Oh dear, could this really be the end of the Big Mac? Well, according to a recent study of McDonald’s franchisees in the US the future for the burger giant appears grim indeed.
The study, by Nomura analyst Mark Kalinowski, found that 30 per cent of franchisees in the US were “probably insolvent”. Respondents believed the brand was in a “deep depression” and could be facing its “final days”. Over 80 per cent of McDonald’s stores are owned by franchisees.
In May, WPP decided not to pitch for the McDonald’s creative in the US saying the management of the fast food chain made “crazy demands” in terms of costing and turnaround times. Last month it was announced that Omnicom in the US had snared the entire creative account to itself, reported to be worth some $US1 billion a year (McDonald’s creative is handled by DDB in Australia.)
The news is hardly new that the burger chain has been in trouble for some time in the US and globally, too. More competition and healthier alternatives have bludgeoned Macca’s bottom lines for almost two decades now.
Yet, one of its more resilient markets has been the Australian one. There are 940 stores in Australia which sell about $4 billion worth of burgers annually. However, it’s difficult to get actual figures on its Aussie operations as the US-listed burger chain does not release its Australian figures separately. Last September, Australian outlets were found in breach of food labelling laws for failing to correctly label the nutrition and calories in its products.
The burger chain has tried a number of new initiatives to cajole customers back such as the all-day breakfast and hiding its clown mascot, Ronald, from new marketing strategies. Here in Australia we’ve seen McCafe, revamped restaurants, design your own burgers, pop-up fries outlets and even a hipster iteration called The Corner.
And despite owners’ alleged chagrin the changes appear to have resonated. In May this year, the US HQ announced an annual profit of $US1.1 billion which was up on 2015’s $US811.5 million. In the 2015 calendar year, McDonald’s reported global turnovers of $US8.5 billion.
However, the US franchisees have complained that all the initiatives have done have distracted from the core of the business, has frustrated customers and reduced the quality of the food. Many complained McDonald’s was trying cater to everyone and had way too many items on the menu.
One respondent to the survey wrote: “The CEO (Steve Easterbrook) is sowing the seeds of our demise. We are a quick-serve fast-food restaurant, not a fast casual like Five Guys or Chipotle. The system may be facing its final days.”
“The lack of consistent leadership from Oak Brook (McDonald’s US headquarters) is frightening, we continue to jump from one failed initiative to another,” wrote another. While another called the senior management “leaderless” who’d told complaining franchisees to quit the business altogether.