YES! FINALLY THE TRUTH ABOUT THE HARMFUL AFFECT OF JUNCK FOODS … IS NOT MAKING IT AS MUCH APPEALING ANYMORE! COULD THESE BE THE BEGINNING SIGNS OF MASS AWEAKING? 5 Reasons McDonalds Is Falling Apart Before Our Eyes Another month, another wave of customer defections at your local Mickey Ds. McDonalds (NYSE: MCD ) posted another disappointing showing in terms of store-level sales for the month of August. U.S. comparable sales slipped 2.8% for the month, falling by an even harder 3.7% worldwide. McDonalds stock hit a new 52-week low on the news. These are lean times for the worlds largest burger flipper, especially closer to home, where comps have fallen in 9 of the past 10 months. Lets explore some of the reasons for the rut that the fast food giant finds itself in at the moment. 1. Quality is a problem McDonalds has been trying to upgrade the quality of its food, realizing that fast casual chains that offer higher-end fare with the convenience of quick-service restaurants are growing at its expense. Unfortunately, its reputation for having crummy food even within its own category isnt going away. A Consumer Reports survey of more than 32,000 fast food fans ranked McDonalds dead last among 21 leading burger chains based on taste. Whens the last time an entrenched consumer brand dramatically reshaped consumer perception of the quality of its grub? It wont be easy for McDonalds. 2. The growing menu is causing delays and prep mistakes McDonalds is no longer just about burgers and fries, but giving customers more choices also has its drawbacks. McDonalds hosted a webcast with its franchisees last year, alerting them on growing number of customer complaints about employee unfriendliness. Whats making customers so unhappy? Industry trade mag QSR puts out its Drive-Thru Performance Study every year, tracking transaction speeds. Last year, it found that the average McDonalds customers wait increased to more than three minutes after placing an order to receive it. Thats worse than the industry average, and a personal worst for McDonalds. Connect the dots, and its easy to see why the more complicated menu at McDonalds is doing more harm than good. 3. The world is no longer its oyster Its been a rough go for McDonalds domestically, but it was holding up relatively better overseas until this summer. August has offered a double whammy of international setbacks as a supplier scare has decimated its traffic in China, while Russian regulators shut down several locations on food safety concerns that may ore may not have had political motivations. In short, the same world that was once there for the taking is starting to turn on McDonalds. 4. McDonalds is being cast as the bad guy Its been a year since the Service Employees International Union launched the Fight for 15 protests, trying to get fast food chains to boost their minimum wage to $15. As the countrys largest burger chain, McDonalds has become the poster child for the campaign. The end result is that a lot of people think its not just the food thats cheap at McDonalds. Its not entirely fair. As big as McDonalds itself may be, 80% of the restaurants are owned by independent franchisees working on leaner markups. However, those siding with the unions push to roughly double wages at McDonalds may be avoiding the chain on principle, even as most of its burger peers are holding up better in terms of comps. 5. Going back to basics may not be on the table A common argument is that McDonalds just needs to return to its simple roots and the Dollar Menu emphasis that served it so well in its heyday. The problem is that it isnt likely to work. If McDonalds scrapped the fancy coffee drinks, premium chicken sandwiches, and gourmet burgers off of its menu, do you really think sales would increase? Outside of a likely improvement in speed of service, it would lose more customers than it would gain by going back to basics. Yes, a place like Five Guys can thrive without adding shakes, desserts, or fancy sandwiches. The challenge is being able to retain popularity once you start to scale back an expanded menu. This is where McDonalds finds itself today, seemingly in a winless situation. fool/investing/general/2014/09/13/5-reasons-mcdonalds-is-falling-apart-before-our-ey.aspx
Posted on: Sat, 13 Sep 2014 13:47:14 +0000
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