September 19, 2018

September 17, 2018

McDonald's Shares Have Not Had a Good Year

McDonald's Shares Go Rancid - TheStreet

The above article includes a short video of Wendy's CEO talking about kiosks, mobile 
ordering, and drive-thru.
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September 15, 2018

Trading Spaces


I recently talked with a former McDonald's Operator who commented that, when pulling into a McDonald's parking lot, he gets the impression that McDonald's is doing everything to keep customers from parking and dining in the restaurant. He was referring to all the signs advertising McDelivery, mobile ordering, and curbside pickup. I hadn't looked at it that way but I have noticed these initiatives appear to be eating up the parking stalls most convenient to the entrance to the restaurant.

Soon after my news-feed picked up an article from the Netherlands about a deal to install charging stations at 168 McDonald's. Most businesses tend to install these facilities in the most visible spot on the property and that's usually near the entrance, often next to the ADA required parking.

Less convenient parking sends more customers to the drive-thru and hopefully not to the competitor next door who probably has parking right in front of the door. In theory this makes it harder to justify dining room upgrades and kiosks.




September 13, 2018

Eating Habits Are Changing Faster than QSRs Can Keep Up

If only McDonald's had an attribute that made it more attractive than cooking at home.

Wait! Fast service could, but McDonald's leadership is going in the other direction. 

Fast Food Races to Meet Americans’ Growing Demand to Eat at Home - Bloomberg
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September 11, 2018

Is McDonald's USA Slowing Service Benefiting Competitors?

Sonic stock surges on improved traffic

From comment below, "Of course there is nobody left in McDonald’s operations who even knows that there are lines in the cups, even if they happened to notice the lines they certainly don’t know what they are for. Even if they know what they are for they don’t know why." 
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September 5, 2018

Wide Gulf Between Average and High Frequency Diners

High-frequency customers are first to notice, and first to be turned off by, slow service.

Wide Gulf Between Average, High Frequency Diners - Franchise Times
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McDonald's Operator Comment of the Day

Modern and progressive would include the company “investing” into O/O’s ability to attract and retain higher quality people. Our business model DOES NOT support the salaries needed to compete with Chic, Hobby Lobby, Buccees gas stations. 

If they’re so interested in modern and progressive and attracting and retaining the best available they’re going to have to allow us to play on a level field. We just can’t offer the pay and benefits others do, no room. These “investments” like college tuition etc sound great but we are busy making note payments and paying rent/service fees and shouldering more annual expenses every year. 

I don’t recall a mebtion of 2% food cost (as a %of sales) at the gallery walk. We were unprepared for this and it isn’t getting better. 

I can’t pay $14/hr with full benefits like the guys mentioned do so we usually get those who others don’t want. Oh, and at business reviews we get to explain why our turnover is so high? Hell, I’m losing 20+yr vets who *were* lifers. They’re tired of unrealistic demands and irrational field service idiots with less experience keeping them on the defensive. 

The whole thing is broken. Leadership is running out of people to blame, they fired those who might have helped. 

They are obsessed with analytics, their own tell a pretty compelling story. 

We will see if the next bunch lives in reality, I predict these guys will soon see the door. Their own obsession will be their undoing.

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September 4, 2018

August 29, 2018

Are McDonald's USA Same Store Sales Doomed?


An analyst buddy sent me the above picture asking for my feedback on this new product test. For the 500th time I had to explain that I don't track or pay much attention to new product tests at McDonald's and that new products often do more harm than good.

This is obviously a picture of a tray liner from one of the test stores. What caught my attention was the term, "made to order right in our kitchen".

Here we are again. Made to order means slow service, pure and simple. And McDonald's can't build sales selling slow food.

There's a reason the average Five Guys barely does $1 million a year, they are dog slow, almost deliberately. There's a reason the average Chick-fil-A does almost $4.5 million, their service is blazingly fast.

