McDonald’s biggest problem may fix itself soon

According to The Street, After several challenging months, the restaurant industry is beginning to show signs of recovery. High inflation has driven prices up across nearly every sector in the last two years, prompting consumers to become more mindful of their spending habits.

Shifting Consumer Priorities

As a result, diners are now prioritizing value when selecting their next meal, opting for choices that provide the best bang for their buck. This shift in consumer behavior has encouraged restaurants—especially in the fast-food sector—to develop innovative strategies that deliver attractive deals while maintaining profitability.

Improving Sales Trends

According to a recent industry study from Black Box Intelligence, the trend of dismal comparable restaurant sales numbers is expected to reverse, with a positive outlook for Q4. Although August reported a 0.4% year-over-year decrease in same-store sales, it also showed a 2% increase compared to the previous month.

However, same-store traffic saw a 3.6% decline from last year, marking the second-worst performance since January. The month-over-month data, however, revealed a slight rebound, with a 1.1% increase in traffic. Fine dining establishments performed the best overall, but fast-casual restaurants also reported encouraging growth.

McDonald’s Focuses on Value-Centered Deals

In response to these market conditions, various fast-food chains are enhancing their value offerings, resulting in positive consumer feedback. During McDonald’s Q2 earnings call for 2024, CEO Christopher Kempczinski emphasized the company’s commitment to broadening value offerings that focus on long-term benefits rather than short-lived promotions.

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Recently, McDonald’s extended its popular $5 value meal deal, which was initially slated to last only a few weeks during the summer, through the end of the year. Additionally, the fast-food giant is promoting free large fries with a minimum $1 purchase via its mobile app and Free Fries Fridays with the same purchase requirement for online orders.

Despite a 1% decline in global comparable sales and flat net revenues compared to the previous year, the $5 Meal Deal has proven effective in driving traffic and boosting sales, particularly among lower-income customers.

“We’ve seen a lot of enthusiasm, and the number of $5 meal deals sold are above expectations. Trial rates of the deal are highest among lower-income consumers, and sentiment towards the brand around value and affordability has begun to shift positively,” stated McDonald’s President Joseph Erlinger during the earnings call.

Operational Strategies for Recovery

McDonald’s proactive approach to menu optimization and staffing could help the fast-food chain regain its footing in the industry. The same study from Black Box Intelligence found that restaurants with fully staffed back-of-house positions reported a 3.6% increase in traffic. Those with fully staffed front-of-house roles experienced an even more significant sales growth of 4.6%.

In a move to enhance efficiency, McDonald’s recently announced the addition of cash kiosks in its restaurants, complementing its existing cash-less kiosks. Importantly, the company clarified that this change would not lead to workforce reductions but rather aim to improve operational effectiveness.

Although McDonald’s has fallen short of analysts’ earnings per share (EPS) expectations for the last two quarters, the company’s stock has risen 2.18% year-to-date as of Tuesday’s market close. McDonald’s is set to release its Q3 earnings report on October 29.