McDonald’s ‘moving with a sense of urgency’

by Monica Watrous    View Me on Google+
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McDonald's has upgraded its kitchens to enable menu customization and personalization.

 

OAK BROOK, ILL. – With traffic lagging at its restaurants in the United States, McDonald’s Corp. is “moving with a sense of urgency” to reignite momentum in the market, said Don Thompson, president and chief executive officer. But efforts currently under way are not expected to improve the fast-food chain’s performance this year.

“We recognize that it will take time to see the results of our actions,” Mr. Thompson said during a July 22 call with financial analysts to discuss second-quarter performance. “Our franchise business is a clear advantage for us, but it also requires alignment around our plans and actions, and this takes time. Once aligned, it takes time to enact changes in the restaurant and time for our customers to notice the changes we’ve made and reward us with more visits.

“Therefore, we expect continued volatility across markets for the second half of the year and expect full-year 2014 global comparable sales to be relatively similar to year-to-date June performance with July global comparable sales expected to be negative.”

Global comparable sales for the second quarter were relatively flat, as average check increased and guest traffic declined across all major segments. In the United States, comparable sales fell 1.5% during the second quarter, reflecting a drop in customer visits amid ongoing marketplace challenges, the company said.

“As we work to regain business momentum, we're pursuing two parallel paths,” Mr. Thompson said. “First, we're strengthening key foundational elements of our business to deliver a better overall customer experience today. And second, we're making progress on comprehensive strategies in pursuit of the sizable growth opportunities that lie before us.”

Efforts to fix the fundamentals of the business are fourfold – with emphases on improving value, enhancing operations and service, refreshing marketing and simplifying the menu.

“We are evaluating the relationship between pricing and quality perceptions across our menu board, and that's because value is one of our brand pillars, so we must continue to fortify our position within this key consumer attribute,” Mr. Thompson said.

Under way in the United States is a service “reset,” designed to support proper staffing, scheduling and positioning in restaurants across all day parts.

“Over the last six months, our operation support staff have been consulting with all franchise and company-owned restaurants to recalibrate around service and customer experience standards,” Mr. Thompson said. “Restaurants across the U.S. are now executing their plans and we're beginning to see a reduction in order accuracy complaints.”

Actions to strengthen McDonald’s marketing position have included a reorganization of the marketing department and a reallocation of media mix with a greater focus on digital channels.

“We're also strengthening our creative to connect more deeply with customers, placing an even greater emphasis on the quality of our great food and on the strong emotional connection that customers already have with our great brand,” Mr. Thompson said.

The chain is working to simplify its menu, with an eye to reducing complexity in the restaurants. Kitchen upgrades were added to increase productivity while enabling customers to personalize their orders.

“We're streamlining our merchandising, menu boards and product offerings and in addition to making it easier for customers to order their favorite products, this will reduce complexity in our restaurants which, in turn, should enhance accuracy and speed of service,” Mr.  Thompson said.

New growth initiatives include menu customization and personalization, digital engagement, and reinforcing brand trust through sustainability and corporate responsibility.

“It's these combined efforts that give me confidence in the future and our ability to drive enduring profitable growth for our system and our shareholders over the long term,” Mr. Thompson said.

For the second quarter ended June 30, McDonald’s had net income of $1,387,100,000, equal to $1.40 per diluted share, down 1% from $1,396,500,000, or $1.38 per diluted share, in the prior-year period.

Revenues for the quarter totaled $7,181,700,000, up 1% from $7,083,800,000.

Comparable sales declined 1% in Europe and increased 1.1% in Asia/Pacific, Middle East and Africa.
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