Though McDonald’s has been riding high on all-day breakfast since its launch last year, the company’s franchisees say the novelty is fading. Part of the problem, several complain, is McDonald’s love of discounts.
Same-store sales were boosted by as much as 5.7% in the last quarter of 2015, partly fueled by the success of all-day breakfast, Business Insider reports. But according to a survey by Nomura analyst Mark Kalinowski of 30 operators responsible for running 271 restaurants, the party is over: those polled reported that their store sales growth slowed to 0.2% in the third quarter, and they’re expecting it to drop by 0.8% in the fourth quarter of this year.
“No way we can beat last year,” one franchisee wrote.
Corporate’s obsession with pushing discounts is squeezing profits, several franchisees said, a situation that can only get worse as labor costs rise.
“Kick the discounting addiction. Focus on profitable sales, not just customer counts,” one franchisee wrote.
“We are discounting almost everything from all drinks to many items on the regular menu, and some items on the breakfast menu,” another said. “It is all about top-line sales, not running profitable restaurants. That is why operators need several restaurants today, as the return on their investment dwindles.”
Speaking of labor costs, some franchisees said smaller operators simply can’t compete amid shrinking profits.
“The increased cost of labor today and in the near future means the days of discounting our food are coming to an end,” one franchisee wrote. “Smaller operators who do generally run superior operations continue to leave the system. Welcome to mediocrity!!!”
We’ll find out next week if franchisees’ expectations reflect reality, when McDonald’s reports third quarter earnings.
McDonald’s franchisees reveal the 3 things that are killing them [Business Insider]
by Mary Beth Quirk via Consumerist