Business

Why McDonald’s is Still a Powerhouse, Despite Troubles

Published

10 years ago

April 21, 2015

This Thursday, Jan. 15, 2015, file photo, shows a McDonald’s fast food restaurant sign in Chicago. McDonalds has been hurt by diners who want something different. Sales have been struggling for more than two years and the company seems trapped in a cycle of bad headlines that likely wont end soon. Despite troubles, McDonalds is still a powerhouse. (AP Photo/Nam Y. Huh, File)

CANDICE CHOI, AP Food Industry Writer

NEW YORK (AP) — McDonald’s sales have been sputtering for more than two years and the company seems trapped in a cycle of bad headlines that likely won’t end soon.

Its quarterly earnings results on Wednesday aren’t expected to be pretty either, and there’s a chance its dominance will continue to wane as newer players keep coming onto the scene.

But don’t write the obituary just yet. McDonald’s has many strengths that the rivals biting at its heels can only envy, including Ronald McDonald’s worldwide recognition. The Golden Arches will need to put them to good use to remain the world’s largest restaurant chain.

Here are six reasons why McDonald’s is nowhere close to death’s door for now.

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MASSIVE REACH

McDonald’s has more than 14,300 locations in the U.S. and that ubiquity continues to make it a default option for many. Burrito chain Chipotle is in growth mode but still only a fraction of that size, with around 1,800 locations. (Shake Shack, whose stock offering earlier this year garnered lots of attention, has fewer than 40.)

Because of its recent struggles, McDonald’s plans to slow its growth to its lowest level in five years. But “slow” is relative: It still plans to add 600 to 700 restaurants around the world this year, on top of the more than 36,200 it already has.

Chipotle said it plans to open up to 205 new stores this year, mostly in the U.S.

___

MARKETING POWER

McDonald’s has enormous marketing muscle, in large part because its franchisees are required to contribute at least 4 percent of their sales to advertising.

Based on the $31.1 billion in sales U.S. franchisees saw last year, that would translate to at least $1.24 billion in advertising money.

That huge bucket of money is split in two ways. Some goes to national advertising and focuses on burnishing the brand. The rest goes to regional advertising and focuses more on promotions to drive customers to stores.

Advertising doesn’t have to be expensive to be effective, of course. But McDonald’s deep pockets give it a clear advantage.

___

PRINTING MONEY

The recent sales decline in the U.S. is squeezing franchisees, who still have to pay for fixed costs like labor and electricity.

But McDonald’s restaurants continue to generate a lot more cash than their peers. In 2014, the average McDonald’s restaurant raked in $2.5 million in sales, according to industry tracker Technomic. Wendy’s restaurants pulled in an average of $1.6 million, while Burger King pulled in $1.2 million.

A big reason for the difference: the popularity of McDonald’s breakfast.

Average annual sales for Shake Shack are higher at $4.6 million, Technomic said. That’s in part because Shake Shack is concentrated in New York City, where volumes tend to be higher. The average Chipotle generates roughly the same sales volume as McDonald’s even without breakfast, in part because of its fast-moving line and higher prices.

___

UNLOCKING BREAKFAST

Fans of McDonald’s breakfast have long called on the chain to offer it past 10:30 a.m. McDonald’s is finally giving the idea a serious try with a test of an all-day breakfast menu in San Diego.

It’s just one way McDonald’s might bring more customers into its stores and may signal the company’s willingness to take bigger risks.

Big companies tend to be cautious about change, and McDonald’s in particular is known for its methodical decision-making. But executives may pick up the pace to avoid becoming outdated.

___

NEW LEADERSHIP

McDonald’s CEO Steve Easterbrook stepped into his role just last month and said he wants to make McDonald’s a “modern, progressive burger company.” In a meet-and-greet with analysts, he also referred to himself as an “internal activist,” according to Sara Senatore, a Bernstein analyst.

Another new executive is Mike Andres, who became president of the U.S. division in October. He started as a manager for his family-owned McDonald’s, and has served in a variety of leadership roles at the company.

(Side note: Andres’ father was a pilot for Ray Kroc, who built McDonald’s into a fast-food giant.)

___

MCDONALD’S HAS BEEN HERE BEFORE

The troubles McDonald’s is facing are partly the result of a shifting industry, with many smaller players posing a challenge to the big guys. If that trend keeps up, McDonald’s may not be able to save itself.

At the same time, it’s easy to forget that McDonald’s has had rough patches before — and pulled out of them.

Consider the expanded menu and focus on value that former CEO Jim Skinner used to turn around business. It isn’t an ancient example; Skinner’s tenure was from 2004 to 2012, the last few years of which were some of McDonald’s strongest.

____

Follow Candice Choi at www.twitter.com/candicechoi

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Oakland Post: Week of December 25 – 31, 2024

The printed Weekly Edition of the Oakland Post: Week of December 25 – 31, 2024

Published

7 hours ago

December 26, 2024

Oakland Post

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Glydways Breaking Ground on 14-Acre Demonstration Facility at Hilltop Mall

Glydways has been testing its technology at CCTA’s GoMentum Station in Concord for several years. The company plans to install an ambitious 28-mile Autonomous Transit Network in East Contra Costa County. The new Richmond facility will be strategically positioned near that project, according to Glydways.