No amount of discounting or food giveaways will keep McDonald's USA sales from declining to Burger King levels if HOTG or "made to order" becomes the operating standard.
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August 28, 2018

Jefferies Excited About McDonald's App

Analyst Andy Barish can be reached at:  abarish@jefferies.com

Buy McDonald's shares because its mobile deal app usage is surging
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Featured Comment of the Day

Anonymous said...
Let do a quick review, Chris K., like all good snake oil salesmen sold us a plan that “WE” all knew in our hearts wouldn’t work. Regional Leadership pressured us to signing under duress on the bottom line the “Letter” that would become our undoing. Gladly many of these Corporate stooges have learned how important they were to the system when they were shown the door. Now we are in the “Save Chris” times, as with the movie Ferris Buller from the same city we are being lied to everyday. Our car has been stolen and the garage attendants that run this company they are running up the miles on our business each day destroying the value of a business that we depend upon. The “Millennial Force” that attend daycare at MHQ each day have no knowledge of our history, our founder or our business and would never tell their peers what company pays their salaries. These blue hair geniuses walk around the West Loop believing in “Change” because Chris & Steve tell them they are part of a movement to change the world. Ever heard of a cult? They think how they are told to think.

Leadership collectively believe that owners are idiots, and honestly why would they not? Sadly things are going to have to get worse before they get better. Individually folks are scared to speak their minds in fear of reprisals from?? They aren’t even sure who does what but I digress. Until operators decide that this is our business and leadership are just temporary in position for the stock market we will continue to be bullied. Ray said “None of Us is a Good as All of Us”. We owe it to Ourselves and Ray to fight the good fight to preserve the brand that we all owe our livelihoods to each day. I am starting to see waves of courage from individual markets voting down the latest wave of OPNAD entitlement. Travis has sold us out to corporate and Chris continues to push the edges of control. Like any good dictator he has eliminated any dissenters from his ranks and is pushing for total control by trying to empower the OPNAD body to have total control. Don’t be fooled by the “More Nimble” propaganda, its all about total control to “Save Chris”. Make sure you stay strong and tell OPNAD NO!
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There more great Operator comments on posts "Tried the BBQ glazed tenders" and "Waiting on my tenders"

August 25, 2018

Why Some Restaurants Are Losing Customers

Jonathan Maze is one of the best journalists covering restaurants and Howard 
Penny is one of the most independent minded analysts covering restaurants.

In this pod cast the two discuss the QSR industry and McDonald's.

That's the first 25 minutes. The remainder is Jonathan and one of his associates
discussing start-up chains.

From Restaurant Business Magazine
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August 24, 2018

Waiting On My Tenders

In last night's post, I neglected to mention that I got pulled to wait for my tenders order. 
The crew person said they were cooking my tenders. Now, my order included a QPC so 
that could have been part of the hold-up.

Nevertheless, from the time I parked in the designated stall to the time I received my 
food was a full SIX minutes. As a customer, I might try the tenders again. If I have to wait
second time I'll likely not order tenders again. I'll order something I know is quick (McChicken) or I'll go to the Taco Bell/Arby's/Sonic across the street.

Remember, the dumbest words ever uttered by a McDonald's corporate employee were 
said during the introduction of Made For You:

"Customers don't mind waiting a little longer if they know it's made just for them."
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August 23, 2018

Tried the BBQ Glazed Tenders

Pretty good product. I went to the drive-thru and the tenders smelled so good in my car I 
had to pull over and try them. When I opened the box I thought to myself, "this has got to 
be the messiest product McDonald's has ever sold".

I finished one tender without staining my upholstery but took the rest back to the office so 
I could wash up in the sink after eating the remainder.

I spent a while wondering, "What were they thinking, developing such a messy product".
With McDonald's being such a drive-thru business, messy products do not sell in large 
numbers. How many orders of Hotcakes and Sausage are sold in the Drive-Thru?

Then it dawned on me - BBQ glazed tenders are for McDelivery! Management is planning 
on loading up the menu with new products that will only be applicable to McDelivery.

That'll simplify things!



A Lobbying Opportunity

Susan Kezios, President of the American Franchisee Association has asked us to make franchisees aware of some interesting legislative activity that may impact franchisees.

