Reporter's Notebook
McDonald's loses more ground

McDonald's loses more ground

First quarter financials are in for most companies now, and one thing is clear so far: McDonald’s Corp. is losing a lot of customers to its primary competitors.

On average in the first quarter, quick-service restaurants not named McDonald’s averaged same-store sales increases of 6.8 percent. McDonald’s same-store sales fell 2.6 percent in the period.

Do the math, and that’s a 940 basis point gap between the Oak Brook, Ill.-based burger chain and its primary, fast food competitors. And, because it remains strong at breakfast, that gap is wider at lunch and dinner.

That’s also a considerably wider gap than McDonald’s had in the fourth quarter of last year.

The numbers are further proof that problems affecting McDonald’s are more specific to the brand than they are some broad-based rejection of traditional fast food. While all restaurants compete with one another to an extent, the chain is most likely to be losing customers to its primary QSR competitors.

It also illustrates the immense challenge ahead of the company’s executives. Its sales weakness is coming at a time when it should have enormous advantages. Consumers have more money thanks to gas prices — and they’re traveling more to boot, which means they’re in their cars and thus are able to use the company’s drive-thrus. Employment is up. And working people eat out more.

None of these factors are lifting McDonald’s sales like they are McDonald’s competitors.

To be sure, McDonald’s has twice the unit volumes of Burger King and serves considerably more customers than Wendy’s. That makes it much more difficult for the big chain to move the sales needle. McDonald’s has to sell twice as many hamburgers to get a 3 percent sales lift than does Burger King. Many of McDonald’s QSR competitors have considerably lower volumes, even when they have all three dayparts.

All of which explains why McDonald’s is testing several things in its push to fix those sales. The company has to get customers excited about eating at the Golden Arches again, and so all-day breakfast is on the table, as is menu customization, regional flavors, a slimmer drive-thru menu and even kale.

McDonald’s has yet to fully articulate a vision for what its restaurant will look like in the future. But eliminating that gap with its competitors will take a long time.

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