McDonald's store owners brand all-day breakfast a disaster
16 October
It was the element of McDonald's turnaround plan that garnered the most media attention, but it doesn't appear to be going down well with franchise owners.
Surveys have consistently reported demand from customers for the fast food giant to offer its breakfast items throughout the day – and as part of a plan to turnaround falling sales the company began doing precisely that last week. The offer currently applies only to the 14,000 restaurants in the US, but is expected to be rolled out across its global operations.
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But according to a survey of 29 franchise owners, accounting for 226 stores, the plan is turning out to be a flop. Managers reported that their kitchens are in disarray due to having to juggle more menu items, which is in turn driving down quality and losing them customers, the New York Post says. Even where sales of breakfast items is strong, the bosses say that's because existing customers are "trading down" from more expensive regular menu items.
"Customers are abandoning us in droves because we are either too slow, or sub-par quality," said one franchisee. Other managers said they are having to bring in new staff to cope with the increased workload in the kitchen, which is eating into profits.
All-day breakfast is one of many changes planned by McDonald's chief executive Steve Easterbrook, as he tries to reverse a sales slide that has seen revenue fall in its home market for the past seven quarters. This year will be the first that McDonald's has closed more US stores than it has opened since 1970 (see below).
It is not all doom and gloom, though, as the company's international performance continues to impress. In the UK, where sales have increased for 37 consecutive quarters, McDonald's latest accounts reveal an increase in revenue for its last full year, from £1.37bn to £1.43bn. Pre-tax profits dipped slightly amid a re-investment programme, the Daily Telegraph reports, from £244.9m to £225.4m.
McDonald's set to offer all-day breakfast
02 September
McDonald's is set to roll out a major change to its menu – and make a lot of so-called "breakfastarians" happy – by offering all-day breakfast on a permanent basis, starting from 6 October.
Bloomberg received email confirmation from spokeswoman Lisa McComb that the trial running in selected locations would be extended across the US, after it was approved by a vote of franchisees that own around 90 per cent of its 14,350 domestic restaurants. It will not yet be available outside the US, although judging by other innovations such as the launch of a table service option it won't be long before afternoon McMuffins cross the pond.
The full breakfast menu will not be offered all day, rather restaurants "will sell either muffin or biscuit-based sandwiches, along with hot cakes, sausage burritos, fruit-and-yogurt parfaits, oatmeal and hash browns". Other items could be removed to make room – the company has struggled of late due to apparent overloading on its menu – but the core product range including the Big Mac, Quarter Pounder with Cheese and McNuggets will not be affected.
While a useful marketing ploy, there is serious sales potential in breakfast for a chain that has seen sales slide at home for seven consecutive quarters. According to an internal company presentation seen by Bloomberg, the all-day offer of its Egg McMuffin could boost sales by as much as 2.5 per cent a year.
McDonald's has always ranked positively among "Breakfastarians" – a term coined by market researchers to refer to those who eat breakfast at all times of the day – who often rank it top when asked which chains they would like to see serving traditionally morning food items for longer.
A survey running on the Mirror website, which had around 2,000 respondents at the time of writing, found 77 per cent of British readers would eat a McDonald's breakfast at any time of day, compared to just five per cent who said their cut off was the current 10.30am finish time.
McDonald's downsizes for first time in 45 years
12 August
A turnaround plan at McDonald's which the company says would reduce its footprint across its home market is gathering pace.
The Daily Telegraph reports that according to a franchise operations document filed with the Minnesota Department of Commerce, the fast food behemoth will close 184 restaurants and open 125 new ones in 2015, a net reduction of 59 stores.
According to a previous Associated Press review of regulatory filings, McDonald's has not reduced the net number of US stores since at least 1970.
It follows seven quarters of negative growth in the US, where McDonald's has 14,350 outlets and which still accounts for 32 per cent of revenue. Last month the latest earnings report revealed a two per cent like-for-like sales drop in the country, which British chief executive Steve Easterbrook described as "disappointing".
Easterbrook is undertaking a massive turnaround plan for the chain, focusing on improvements to its menu and innovations designed to head off competition amid a shift in customer tastes towards fresher food and greater customer engagement.
There are signs these plans are also ramping up, with CNBC reporting the chain has "quietly" increased the size of its iconic quarter pounder, while ABC notes it has begun to roll out a trial mobile app in San Diego and New York ahead of a national launch in the autumn.
Technology is another area in which McDonald's has lagged behind rivals and it hopes the new app will help to bring in younger customers.
Features will include an offer of a free drink after a set number of purchases, local food promotions such as a current 'buy one, get one free' offer on Big Macs in the San Diego area, and nutritional information.
McDonalds is trialling a table service option that could be rolled out across the whole of its 1,250 restaurants in the UK, as it seeks to exploit a strong position and offset continuing struggles in its US home market.
Sky News says the trial at its restaurant in Mottram in Manchester follows similar successful trials in Australia, France, Germany and Switzerland. Customers will be able to select a seat and choose their order from a fixed computer terminal, which will then be brought directly to the table.