A Federal program called EB-5 was initially created by Congress on 1990 but is up for 
renewal in September. The EB-5 program allows well capitalized immigrants to invest in
the United States and eventually receive permanent resident status.

Small business and franchises have had access to this capital but with this renewal large 
real estate developers are leaning on Congressional representatives to delete the small 
business and franchise language.

The AFA is asking franchises in Iowa, Kentucky, and Texas to flood their Senators' offices 
with phone calls and E-mails supporting the continued inclusion of "small business and franchise" language in the renewal of EB-5.

If anyone is interested in more information I have a package I can send you by E-mail.

Meanwhile, McDonald's Operators in the above three states might consider contacting 
their Senators.
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August 21, 2018

Check Out Our Featured Post >>>>>>>>>>>>>>>>>>>>>>>

Frequently a post  will get down the page while Operators are still making comments on the
topic. If we get a string of comments I'll feature the post so the comments don't get missed 
by regular visitors. The Featured Post always shows up in the upper right hand corner.
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August 14, 2018

The McSpin Machine Rehashes Two Year Old News

What are we missing here? This is old news repackaged with a lot of work done bringing
in local politicians and McDonald's Operators for pithy quotes. 

Apparently, management is frustrated that the share price has languished in 2018 and is
trying to revive the "modern and progressive" angle.

It appears there were individual press packages for nearly all 50 states.

It worked to some degree as MCD shares were up $2.46 today. We'll see what happens
on Wednesday.

McDonald's to spend $6 billion on nationwide restaurant makeovers
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August 11, 2018

August 7, 2018

Too Many Restaurants

"At what point do lenders stop lending money to weak restaurant chains?"

Where are all the restaurant customers? - Restaurant Business
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August 4, 2018

Deep McThoughts

Paging through "Behind the Arches" it occurred to me that - if we use 1955 as the starting 
date for the McDonald's system - the company is 63 years old. The book was published (plus/minus a couple of years) half way through the company's life. 

The book describes the founding and the first 30 years of entrepreneurial growth.

The second half of McDonald's history has been all about enriching McDonald's shareholders and impressing Wall Street analysts.

That book has yet to be written.
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McDonald's Operator Association (MOA)

Occasionally a visitor to this website mentions or asks about the history of the first 
McDonald's Operator Association (MOA). Several people have asked me for some feedback 
on the topic.

Frankly, MOA was before my time in that I was a shave-tail McOpCo guy in those days in a predominantly McOpCo market.

I didn't know much about the franchised side of the business until I moved into field service. 
By then MOA had dissolved and the NOAB had been formed.

I do remember the regional managers being very nervous about MOA. But, two of my first instructions as a field consultant were, a) Don't talk to the Operators about MOA. b) Don't treat the Operators who were in MOA any differently.

But, I can make a reading recommendation. Even though it was originally published more 
than 30 years ago "Behind the Arches" by John Love is still the definitive work on the history of McDonald's.

Love begins with six words, "This is not a corporate book".

I can bear witness to that statement. He did most of his research on the book when I was 
still a corporate franchise guy. I worked out of the San Diego regional office and John spent 
a lot of time in that office attempting to get some of Ray Kroc's time. While he was waiting 
he had complete access to corporate employees with no supervision from Oak Brook.

I'd find him chatting casually with corporate employees at all levels. He was often in the
break room having coffee with a couple of corporate staffers. This is not a corporate book.

While he doesn't devote an entire chapter to MOA he covers that part of McDonald's history pretty well.

Anyone who has made McDonald's their career or a path to business ownership should read "McDonald's, Behind the Arches".


August 2, 2018

Crain's Cahill on McDonald's Barbell Strategy

"Yet an all-out price war risks blowback from McDonald's franchisees, who now control 
more than 90 percent of the chain. Deep discounts squeeze their profit margins, and 
they won't hesitate to complain if McDonald's goes too far. Franchisee pressure forced McDonald's to abandon the original Dollar Menu."

