The world’s largest restaurant company by revenue, McDonald’s (MCD, Financial), is losing its popularity among young customers. The company is facing the worst slump in a decade that appears to signal tougher times ahead.
The fast food giant has 35,000 outlets across the globe and most have been facing flat sales since last year. The young customers are preferring healthy options with customizable menu provided by Chipotle Mexican Grill (CMG, Financial) and Panera Bread Co. (PNRA, Financial). These companies offer organic foods rather than frozen ones.
So what steps are being taken by the company to come on track and increase comparable store sales? Let’s find out.
Strategies undertaken to regain momentum
McDonald’s is replacing its U.S. division head for the second time in less than two years. Mike Andres, a former executive of the company will take charge of the headquarters in the U.S. The company is working to formulate strategies that could help it recover from the current lull and pick up the pace.
The percentage of people in the age group of 19-21 that used to visit the quick service restaurant chain regularly are not as interested. The foot fall of this group has fallen dramatically by 12.9 percent over 2011 levels. Customers aged between 22 and 37 are also showing greater interest towards healthier offerings, which is again having a bearing on sales. It’s been observed the visit to casual restaurants by customers of the same age group has increased in the same period.
Several challenges
McDonald’s is facing tough competition from competitors like Noodles Co., Five Guys and Corner Bakery Cafe that use fresh ingredients and take custom orders. In the U.S, McDonald’s is also facing protest from its workforce demanding higher wages. In China too, sales have gone down after the authorities found out that the main meat supplier was providing them expired meat.
This affected the sales of Africa, Asia and the Middle East, too. Some McDonald’s outlets in Ukraine and Moscow were shut down last week due to sanitary violations. Now outlets in Russia are also being inspected. Another drawback is the overcrowded menu which in turns makes their service slow. Overall, McDonald’s is seeing trying times. All these are affecting the sales of the fast-food giant.
Overcoming the challenges
McDonald’s is trying to woo customers with menus such as McWrap Sandwich, which is vegetable or chicken wrapped in tortillas. In addition to this, it’s undertaking other methods as well. Some of them are marketing on digital channels or trying the mobile app for ordering and payment. McDonald’s is developing its mobile app so that customers have the option of ordering online. The company has also set up a "learning lab" in one of the restaurant in June to monitor people's likes and dislikes. This should assist the fast-food chain in setting a new menu.
The takeaway
McDonald’s is in a bit of a difficult state as of now with sales remaining flat. The young have been the key source driving the top line. However, the company needs to change its strategy and create a fresher menu that could be customized to bring some excitement among customers. Let’s wait and watch what other steps the company undertakes to fight the current headwinds.
