Can Monopoly Save McDonald's This Summer?
It couldn't have come at a better time for the fast food giant.
After a decade of steady same-store sales growth, the world's largest restaurant chain surprised investors late last year with its first monthly decline since 2003. There have been a couple of other negative months since last October's dip: Global comps declined in January, February, and April of this year.
Many analysts suggest that sales have been soft because McDonald's is losing sight of the value message that helped propel the chain to the top. McDonald's has responded by reemphasizing its signature Dollar Menu and rolling out more low-priced promotions.
When that's not enough, giving away free food usually seems to do the trick.
Summers Are Slipping Away
If you don't recall last summer's Monopoly promotion it's because it didn't happen. Well, it didn't happen during the summer anyway.
McDonald's kicked off 2012 its game on Sep. 25. It wasn't enough to spare the burger flipper from experiencing a weak October, but advancing the game to mid-July this time around would seem to indicate that there's a desperate tone to drumming up traffic during the seasonal summer lull.
The 2011 contest also kicked off in late September.
Shifting the game's launch should help increase store traffic during the four weeks that it's attaching game pieces to certain menu items. It will be hard to tell if the likely increases in late July and early August will be the result of new initiatives or attributable to the promotion. And if sales are soft again this October, McDonald's will have a scapegoat -- not having the Monopoly promotion around to help beef up sales.
Bringing Order to Franchisees
McDonald's could use the promotional boost.
Analysts see revenue climbing a mere 3 percent this year. Earnings growth should be stronger, but this is also the same company that has missed Wall Street's profit targets in three of its past four quarters.
For years, McDonald's figured that expanding its menu with more healthy and exotic items would help breathe new life into the chain. That hasn't been working, so the chain is asking franchisees to update their stores to include a new dual-point ordering system that should speed up the delivery of orders and also help crack down on the growing number of incorrect orders.
The new system -- with a dedicated runner checking and handing over food -- will also ideally tackle growing complaints of unfriendly employees at the chain.
However, it's not really about McDonald's nabbing a "get out of jail free" card here. The softness in sales since late last year may not be entirely the chain's fault.
The growing popularity of fast casual chains that deliver higher quality food at slightly higher price points -- but without the check retrieval hassles and tipping requirements of traditional casual dining -- have been weighing on both ends of the dining spectrum.
Meanwhile, at the Competition
Speaking of fast casual, it's merely a coincidence that the darling of the niche -- Chipotle Mexican Grill (CMG) -- is also rolling out its own multi-week promotion.
The Internet is making it too easy. Folks are already making YouTube comments -- blurting out the correct responses -- on the daily Adventurrito clips. As this week's Monopoly promotion rolls out, you can be sure that several online sources will be out with the names of the rare properties that are the most valuable game pieces.
That's the nature of the Web. (You have to take the good of viral marketing along with the setbacks that come with the seamless spread of information.)
However, at the end of the day, McDonald's has problems that a single four-week game can't fix. There are bigger trends working against McDonald's, and that's something that isn't as easy as advancing to Boardwalk.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald's.