McDonald's Easterbrook needs a clearer marketing strategy
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July 28, 2018

McDonald's Q2-2018 Earnings Call

Best analyst question:
Jeffrey Bernstein - Barclays Capital, Inc.
Great, thank you very much. Just touching on the company-operated and, I guess, maybe more importantly, the franchise profitability, I think you said all constituents are behind you in terms of being more nimble. But with the continued pressure on labor and, I guess, to a lesser degree, food costs, it seems like you want to keep pricing below food away from home. But do you think the franchisees are okay with the near-term margin pressure or do you think maybe that this inflationary environment is unusual and, therefore, justifying a further bump in the pricing, whether or not that's on premium or still keeping the value? I'm just trying to gauge the franchisee sensitivity to this aggressive value push and their profitability.
Stephen J. Easterbrook - McDonald's Corp.
(This is part of his answer)
Are they still entirely unified behind the plan we have and believe in its long-term strength? Absolutely, right. And there's nothing we want to do more than grow operator cash flow, because that's such a great motivator for future investment and future confidence. So in the immediate term, they are pragmatic, but we certainly have a desire to be growing, not just our own income and margins, but also their cash flows as well.
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July 26, 2018

McDonald's to Push Hard on Value - NRN

From Nation's Restaurant News

"""But some franchisees have expressed concern about the deep discounting, according to a recent operator survey conducted by analyst Mark Kalinowski of Kalinowski Equity Research.

In the survey, which included input from 26 domestic franchisees with about 281 stores, franchisees seemed caught in a conundrum when it comes to the chain’s pricing strategy. Many said they are frustrated by the deep discounting but also complained about higher menu prices hurting guest counts.

“We’re worn out on the discounting. It no longer works,” one franchise stated in the Kalinowski survey. 

Yet, raising prices isn’t helping, either. “Can’t raise prices any more without destroying transaction counts,” one person said. 

Kalinowski said McDonald’s is challenged by “an industry that has trained the fast food customer to look for discounts.”

“Discounts, in a way, aren’t as special as they used to be,” he said.""" 

Entire article: McDonald's to push hard on value to step up sluggish guest counts
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Less McDonald's Stores Should Help SSS



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July 23, 2018

MillerPulse: Q2 Sales Gains Boost Outlook For Year

Sales may be in up slightly but traffic is still down.

Analyst sees light at the end of the tunnel
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Just Give It Away



Millions in Operator ad dollars 
were spent to build up the 
McCafe brand and McDonald's
Corp. is now using the McCafe 
grocery pipeline to give away Operator's product.

July 14, 2018

Dumb and Dumber

The year was 2000 and a McDonald's corporate PR person uttered the dumbest words
ever to come out of the Oak Brook headquarters.

By the end of 1999 most McDonald's USA stores had implemented the "Made For You"
cooking system. Reporters and analysts observed that suddenly the service was slower 
and lines were longer.

When asked about service times the corporate PR person said, "People don't mind 
waiting longer if they know the sandwich was made just for them".

Pre-MFY 1999 same store sales were a healthy +4.0%, 2000 +1.5%, 2001 +0.5%, and 
2002 (- 1.5 )%.

Customers on were voting on MFY with their feet.

This week Restaurant Business Magazine published an interview of one of McDonald's 
chefs. Editor Jonathan Maze asked about menu innovation and its impact on service 
times. The chef talked about "indulgent moments". Another editor asked, "So it's the 
opposite of fast-food?'

Answer: "When the food is right, people slow down"

Yikes! Now, it's his job to think that way. But, if that thinking permeates the minds of 
more than a few people at the new headquarters McDonald's USA is about to take a trip
back to the years 2000, 2001, and 2002.

By the way, desperate to get sales turned around, management strong-armed Operators
into launching the original Dollar Menu in the fall of 2002. Same store sales in 2003 were 
a robust +6.4%.

So "Made For You" was the father of the Dollar Menu.

This is a recorded interview and is only seventeen minutes long. The discussion on speed 
begins at the eleven minute mark.

How McDonald’s is working to change its menu by Restaurant Business Magazine
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July 10, 2018

But Will Customers Care?

