necessarily a trade-off of one against the other. It’s not “you can make your employees enjoy work more or you could be more productive.”

The art is looking for the double word score.

Thanks for reading! We’ll see you Monday.

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