Published

3 days ago

December 24, 2024

Oakland Post

Image of planned Richmond facility courtesy of Glydways.

The Richmond Standard

Glydways, developer of microtransit systems using autonomous, small-scale vehicles, is breaking ground on a 14-acre Development and Demonstration Facility at the former Hilltop Mall property in Richmond, the Contra Costa Transportation Authority (CCTA) reported on social media.

Glydways, which released a statement announcing the project Monday, is using the site while the mall property undergoes a larger redevelopment.

“In the interim, Glydways will use a portion of the property to showcase its technology and conduct safety and reliability testing,” the company said.

The new Richmond development hub will include “over a mile of dedicated test track, enabling Glydways to refine its solutions in a controlled environment while simulating real-world conditions,” the company said.

Visitors to the facility will be able to experience on-demand travel, explore the control center and visit a showroom featuring virtual reality demonstrations of Glydways projects worldwide.

The hub will also house a 13,000-square-foot maintenance and storage facility to service the growing fleet of Glydcars.

“With this new facility [at the former Hilltop Mall property], we’re giving the public a glimpse of the future, where people can experience ultra-quiet, on-demand transit—just like hailing a rideshare, but with the reliability and affordability of public transit,” said Tim Haile, executive director of CCTA.

Janet Galvez, vice president and investment officer at Prologis, owner of the Hilltop Mall property, said her company is “thrilled” to provide space for Glydways and is continuing to work with the city on future redevelopment plans for the broader mall property.

Richmond City Manager Shasa Curl added that Glydways’ presence “will not only help test new transit solutions but also activate the former Mall site while preparation and finalization of the Hilltop Horizon Specific Plan is underway.

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2024 in Review: 7 Questions for Outgoing Stockton Mayor Kevin Lincoln

Lincoln’s decision to run for mayor stemmed from his love of people and his desire to serve his city. He prioritized resolving issues, including homelessness and public safety, among others. Lincoln, a Republican, will transition out of his role as mayor on Dec. 31, after an unsuccessful campaign to represent the 9th Congressional District.

Published

3 days ago

December 24, 2024

Oakland Post

Stockton Mayor Kevin Lincoln. Photo provided by California Black Media.

Kevin Lincoln, outgoing mayor of Stockton, CA, captured during his tenure as a leader dedicated to the city’s progress and community engagement.

By Edward Henderson
California Black Media

Born in Stockton, Mayor Kevin Lincoln says his Army upbringing inspired him to serve others.

Lincoln joined the United States Marine Corps in 2001 and was later assigned to Marine One, serving during President George W. Bush’s administration.

Following his military service, Lincoln worked for one of the nation’s top private security companies for eight years in Silicon Valley. In 2013, he resigned from his corporate position to give back to his community in Stockton through full-time ministry at a local church.

Lincoln’s decision to run for mayor stemmed from his love of people and his desire to serve his city. He prioritized resolving issues, including homelessness and public safety, among others.

Lincoln, a Republican, will transition out of his role as mayor on Dec. 31, after an unsuccessful campaign to represent the 9^th Congressional District.

Recently, California Black Media (CBM) spoke with Lincoln. He reflected on his accomplishments this year and his goals moving forward.

Responses have been edited for length and clarity.

Looking back at 2024, what stands out to you as your most important achievement and why? 

What I prioritize for our city council is our youth. They are the future — not only our city, but this region as a whole.

We were able to invest over $6 million in youth programming and workforce development, and partner with 14 different community-based organizations. We were able to employ over 600 young people through the city of Stockton. We launched even our first ever summer jobs program for the city of Stockton.

How did your leadership and investments contribute to improving the lives of Black Californians? 

It’s about giving people a seat at the table, and not necessarily waiting for people to come to me, but me going to the community, making myself accessible, meeting our community at the point of their need, where they’re at.

What frustrated you the most over the last year?

It’s politics. Because unfortunately, there’s politics in everything. And I say politics impedes progress. You can have a policy, a solution that may not necessarily be 100% perfect. But it’s a good solution for everybody. But because we allow politics to get in the way based off our personal ideologies, oftentimes we can miss opportunities to make an impact for the benefit of the whole.

What inspired you the most over the last year?

My biggest inspiration has been the community and our ability to work together. What’s unique about Stockton, one in 20 jobs are nonprofit jobs in the city of Stockton and even San Joaquin County.

What is one lesson you learned in 2024 that will inform your decision-making next year?

To stay focused. In politics, there’s a lot of opportunity for distractions. There are a lot of influences from the outside — good, bad and indifferent. It’s important to stay focused, have a clear vision, and be committed to that vision.

In one word, what is the biggest challenge Black Californians face?

Economics. When the economy is not healthy, when we’re not thriving, we’re limited. Opportunities are limited.

What is the goal you want to achieve most in 2025?

I just want to continue to be a servant leader and serve our community in whatever capacity I am in.