Ahead of McDonald's earnings, an analyst’s survey of franchisees shows that same-store sales at the quick-service chain are improving amid the coronavirus crisis.
In the latest “McDonald’s Franchisee Survey” by Kalinowski Equity Research, analyst Mark Kalinowski projected same-store sales at the quick-service chain had decreased 20% to 25% in the second week of April. That compares with a projected decline of “25% to 30% in the first week of April,” Kalinowski wrote.
The analyst report comes as The NPD Group revealed that consumers increased their restaurant transactions for the week ending April 19.
The market research firm said Monday that “although the industry is still at historic lows compared to year ago, restaurant customer transactions declined by 36% compared to a 43% decline the prior week.”
The results are based on transactions and trends from 70 quick service, fast casual, midscale, and casual dining chains.
Kalinowski’s survey, which has been conducted 84 times, included responses from about 20 McDonald’s franchisees.
The report comes as McDonald’s is about to reveal its first quarter earnings on Thursday. On April 8, the chain shed light on how the COVID-19 pandemic has impacted the Chicago-based chain.
While sales have been significantly impacted by the crisis, same-store sales at McDonald’s held positive for the quarter ended March 31. Same-store sales in the U.S. were up .1%.
In March, which included the onset of the COVID-19 crisis, McDonald’s said same-store sales declined 13.4% at its U.S. restaurants.
The company previously said it is continuing to work with franchisees around the world to support financial liquidity. Relief includes deferral of cash collection of rent and royalties.
CEO Chris Kempczinski, who has taken a 50% salary cut, said the chain will reduce Experience of the Future remodels across the U.S. and halt new restaurant growth worldwide to preserve liquidity during the crisis.
A majority of McDonald’s nearly 14,000 U.S. restaurants have remained open for off-premise orders during the pandemic. However, the brand is serving a limited menu.
“This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath,” Kempczinski said.
Kalinowski’s survey also provides anonymous operator commentary on the business outlook for their restaurants.
Here’s what a few had to say:
- “I will weather this storm OK, because I am very conservative in my spending and borrowing…Once I get back to a neutral ground I plan on selling and retiring. This is not the world or McDonald’s I grew up with. I have put in my time, and it’s time to go. I have given everything for decades.”
- “My stores that have no drive-thrus are down by about -40%, but my stores with drive-thrus are down by about -15%.”
- “The ship has a massive hole, right now staying afloat is the priority. Forget growth, it’s gone for a very long time,” one franchisee stated in the survey.
- “The last half of March was the end of the world, but with the limited menu we’ve been able to speed up our drive-thrus to the point we are now only down about -15%. Many stores are still down -20% or more. Let’s keep the limited menu!”
- “There is no fun on the business side. Employees have been great during this whole ordeal. The media continues to incite the negative and place uncertainty on life, economy, etc. -- they could help by being positive about the future.”
- “We went from -15% a week ago to -35% the last three days. Won’t come back for a VERY long time in my opinion.”
- “Other companies are doing FAR MORE for their franchisees than McDonald’s. We get useless rent deferrals; others get rent ABATEMENTS.”
- “Deferrals only kick the can down the road. When the balloon comes due 25%-35% of Operators will go bankrupt!"
- “I believe that the McDonald’s system is in a better position to survive than most. Once this is over many ‘mom and pop’ restaurants will not re-open.”
- “Ninety days of decreases like this and we will lose a lot of the smaller franchisees.”
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