Is McDonald’s Turning the Corner?

For the first time in two years, McDonald’s saw positive same-store sales in the U.S. in the third quarter of 2015. The fourth-quarter comparable sales results, released at the end of last month, surpassed expectations even further, jumping 5.7% for U.S. stores from a year earlier. Subsequently, stock prices reached an all-time high in February, and the market remains bullish.

As just about any American consumer may surmise, McDonald’s all-day breakfast program is an early success. But there’s more to McDonald’s quarterly sales boosts than its all-day McMuffin and Biscuit menus. Here’s a look at what else is currently working in this legacy brand’s favor:

  • CEO Steve Easterbrook brings a fresh perspective to McDonald’s. As the former CEO of McDonald’s U.K., he helped turn around the company’s sales between 2006 and 2010; this insight into a smaller, more nimble market has informed his decision to place more focus on McDonald’s USA’s regional development. And as the former CEO of U.K.-based chains Wagamama and PizzaExpress, he aided unit and sales growth at both chains, which provided him with a valuable outsider’s perspective overall.
  • Menu improvements include investments in cage-free eggs; chicken raised without human antibiotics; milk from cows not treated with growth hormone; and real butter instead of liquid margarine. Alongside these improvements, the corporation has not lost sight of its necessary competitive value platform. It recently launched the McPick 2 menu, offering two items for $5, including its Big Mac and Filet-O-Fish.
  • Service changes include its new “ask, ask, tell” drive-thru policy, wherein employees verify the customer’s order three times to improve accuracy and personal engagement. Crew members also leave the paper food bags open so customers can more quickly confirm that their contents are correct before driving away. Additionally, McDonald’s is testing table service at 600 restaurants in Southern California to better compete with QSR-plus chains offering the service. Under this model, customers still order at the counter, but employees deliver the orders to tables.
  • On the technology front, McDonald’s rolled out its mobile app nationwide last summer, and the chain is tying improved sales to its digital strategy for the first time. Among a few reward functions, the app allows customers to earn a free drink after five purchases of McCafé beverages. This reward program also underscores how the chain continues to invest in its competitive McCafé program, which helped carry the chain through the recession in the U.S.

AS I SEE IT, if McDonald’s manages to achieve same-store sales growth this first quarter, it would then seem safe to say that this fast-food giant has turned the corner, with greener pastures ahead. However, it will need to make sure that its all-day breakfast items are not cannibalizing lunch or dinner sales. What is more, McDonald’s must continue to fiercely battle for market share by making faster changes to meet changing consumer demands. If it can manage these feats, then the golden arches will reign supreme for years to come.

Note: This content originally appeared in the February 2016 issue of Technomic’s Foodservice Digest newsletter

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Darren Tristano

Darren Tristano is President of Technomic Inc. Since 1993, he has led the development of Technomic’s Information Services division and directed multiple aspects of the firm’s operations.

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