This is a terrible sign for McDonald’s

Roberto A. Ferdman
August 13, 2015
The Washington post
McDonald’s missteps are well-known. At a time when specialization is increasingly important in the food business, the brand has opted for breadth, offering everything under the moon: hamburgers, salads, yogurt parfaits, and fancy chicken wraps. And it hasn’t worked. In fact, that’s putting it mildly.
Month after month, the burger behemoth has had to share that it has, once again, seen same-store sales drop in the United States. The routine became so consistently depressing that McDonald’s decided to quit sharing monthly performance data altogether this past March.
But now the struggles are swallowing more than just revenue — they’re eating up entire McDonald’s restaurants.
On Tuesday, McDonald’s announced it is planning to close 184 restaurants across the United States this year, 59 more than it is planning to open. The scale-back is something of a historic negative milestone, because it hasn’t happened in more than 40 years. The last time the company contracted was in 1970.
The maneuver is driven, in part, by a company-wide commitment to reducing costs. Earlier this year, McDonald’s announced that it will shutter as many as 700 locations around the world, roughly half of which are in the United States, China, and Japan. The company also said earlier this month that it will be downsizing the head count at its U.S. headquarters in Illinois.
McDonald’s has called the U.S. store crunch “minimal.” And indeed, when one considers that the fast food giant still operates more than 14,000 locations around the country, it’s hard to argue with that assessment. But the news is no less troubling for the company, given how rare a McDonald’s downsize has been. The contraction is a telling sign that all is not right atop Big Mac mountain.
Part of McDonald’s woes are due to the growth of new-age competition. Chipotle Mexican Grill, which has become a staple for many Americans, is perhaps the best example. But the chain’s popularity is emblematic of a larger trend away from traditional fast food outlets. Chipotle belongs to a new, somewhat nebulous category called fast casual, also includes Panera and Shake Shack. The new wave, which is almost but not quite fast food, has proved that Americans are willing to pay a little extra if it means better quality and fresher ingredients. It now accounts for more than five percent of all restaurant traffic, roughly five times what it did 15 years ago.
But McDonald’s has also been a victim of its own lack of self-awareness. By offering salads, wraps, and other healthier fare, the chain has confused its place in the American food system. People visit cheap burger chains for a respite from their (hopefully) healthier dietary regimen, not another reminder that they could be eating something healthier.
For now, the burger chain seems intent on winning back customers by reintroducing the brand as an able member of the popular fast casual sector. McDonald’s has begun making burgers to order, and offering a range of fancier ingredients, like jalapenos, guacamole, and brioche buns. It has also considering a roll-out of all-day breakfast, which patrons have been requesting for years.
But mimicking the new cool kids on the block might very well only further highlight the chain’s inadequacies. McDonald’s competition is buoyed, at least in part, by its association with meaningful trends in the food world that prioritize good food over cheap food. It’s hard to convince people you’re on board when your french fries have 19 different ingredients in them.