The Guardian says the option will be trialled at a further 11 locations before the end of August. If it proves popular it could be rolled out nationwide - but "for those who prefer to queue, there will still be the option of ordering at the till".
It is the latest innovation from the company, which is struggling with falling sales in the US. That has prompted its British chief executive to launch a turnaround plan that could result in popular breakfast items made available all day (see below). It's latest "disappointing" results saw US sales fall two per cent, dragging global sales modestly down despite strong performance elsewhere.
The story is very different on this side of the pond, where the Guardian points out that sales have risen for 37 consecutive quarters, covering more than nine years. Nevertheless, the company is investing to keep up with evolving tastes and customer demands, with the UK arm currently in the midst of a £350m overhaul that will result in 250 stories being renovated by the end of the year.
McDonalds seeks solace in all-day breakfast
24 July
Fast food chain McDonalds is considering making its popular breakfast McMuffins available all day after its latest results revealed that its long-running sales slump has not been reversed.
Bloomberg reports that sales across outlets open for at least 13 months in the company's home market of the US (still its biggest profit driver) have declined by two per cent, underperforming analyst expectations of a 1.5 per cent fall. On a global basis, a modest rise in Europe left sales 0.7 per cent lower, again worse than the consensus forecast.
Investors were mollified by cost cutting that limited the slide in revenue to 9.5 per cent, with the $6.5bn sales and $1.26 earnings per share both marginally overperforming estimates. Shares closed down one per cent at $97.10 and were broadly flat in after-hours trading. The company is up 3.6 per cent over the past year.
During a conference call with investors, the American company's British chief executive, Steve Easterbrook, called the results "disappointing". He pledged to lift sales in the next reporting period, citing a turnaround plan launched in May to revitalise the company's menu and change its cooking methods.
The Daily Mail says Easterbrook pointed to a potential rethink on the scrapping of its successful 'dollar menu', extending and possibly making permanent a trial in San Diego to make breakfast items available all day, and a simplification of its 'core menu'. McDonalds is also seeking to improve quality by toasting buns for longer and sealing meat, and by only using chickens not raised on antibiotics.
But CNN Money notes that the turnaround will not be easy for a company which has lost favour with younger consumers increasingly opting for fresher, less processed alternatives, and which is locked in a price war with fast food rivals at a time when minimum wage increases are driving up labour costs.
Easterbrook said: "There is no silver bullet. No one move will turn [around] a business. There's been a decline for nearly three years."
McDonald's plans global shake-up to boost falling sales
5 May
The world's largest burger chain has unveiled its turnaround plan, which involves radical restructuring and dramatic cost-cutting.
Following months of poor sales, bosses at McDonald's have announced plans to reshape the brand as "a modern, progressive burger company" that puts customers' needs first.
What's gone wrong?
The struggling fast food company has suffered one of its worst years on record, with month after month of falling sales. "The reality is our recent performance has been poor. The numbers don't lie," the company's new president, Briton Steve Easterbrook, said in a statement about his turnaround plan.
The numbers continue to fall in the US amid "vicious" price wars with rivals Burger King and Wendy's and increasing sales at other fast food chains like Chipotle, The Guardian reports. Even the company's heavily-advertised promotions, including allowing randomly selected customers to "pay with lovin'", failed to boost sales in the US.
Its business in Asia, where it nets a quarter of its global revenues, has also been hit by a number of health scares, says The Economist. Sales slumped in China after it was revealed that McDonald's had been using expired beef and chicken, and customers in Japan reported finding pieces of plastic and even a tooth in their meals. "Geopolitics has not helped" either, with a number of outlets in Russia temporarily shut down in apparent retaliation to US sanctions.
How does it plan on fixing this?
Easterbrook says the shake-up will focus on three key priorities: "driving operational growth, returning excitement to our brand and unlocking financial value". The company is planning a large restructuring of its business, aiming to sell 2,500 restaurants to franchisees by 2018. Easterbrook has promised to remove "cumbersome" management and go on a cost-cutting mission, searching the company for inefficiencies that will result in $300 million in net annual savings in the next two years, Reuters reports. McDonald's has also outlined plans to become more customer-oriented. "[We need] sharper focus on the customer," said Easterbrook. "Sharper focus on what they want.”
What about its employees?
Earlier this month, McDonald's announced that it would increase wages for 90,000 of its US employees, bringing the average hourly rate to £9.90. But employees described the move as a publicity stunt and argue that it doesn't go far enough.
Workers are planning on gatecrashing the company's shareholder meeting later this month, demanding an end to the "poverty wages" paid to many of its staff and asking for the rate to be increased to $15 an hour. In what employees say will be the largest protest ever held, they will demand that the fast-food giant "include in its turnaround plan a serious investment in the cooks and cashiers who make its billions in profits possible."
"We've worked hard and we've walked a long path to get here," employee Ariana Alvarez, who was arrested for protesting outside last year's meeting, told The Guardian. "Now it's time for McDonald's to make the right choice – to do the right thing for their workers."
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