You’re still not eating at McDonald’s, and the new CEO wants to change that

Sarah Halzack
April 22, 2015
Washington Post
Customers still aren’t hungry for what fast-food giant McDonald’s is selling.
The chain reported Wednesday that U.S. comparable sales were down 2.6 percent in the first quarter of 2015 as foot traffic to its restaurants declined in all of its key global markets. Global profit tumbled 33 percent. The slide comes on the heels of one of the bleakest years in company history, in which the company was consistently dogged by slow sales across the globe.
Chief executive Steve Easterbrook said in a statement that the company was set to unveil a turnaround plan on May 4 that is meant to help it “better address today’s consumer needs, expectations and the competitive marketplace.”
The Golden Arches have been crumbling under the weight of a long list of problems: Its Asia business has been reeling since a supplier was accused of using expired meat. Its U.S. business has slipped as diners seek out healthier options, and the company says its complicated menu was slowing down wait times at drive-thru windows because it was too challenging for workers to prepare. Its “pay with lovin’” marketing campaign—in which diners were given free food if they did something like call their mom or give someone a hug—seemed to befuddle customers, rather than entice them.
Don Thompson, who had served as McDonald’s chief executive since 2012, retired in January as the company’s problems swirled. His successor, Easterbrook, has reportedly declared himself an “internal activist” who is determined to lure diners back to the chain.
On Easterbrook’s watch, the company has already made a string of announcements that show it is serious about shaking up its menu and shining up its image.
Promotional offers failed to pull more customers into the fast food-chain in the U.S. McDonald’s has been losing share to fast casual restaurants that offer fresher, healthier fare. (Reuters)
For starters, it has begun piloting an all-day breakfast menu at its stores in the San Diego area. Analysts are divided on whether such a move could lift business if it were rolled out nationwide. In the first quarter, breakfast sales were slightly positive in the U.S., and customers have long begged the chain to expand its breakfast hours. (Cue that scene from “Big Daddy” in which Adam Sandler has an epic meltdown after finding out he was 34 minutes late for his pancakes and sausage.)
But McDonald’s has already been struggling with a menu that it has said is simply too complex. Wouldn’t adding new items to all-day service only compound that problem?
As it experiments with its menu, McDonald’s is also trying to polish its tarnished image. For many Americans, the company’s name has come to symbolize unhealthy eating, and that’s a major obstacle at a time when diners are increasingly curious about where their food comes from and are looking to eat healthier, fresher meals.
McDonald’s has tried to address these concerns, most notably with a pledge to serve only chicken that has not been treated with human antibiotics. (While this was announced during Easterbrook’s tenure, the policy shift required intense coordination with suppliers and public health advocates and thus had been in the works for months.) An ongoing digital marketing campaign aims to pull back the curtain on its food supply chain, in hope that it will convince customers that the food is safe and healthy.
McDonald’s made another push to brush up its image by announcing it would hike hourly wages for about 90,000 workers. The increase would not apply to hundreds of thousands of workers at its franchised restaurants, though, leading labor activists to say that the efforts do not go far enough.
Though Easterbrook is new to his role, he is a veteran McDonald’s executive. On Wednesday, he signaled to investors that a shift in corporate culture is part of his plan to fix the business. Easterbrook said some of McDonald’s problems stem from its tendency for “conservatism and incrementalism.”
“When you do need to make a step change, our organization doesn’t naturally go there,” Easterbrook said.
Despite the weak earnings results, McDonald’s stock was up about 3.3 percent in morning trading, a sign that investors had expected an even worse showing. McDonald’s stock has slipped about 6 percent over the last year as the company has struggled.
Easterbrook’s pledge to offer a fresh turnaround plan comes after Thompson made similar promises to get the burger chain in better shape. During Thompson’s tenure, the cornerstone of that strategy was the expansion of the “Create Your Taste” menu, which allows diners to build a custom burger. Thompson was also working to give restaurants the chance to adapt their menu to local taste preferences and to enhance the restaurant’s digital ordering capabilities. From his remarks to investors Wednesday, it appears Easterbrook plans to stick with those initiatives.
“We are moving from a world of mass marketing to a world of mass personalization,” Easterbrook said, suggesting that customization and localization will continue to be themes of its business strategy.