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McDonald’s Idea Proposal

McDonald’s Idea Proposal
 

Will McDonald’s continue to see growth with its turnaround story?

Report Available: July 14, 2016

 

Blueshift’s initial research found MCD enjoying its successful turnaround in the last year with big gains in same store sales as promotions resonate with customers and all-day breakfast becomes a fixture. The company continues to roll out new offerings, including testing food options regionally, but recent surveys point to potential industry struggles this summer and for the rest of the year as sales and traffic are tapering off.

 

Observations

  1. MCD profit beat estimates as the company reported a comp store increase of 6.2%, the largest gain in four years. In the U.S. comp sales grew 5.4% on the heels of all-day breakfast and the McPick 2 promotion. During the quarter, MCD successfully switched from its 2-for-$2 promotion to a 2-for-$5 deal centered around more premium offerings like the Big Mac and McNuggets.
  2. MCD’s comeback story has gained steam in the last year and a recent survey exemplifies MCD’s return to prominence. The report shows 32% of all quick-service restaurant visits were to McDonald’s locations. SBUX was next at 11%. While MCD’s sheer number of locations plays an important role in the results of the foot traffic survey, the findings also revealed that MCD patrons are among the most loyal as they are the least likely to visit any other QSRs. As an example, 22% of SBUX customers go to MCD, while only 8% of MCD customers go to SBUX. Similarly, 37% of KFC customers go to MCD, but only 5% of MCD customers frequent KFC.
  3. MCD continues to introduce new products. In Dallas and Columbus, OH, the company is trialing a bigger Big Mac called the Grand Mac and a smaller Big Mac called the Mac Jr. MCD is also testing garlic fries in four San Francisco Bay Area stores. They were so popular the company ran out in four days in May, but brought them back a few weeks later. They could be rolled out to 250 stores in the Bay Area by the end of summer. MCD is experimenting with other regional dishes, like chorizo and kale as ingredients in breakfast bowls in Southern California and bratwurst in Wisconsin. And in the latest development, the company just upgraded the quality of its salads.
  4. Competition for MCD is ramping up as QSR’s Burger King and SONC launched new discount offerings, including Burger King’s 2-for-$10 meal of two Whoppers, two small fries and two small drinks. An industry survey showed meek same-store-sales growth of 0.7% for April, the slowest growth rate in more than two years, while traffic fell 1.2% year to year. And the latest Knapp-Track index for the casual dining sector showed same-store sales fell 2.1% in March with a 3.6% drop in customers.
  5. Blueshift’s April 7 report said MCD was building on its 2015 success and 2016 was off to an even better start. Sources said McDonald’s all-day breakfast was seeing continued success and has contributed significantly to comp sales growth. New promotions are bringing customers into stores, and the momentum is expected to continue. Blueshift’s May Trends Tracker consumer survey showed visits to McDonald’s in the last month were the second highest since Blueshift began measuring in July 2015. In the May survey, 47.4% of respondents had eaten at MCD in the last month, trailing only the 48.4% from December. All-day breakfast demand cooled, however.

 

How is momentum for MCD’s all-day breakfast? How are the McPick 2 promotions being received? What are the outcomes of the new food offering testing programs? Are the meager industry sales and traffic trends touching MCD, too? How are the kiosks working out? How is the MCD reward program resonating? To answer these and other questions, Blueshift will issue a market research report by gathering data from independent sources in the following areas: Franchise owners, Supply chain, Stores, and Industry specialists.

 

Companies: McDonald’s (MCD), Burger King (QSR), Wendy’s (WEN), Sonic (SONC), Starbucks (SBUX), Yum Brands (YUM), Dunkin Donuts (DNKN)

 

Research Begins: June 27, 2016