"As for how long the paper straws last after being inserted into liquid, Merran said it depends on the beverage and temperature.
"It should hold for about the time for you to [finish the] drink," he said. "It’s going to become a little soggy, but you can still drink from it. It’s like any alternative. It’s not perfect but it does the trick."
Paper straws are better for the environment, but they will cost you

July 7, 2018

Crazy Bernie


McDonald's is Officially Out of People

Apparently the effort to downsize McDonald's has no plan or logic. For a mature company 
to have a lack of middle management is a sign of incompetence. Of course, the downsizing
is being managed by people who know little or nothing about McDonald's so some of this 
blundering is to be expected.

This Linkedin job posting is interesting. It appears that the new position of "Operations Assistant" has a primary function - reporting Operator food safety problems to HQ.

Will that attract quality people or just nasty, control-freak types?

MCD
"The Operations Associates main focus is on evaluating the Franchisee business

and ensuring it is in accordance to operating standards held by McDonald’s. 
The Operations Associate is responsible for immediately reporting restaurants 
below food safety standards to Operations Associate Lead and Operations Officer. 
This position works collaboratively with Franchisee Business Partners, Franchisee, 
and the deployment team.
This role is based in Denver, CO."

Linkedin job posting is HERE
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July 3, 2018

Cheesy Lawsuit Frivolous?

Yes, this is a cheesy lawsuit and people who use our legal system in such a way should be stripped of their citizenship. But, there is a point here.

In sampling the never-frozen quarter patties I decided to try a couple of quarters without cheese so I could better examine the patties. When the kiosk charged me full with/cheese 
price I thought to myself "Hey?".

The problem is, the typical McDonald's store charges more for a regular cheeseburger than 
a regular hamburger. And, for customers who remember when the quarter pounder without cheese was on the menu, it cost less than a QPC.

So McDonald's has done a good job of implanting the idea that cheeseburgers are more valuable than hamburgers without cheese.

My humble opinion? Quarter Pounders without cheese should not be on the menu but if a 
kiosk customer deletes the cheese the price of the sandwich should be reduced by a modest amount.

The profit loss to the Operator should be minimal because - face it - very few customers 
are going to delete the cheese. Based on my recent experience the Quarter Pounder without cheese is OK but these days few people will opt for a sandwich as plain as a Quarter Pounder without cheese.

Is this cheesy McDonald's lawsuit frivolous, or have we all been paying too much for our burgers? - Sun Sentinel
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Sonic's Digital Strategy

The words "competitive advantage" and "Sonic" rarely go together but in terms of mobile
ordering this might give them a leg up. Customers order on their phone, pull into one of 
Sonic's many car-hop bays, and their phone interfaces with the intercom and POS system. 

Sonic's Digital Strategy Could be a Game-Changer - QSR magazine
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June 27, 2018

Freestanding McCafes to Grow in Canada

...most franchisee agreements contain geographical exclusions which prevent 
cannibalization from new stores within the network, but McCafés would be 
an exception to the rule because they are a different concept with a different 
menu that includes a lineup of grilled cheese and specialty sandwiches. “You 
could put (standalone McCafés) in areas where you would not put an existing 
McDonald’s,” Arifuzzaman said. “It is a way to grow McDonald’s footprint 
and potentially steal more share.”

McDonald’s extends its cafe chain rollout as it battles Tims and Starbucks - Fin. Post
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How Do the Third-Party Delivery Players Stack Up?

Restaurant Business reports on Technomic study
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June 25, 2018

McDonald's to Close 13 Year Old Oak Brook Flagship Store

This is the 50th anniversary store opened in 2005. We will see more and more of this kind of real estate wheeling and dealing in the future as McDonald's looks for more ways to return cash to shareholders. This time it involves a McOpCo so there's no franchise agreement to terminate. But, if it was franchised the Operator would have to be bought out or be talked into walking away from the remaining seven years.

A McDonald's isn't always the highest and best use for a property.


With McDonald's moving to Chicago, Oak Brook's 22nd Street restaurant will close Saturday
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