McDonald’s latest results reveal the rollercoaster ride the fast food giant has been on over the last year. Global sales grew by 5% in the past quarter after the launch of all-day breakfasts in the US, but revenue fell by 4% (a result of the strong dollar) and profits rose by 10%. It not only shows our appetite for fast food is as strong as ever – but also that McDonald’s is getting better at pulling in customers.
The turnaround in its fortunes following a troubled 2015 second quarter is said by McDonald’s chief executive, Steve Easterbrook, to be largely down to introducing all day breakfasts in the US, which have clearly proven very popular. So it seems that McDonald’s has once again found a way to beat its competition and critics.
The past decade or so has not been easy for the chain. Back in 2003 it posted its first ever quarterly loss of more than $300m and closed more than 700 restaurants in Latin America, Japan and the UK as it faced increasing competition from the likes of Burger King, Wendy’s and Taco Bell. At the time it seemed that the public was not only becoming tired of a menu of Big Macs, fries and Coca-Cola, but also starting to watch their waistlines and demanding more from fast food in terms of taste and variety. This led to the launch of new offerings including salads. Unfortunately for the health conscious, many of these had dressings and croutons, which contained more calories and fat than a standard burger.
McDonald’s was also hit by the negative media of lawsuits and Morgan Spurlock’s Super Size Me documentary which catalogued the toll that eating only McDonald’s food for a month had on his health and body size. Although McDonalds denied that the film had anything to do with its decision to phase out super-sized portions, the coincidence of the timing made it difficult not to link the two.
McDonald’s became not only a symbol of American fast food and its equation with unhealthy diets and obesity, but the golden arches also came to symbolise something essentially negative about American culture. This included a desire for cheapness and quantity over quality, as well as a lack of concern for animals, employees and customers. Writers such as George Ritzer (The McDonaldization of America) and Eric Schlosser (Fast Food Nation) did not spare the fast food company in their critiques of how McDonald’s had become a symbol for speed, convenience and standardisation replacing care and quality in food production.
New kids on the block
Last year it seemed that McDonald’s was in trouble again, but this time there seemed to be other issues stacking up against the company. The emerging generation of fast food customers wants quality food, is concerned about calorie content, sustainability and the humane treatment of animals – and seems to be prepared to pay for it. It is patronising new, often limited menu, fast food chains such as Five Guys and Shake Shack. And these companies are using the same franchise model as McDonald’s did before them to succeed but they are offering higher-quality food (albeit at a higher price) and a better experience.
McDonald’s previously dealt with the health issue of its offering by providing more fruit and vegetable options. But it is probably missing the point here. The success of new competitors shows that there is still appetite for burgers and fries. Rather than trying to introduce items that are low calorie in nature, it could be better off ensuring that its burgers are better quality. People are prepared to splurge the extra calories and dollar on a good fast food experience now and again – clearly there are different levels of unhealthy when it comes to fast food. The addition of even more alternatives away from the straightforward burger and fries can also be simply confusing for customers expecting one thing and being presented with a host of alternatives.
But while the new competition is finding its international feet, McDonald’s has had much longer to manage its global expansion and its presence across the world may ultimately see it through the hard times. Doubtless much of its recent success has come from expansion across Asia. And in some of the countries where McDonald’s has set up shop it seems to be doing a real social service away from issues of obesity and cultural imperialism. For example, it is known in Beijing, Hong Kong and Tokyo for allowing homeless people to spend the night when they are shut out from homeless shelters and disowned by their family. As the latest earnings show, it’s far too soon to write off the fast food chain.