McDonald’s is in trouble, as far as investors and consumers are concerned. Wall Street isn’t lovin’ McDonald’s latest turnaround effort, while consumers aren’t lovin’ McDonald’s boring food. Its shares closed down 1.7% at US$96.13 a pop on Monday. Two months into the job, CEO Steve Easterbrook admits the “urgent” need to “reset” the business. Such alert is expected after the company reported a disappointed earnings result.

The burger-based chain had reported first-quarter comparable sales down 2.3% and revenue of US$5.96 billion, short of the $6.02 billion analysts expected. What this means is for close to two years, its same-store sales have been tumbling in the U.S. market and abroad. While McDonald’s tries to compete with old rivals, such as Burger King, and newer ones, such as Chipotle and Panera, there’re no impressive new menus.

 

CEO Easterbrook has announced the chain will speed “refranchising,” which means converting company-owned stores to franchises. He hopes 3,500 stores will be refranchised as part of the business “reset” plan, and in the process bring “more stable and predictable cash flow”. McDonald’s also reveals special delivery experiment in New York City that will involve 88 local restaurants – full menus offering, with some to offer 24-hour delivery.

It seems the 11% drop in revenue and 33% decline in net income has sent the company’s top management into panic, desperately cutting overhead costs and pushing sales, at every corner. But even if the entire refranchising exercise could successfully done by end of 2018, whereby 90% of McDonald’s restaurants will be operated by franchisees, that would bring in US$300 million annually, a mere 6% of the company’s US$4.8 billion 2014 net income.

 

The fact is, McDonald’s is still hugely regarded as low quality fast-junk-food, no matter how hard it tries to paint itself as “healthy food” provider. Some joked that McDonald’s actually serves toxic food (*grin*). So, perhaps the real problem is the lack of nutritious menus, which until today it couldn’t convince the consumers. While waiting for new menus, which may not happen at all, McDonald’s has taken the trouble to introduce a new take-away bag.

Apparently, the new “invention” is supposed to make takeaway more convenient. The new McDonald’s paper bags now come with a “tear-away strip” at the bottom, revealing a built-in serving tray. Developed by McDonald’s Hungary alongside ad agency DDB Budapest, the bottom of the eco-friendly and recyclable paper bags is made from reinforced cardboard so that it can safely hold even a large-sized meal without collapsing.

Depending on how clumsy and creative you’re in decorating your desk with oil, mayonnaise, ketchup and other sauces, the new design could be fabulous, or may be unnecessary. Or does it trying to solve a problem that doesn’t exist? Okay, unlike the old way where the paper bag your food comes in also doubles as the bag to dump the trashes, how do you plan to do it now, since you would have extra (tray) trash but no more bag, after removed the bottom?

 

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May 5th, 2015 by financetwitter

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