I noticed recently in Missouri many closed, empty restaurants.
http://news.yahoo.com/mcdonald...thank-143002095.html
- McDonald's reported Monday that November sales declined 2.2 percent around the world for stores that were open in both 2013 and 2014.
- The decline was led by a 4.6 percent decline in the US market.
- Throughout 2014, McDonald's' sales in US stores have fallen 2.3 percent compared to the previous year.
- The company's official release on the matter blamed the decline on "strong competitive activity."
McDonald's is in big trouble
The huge problem for McDonald's right now is that they're flagging in all three of their major geographical segments. In Europe, sales are falling because of the terrible euro zone economy. In the Asia-Pacific region, sales are falling because of scandals that revealed appalling and unsanitary conditions at the plants supplying stores in China and Japan. And in the United States, sales are falling because of increased competition.
If you look outside the United States, and then ignore Europe's awful economy, and then ignore the China/Japan scandals you can see the company's underlying strength. Sales are growing in Australia. They are also growing in the "other countries & corporate" division that oversees Latin America and Canada. Australia is just really small compared to China, and McDonald's does more business in the USA than in the rest of the Western Hemisphere combined.
Chipotle is killing McDonald's
Even though the Europe/China/Japan news is bad for the company's bottom line, those setbacks are all survivable. Europe's economy will, probably, recover some day. (And if it doesn't, that's equally problematic for all global retail brands, not just McDonald's.) The supply-chain issues in Asia are fixable. But the US situation should be terrifying for the company. Competition is hard to fix. And that competition is led right now by Chipotle, Wall Street's hottest fast food company.
Through the end of September, Chipotle opened 132 new restaurants. At the same time, sales in their old restaurants grew 17 percent. There is no sign that America's appetite for giant burritos is anywhere near sated.
And behind Chipotle stand a broad array of other so-called "fast casual" restaurants offering a similar value proposition — fast food service with better-tasting food. Five Guys, In-and-Out Burger, and Shake Shack are all privately held so we don't know their financial details, but they seem to be growing rapidly. And why shouldn't they be? For all of Americans' economic struggles, as a society we are both wealthier and busier than we were a generation ago. Under the circumstances, paying more for tastier food in the quick-service format is a compelling idea and not one that it's clear McDonald's can match.
The global future
McDonald's says it will revive its US operation by "diligently working to enhance its marketing, simplify the menu, and implement a more locally-driven organizational structure to increase relevance with consumers."
Maybe that will work. But it seems unlikely. It's difficult for a company to change what it is, at root. McDonald's has one of the strongest brand identities on earth. People all around the world know exactly what those golden arches stand for. This has been, traditionally, an enormous source of strength for the company. But it becomes a weakness at a time of tougher competition. From theMcDLT to the Arch Deluxe to the Big N' Tasty, McDonald's has always struggled to sell a "premium" burger to the public. It's always been their weak spot, it's just never been a problem before.
The good news for the company is that the problems in Europe (which is poorer than the USA) and Asia (which is much poorer) really will pass, and the Latin American market opportunity will probably continue to grow. The basic McDonald's value proposition that's increasingly unappealing at home continues to be relevant abroad. Upscaling in the United States will be difficult, but continuing to lean in to globalization is perfectly workable. It just means that the long-term future of what is in many ways the iconic American brand doesn't have much to do with the United States.
