Analyst Insight by Elizabeth Friend - Senior Foodservice Analyst
In its second-quarter 2014 earnings call, McDonald’s’ executives announced a number of disappointments: global comparable store sales were flat, guest counts declined, and four of the company’s largest markets, including the US, were also its weakest performing. However, it also laid out an ambitious new goal for itself: Figure out a way to rehab its image in its domestic market, make itself a “more trusted brand” and finally, finally, figure out how to compete with fast casuals.
The latter announcement was serendipitously timed, coming amidst the fallout of yet another China-based food safety scandal. In this iteration, a local subsidiary of major McDonald’s supplier OSI Group was allegedly caught mishandling meat and tampering with sell-by dates in order to sell expired products. Though the scandal didn’t directly touch US outlets, the involvement of a major US company brought it closer to home, challenging consumers’ trust in fast food just as industry leaders are working hardest to preserve it.
The announcement also comes after a year of reckoning for traditional fast food chains in the US, in which operators have been forced to realise that surface-level improvements may not be the key to long-term success after all. Stylish outlet remodels, new menu items, and shiny new service models can win back a lot of favour with consumers—and they did, for a time—but ultimately the entirety of the dining experience has to live up to these upgrades. US consumers may prefer a McDonald’s outlet with comfortable seating, free Wi-Fi, and flat-panel menu displays to the McDonald’s outlet of a decade ago, but those perks can only hold customers’ attention if the food, the service, and the brand identity itself can likewise measure up.