McDonald’s global sales slowdown causing concerns

Posted by AFN Staff Writers on 11th June 2015
It is not breaking news that McDonald’s has been experiencing significant difficulties in the past few years.
It is not breaking news that McDonald’s has been experiencing significant difficulties in the past few years.

It is not breaking news that McDonald’s has been experiencing significant difficulties in the past few years.

Growing Competition and Extending Menus

In Australia, boutique burger makers are popping up in many prime locations. Groups such as

Huxtaburger, Burgerfuel, Grill’d, Lord of the Fries, and the list goes on, offer a special variety of burgers.

Where McDonald’s once might have been one’s only choice, there simply is lots more competition.

These competitors are marketing their brands as a  gourmet variety with customers turning their backs on eating with McDonald’s. With offerings like pulled pork or zucchini fries on offer at these independent competitors, it is the case that the marketing of their brands fit in with samples of a  ‘foodie’ culture.

McDonald’s has not been blind to these competitors and especially Australia’s current gourmet obsessions stimulated by lots of cooking shows and competitions in various media.

One of McDonald’s latest Australian marketing campaigns, “Create your taste” recognises the need to allow customers to choose exactly what they want on their burger. Visitors to the store have a wide variety of new ingredients to choose from as well, which narrows down to even what type of bun they want.

But is all this choice able to work for McDonald’s?

Criticisms in the US suggest that additional meal options are slowing down service and McDonald’s point of difference as a quick service restaurant is being lost.

In the US, McDonald’s started out with nine items on its menu, but in 2014 there were 121 items and whilst crew members fix lattes, many US customers are apparently not sticking around to wait on their burger and fries fix.

Geographical Spread

McDonald’s franchises have been complaining in Australia and elsewhere that head-office has been insensitive to over-selling of franchise territories which has impinged on the geographical market share of many franchises.

This has compromised the level ofMcDonald’s  franchise profitability.

Management staff concerns

McDonald’s period of turbulence started in 2012 which coincided with global boss Don Thompson’s reign in the global CEO spot. Back then, the chain’s sales were already taking a dive in the wrong direction.

Unfortunately across the length of his appointment, profits did not soar back up. McDonald’s experienced a number of international problems across this period too. In China meat suppliers were caught out using expired products.  In Russia last year five restaurants were temporarily shut down due to alleged sanitary issues (although there were suggestions the closures came about out of tensions between US and Russia over Ukraine).

Things came to a head at the start of 2015 when McDonald’s first quarter earnings came out showing the first drop in same-store sales since 2002. Five days later, Thompson had resigned and the UK’s Steve Easterbrook was promoted to the global CEO role.

Since being in top position, Easterbrook has suffered criticism too. He recently received criticism over a webcast and had to take the heat at McDonald’s annual general meeting in May 2015 when a group of investors raised questions about ‘ethical’ issues.

US campaign for higher pay targets McDonald’s

Complaints over the low level of staff wages in US quick service restaurant chains have been causing protests across the country with high-profile McDonald’s bearing the brunt of this campaign.

Approximately 3000 people attended a rally outside McDonald’s most recent annual general meeting, asking for at least $US15 an hour minimum wage for McDonald’s employees plus the right to unionise. These demands were supported with a petition containing 1.4 million signatures the protesters handed over to McDonald’s.

Inside the meeting, Easterbrook said he was “proud” that the company recently decided to increase employee wages $1 an hour above the average local minimum wage. The minimum McDonald’s wage in the US is $US7.25 per hour and the decision does not apply to franchised stores which make up 90 per cent of all McDonald’s restaurants in the USA.