McDonald’s CEO Chris Kempczinski has issued a warning regarding the challenges facing the fast-food industry, signaling both to competitors and consumers that even the resilient fast-food giant is not immune to economic pressures.
Despite its reputation for offering good value and comfort food, McDonald’s (MCD) is feeling the effects of a slower economy, especially in the third quarter. The company’s business, known for its ability to withstand economic fluctuations, has seen a decline in consumer spending, particularly among lower-income households who have opted to dine at home more frequently.
During McDonald’s third-quarter earnings call, Kempczinski highlighted ongoing struggles in the quick-service restaurant (QSR) sector, noting that traffic declines continued across key markets. He acknowledged that while the company had expected challenges heading into 2024, its performance so far this year has not met expectations.
“QSR traffic has remained pressured, reflecting industrywide challenges,” Kempczinski said. “While we anticipated a challenging environment in 2024, our performance has fallen short of what we expected.”
However, the CEO stressed that McDonald’s would not use external factors as an excuse. “We recognize that there are many aspects within our control that we can influence, guided by our ‘Accelerating the Arches’ strategy,” he emphasized.
Positive signs have emerged in some areas, particularly in the U.S. market, where McDonald’s has experienced progress through its value offerings, menu innovations, and strategic marketing. “We’re encouraged by signs of progress, especially in the U.S., where we’ve seen strong market share growth driven by compelling value platforms, exciting menu items, and effective marketing,” Kempczinski noted.
Value, Kempczinski explained, is a crucial driver for the company. He admitted that McDonald’s had lost some of its competitive edge in terms of value leadership, conceding ground to rivals. “We’ve recognized that our value leadership gap has shrunk,” he said. To address this, McDonald’s has moved quickly to improve its value offerings in several key markets, working closely with franchisees to adjust pricing and create more appealing deals.
Examples of McDonald’s recent value initiatives include €4 ($4.38) Happy Meals in France, £3 for three items ($3.90) in the U.K., and affordable coffee in Canada, priced at $1 (US$0.70). Kempczinski emphasized that these changes are part of a broader strategy to offer customers everyday affordability that they can depend on.
“Our strategy is designed to generate sustainable growth by improving guest counts and increasing market share,” he explained. “We define our approach as offering Every Day Affordable Price menus, which include a range of items at entry-level price points, such as breakfast and sandwich options.”
Kempczinski highlighted the importance of combining affordable menu options with meal bundles to ensure customers have access to reasonably priced meals. This approach, he believes, will help McDonald’s reinforce its position as the go-to option for affordable dining.
“Blending our Every Day Affordable Price menus with meal bundles allows us to build recognition and loyalty with our customers, so when they’re looking for an affordable food option, we’re top of mind,” he concluded.
Related topics
