July 14, 2017

Don't Just Focus On Millennials


1 comment:

Anonymous said...

McDonald's is a financially healthy company, but its business model is broken and in desperate needing of fixing. Alas, merely changing the service style is not the answer and could, in fact, create additional friction within the franchise system.

More importantly, McDonald's does not have a Millennial problem, as it hinted on its earnings calls. The real issue is the food it is serving. Food that is, for the most part, inferior to that of its competitors. It simply doesn't resonate with consumers, and it will take much more than a "myth buster" for this to change.

McDonald's recent earnings call lacked clarity. To their credit, management is trying to stem the sales decline and even conveyed a sense of urgency in doing so. The issue, however, is that management doesn't properly understand what the actual problem is, rendering their solutions haphazard. But, perhaps more concerning is the reactionary nature of these initiatives.

Both management and analysts alike were focused on the fact that Millennials are skipping out on McDonald's to go to chains such as Chipotle. Sonic reported a +4.6% same-store sales increase and, interestingly enough, didn't mention the word Millennials once on the earnings call.

Wendy's , another brand that has been resonating lately, isn't particularly focused on Millennials either. Why then is it necessary for McDonald's to pin its troubles on Millennials? The company's issues run far deeper than this and it will take some serious soul-searching for it to regain the momentum it once had.

The message sent to the McDonald's franchise system was loud and clear: we will do what it takes to grow sales and you better get on board. The current plan, as it stands, will be very expensive for franchisees and will not impact sales until sometime in 2018 at the earliest.