McDonald’s is such a familiar restaurant that it has become an American icon in the restaurant business. While other fast food chains suffered during the recession, McDonald’s continued to perform for nine straight years, steadily above expectations. However, global sales figures for July 2012 are starting to paint a different story and have some people wondering what’s going on under those golden arches. It seems almost contrary that now that the American economy is starting to chug forward, McDonald’s hits a rough patch.
Wendy’s Has a Value Menu Too.
The recession was kind to McDonald’s which saw many customers flock to its location for its value meals. However, it also forced competitors in the fast food industry to take a long, hard, look at their menus and to revamp their offerings. They’ve also been forced to be far more aggressive with their advertising, which has created more options for consumer in frugal eating, and stiff competition for McDonald’s.
Golden Global Arches.
McDonald’s global sales tend to give it high exposure to overseas markets. This can drive sales up in good times and even out figures in bad times. However, even with 33,500 restaurants open worldwide, the slump in Europe is already showing signs of impacting McDonald’s bottom line. Add to that the Asian slow-down, and in total that accounts for 2.1 percent of losses. McDonald’s is a huge global chain of restaurants and working in the global market can also expose them to currency fluctuations that eat into the profits these chains produce. There’s no doubt that a global company has far more hurdles to overcome when things start to go bad elsewhere, even as the domestic situation continues to improve daily. For a global company like McDonald’s, they must serve other areas of the globe while maintaining a presence at home and manage to balance it all very artfully to avoid losing money.
Forgot to Super-Size the Stock Price.
McDonald’s has been a strong stock up until recently. Over the last 10 years, the price has climbed fourfold passing the $100 mark in late 2011. Since then, McDonald’s stock price has been declining steadily. It is now at $87.53. However, one bad month of sales figures doesn’t equal a trend, and McDonald’s has shown an innovative and creative spirit that continues to dominate the fast food market, despite a few short-term losses.
Ronald is Adaptable.
The restaurant chain is gearing up to customize its offerings locally. For Europe, which is now in the midst of a financial crisis, more value offerings will appear on their menus. For Asian customers, more local tastes will be included in the menu and even a delivery service might be offered. As America’s economy recovers, McDonald’s will step up its higher-priced offerings and not emphasize its value meals as much. Instead, they will focus on creating more variety for the American consumer who is looking for something new. The restaurant chain continues to be a good stock; however, analysts expect that in the future, growth won’t be as fast or as high as previously. McDonald’s will have to work a lot harder to compete successfully with many other fast food chains that have diversified their menus, added more value offerings, and managed to steal some market share.
Restaurant News August 13, 2012