![]() His ascension was a proud moment for McDonald’s. In 2011 the company took the title of top-performing stock in the Dow for the one- and five-year periods. In his eight years as CEO of McDonald’s, Jim Skinner had eight years of consecutive positive same-store sales growth, a nearly 50% increase in revenue, and a more than doubling in profits. David Gregory never quite emerged from the shadow of the mighty Tim Russert at Meet the Press. Ray Perkins, the coach who followed the legendary “Bear” Bryant at the University of Alabama, lasted four seasons before the grumbling Tide faithful helped drive him back to the NFL. When those things fall out of line, you get Mighty Wings. A week later, in an interview with Fortune at his Oak Brook office, Thompson goes a step further: “What we have to do is look at the gap in terms of what we want to be and aspire to be vs. “In some of our markets the reality is that we haven’t been changing at the same rate as customers’ eating-out expectations-or more specifically, their expectations of us at McDonald’s,” he said on the call. There was also a nod to the fact that McDonald’s has been slow in responding to more secular shifts. On his most recent earnings call Thompson talked of a new customizable burger platform for McDonald’s, a more regional approach to the menu, and investments in digital initiatives. “It is a battle over perception, and they’re losing,” says Aaron Allen, a global restaurant consultant. A growing segment of restaurant goers are choosing “fresh and healthy” over “fast and convenient,” and McDonald’s is having trouble convincing consumers that it’s both. It has risen to the top of the fast-food chain by being comfortably, familiarly, iconically “mass market” and so ubiquitous as to be the Platonic ideal of “convenient.” Neither of these selling points, however, is as high as it was even a decade ago on Americans’ list of dining priorities. McDonald’s size makes it a target too, putting it in the cross hairs of minimum wage and nutrition battles.īut the company has even bigger-dare we say, Mighty Wing–size-challenges, not least of which is an existential one: McDonald’s is the quintessential quick-serve restaurant. With its $28.1 billion in revenue-the average McDonald’s restaurant brings in $2.6 million in sales, compared to Burger King’s $1.2 million, according to research firm Technomic-the company’s scale makes it harder to move the needle. There have also been a handful of one-off disasters, including a supplier in China accused of selling expired meat and the closure of nine company-owned restaurants by the government in Russia. Some of the pressures facing the company are beyond its control: higher commodity costs, fiercer competition, a restaurant industry showing little to no growth, and a strapped lower-income consumer. The year has been written off-there will be no bonuses for anybody.Ĭlick to enlarge Graphic Source: McDonald’s Euromonitor International “People have seen results go from the best in the industry to one of the worst in the course of three years,” says Stephens analyst Will Slabaugh. Expenses were growing even as sales were falling-a big problem for any company.Īnalysts are now predicting that 2014 will be the first year of negative global same-store sales since 2002. Overall, the company reported a distressing 30% decline in profit. In late October, McDonald’s reported a significant loss of market share and its fourth straight quarter of negative same-store sales in its U.S. ![]() Since then things have gotten worse-much worse. The company’s performance had slipped on his watch, suffering from disappointing sales growth and deteriorating margins. Customers simply viewed them as expensive.ĬEO Don Thompson, then in the job for a little over a year, had needed the wings to be a hit. “This was quality for price,” a former executive tells Fortune, “but McDonald’s is known for quantity for price.” McDonald’s might have thought they were value. Cost-conscious diners gazing up at the menu didn’t realize they’d be getting “absurdly huge drumettes,” as the blogger put it. 3: Customers didn’t make that connection. The wings were arguably a bona fide deal. McDonald’s (MCD) had justified the lofty price because the wings were so immense, taken from its suppliers’ gigantic eight-pound chickens. ![]() A box of five Mightys cost a buck more than the equivalent number at KFC. Some blamed the price, at a hefty $1 per wing. Some blamed the coating, which was too spicy for broad American tastes, they said. ![]() At corporate headquarters in Oak Brook, Ill., executives began pointing fingers.
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