McDonald's Suffering Franchisees Pin Hopes on Monopoly, McRibs
For a fast food company that for a long time could do no wrong , McDonald's is in a not-so-happy place now. In September, the chain announced its worst sales dip since 2003, according to Bloomberg. Between slow demand in the U.S. and health scares over a Chinese meat supplier, same-store sales were down in August 3.2 percent in the U.S. and 7.3 percent in Asia, for an overall 3.7 percent hit. And it's expected that the chain will see another 2.7 percent drop in September, according to the site BurgerBusiness.com.
Same-store sales, or sales in locations that have been open more than a year, are a critical measurement in retail. They show how well a company's operations are doing without the distorting factor of new outlets opening. So same-store sales declines are a problem not just for McDonald's, but its franchise owners.
About 80 percent of McDonald's 35,000 stores are run by franchisees, with some 3,000 owner operators in the U.S. alone managing 14,000 restaurants, according to the company. Naturally, many are looking for solutions -- specifically, Monopoly and the McRib sandwich, at least in the long run, according to a report by Janney Montgomery Scott analyst Mark Kalinowski, as quoted by BurgerBusiness.
Some past attempts fell short, like the 10 million pounds of chicken wings the company reportedly was left with at the end of 2013's Mighty Wings promotion.
So what's gone wrong? Franchisees pin blame for McDonald's sales slide on a number of factors. "We just have nothing new to offer our customers," was one explanation. Another cites "total loss of momentum." Corporate management is a frequent target for these operators. "We are leaderless," says one franchisee. "McDonald's Corp. is scrambling to find answers to their problem," says another.
Given that a franchise owner must demonstrate $750,000 in non-borrowed personal resources to gain a location, these people have a lot of money at stake.
The hope now is that the Monopoly promotion, in which people get stickers on products that they can collect to win prizes, will help goose sales. And then there is the McRib, which has an almost cult following, according to the Wall Street Journal. But the fall promotion won't be a "national effort," according to BurgerBusiness, so whatever help it can provide will be limited.
Countering those efforts have been rising prices, as the so-called dollar menu has become more of a two-dollar menu, as The Consumerist reports. The low-cost items have been responsible for between 13 percent and 15 percent of sales.
Until McDonald's can straighten out its direction and lure back the American public more frequently, franchisees won't be lovin' it.