McDonald’s has announced that earnings dropped nearly one third for the first quarter of 2015. Clearly this has been known internally long before the public announcement.
To McDonald’s great credit, several months ago, it announced that all workers will receive at least $1.00 per hour more than the prevailing minimum wage in each store location.
Yet perhaps predictably, Mickey D’s initial public reaction to declining profits is a short term fix: close 350 or 400 of the least profitable locations, presumably to increase average store revenues per location by reducing the number of locations. This is the old CEO trick of buying time.
The new CEO (since January) says that on May 4 “preliminary details” of a new turnaround plan will be revealed. He will thus, spend about four months since his coronation, preparing a plan to face problems with McDonald’s that have existed for awhile.
Other “experts” are already sure they have the answer. On the CBS national news today, a woman identified as a food sector stock analyst for Piper Jaffrey said that McDonald’s declining sales are linked to disappointing potential customers who do not like the inability to place McDonald’s food orders by app, pay by app, then drive over to the location to get the food. She alluded to this being possible at food service competitors such as Chipotle or 5 Guys, who had better financial results.
Oh really? She opines that the problem is the app but not the appetite?
You know that is not true. She doesn’t have a clue.
I like many people have stopped going to McDonald’s because of the FOOD. Chipotle is having great sales growth because of the FOOD. I stop at Chipotle often enough for carry out and have never seen anyone come in to pick up an order already ordered on an app. Frequently there is a long line of people who wait to order, then wait for food, because it is fresh, good food. People go to Chipotle and wait because the FOOD is great, not for any APP reason.
Once in awhile I stop at a McDonald’s for milk or a soft drink. There is usually never a line. If there is, it tales only a minute or two to order.
The problem with McDonald’s is not the result of having to wait. Even with app ordering, you would still have to get to the front of the counter to get your food.
This expert stock analyst has drunk the ridiculous kool aid of Madison Avenue, preaching that everything must be accessed through an app. She believes that if there is a problem with profits, the answer must be to get an app. Have a problem, solve it with an app.
People are over with wonder bread type buns, beef that was stuffed with antibiotics and hormones, chopped and stirred in 50,000 pound vats in Iowa or Nebraska, then frozen and shipped thousands of miles to each McDonald’s. The same with chicken.
People like the taste of grass fed, even organic beef. The same with tomatoes, cheese, etc. Chipotle has a program of buying cheese only from cheese plants which pay premiums to dairy producers for milk produced with some pasture access rather than solely feed lots, no growth hormones, and other factors.
QUALITY FOOD is what matters.
The next time a TV stock expert tells you the problem is the APP, remember, you know better. It’s not the APP, but the APPETITE.