Tidbits from McDonald's (MCD +0.5%) earnings call: 1) CEO Don Thompson expects growth in the restaurant industry to remain subdued for the rest of 2013. 2) The company will look to boost sales with new products (Fish McBites and $1 Grilled Onion Cheddar Burger) and longer store hours. 3) Commodity cost inflation of 1.5% to 2.5% for this year is forecast. (webcast) [View news story]
Given the lingering impacts of the drought and the recent cold weather in California those commodity expectations are probably a low-ball.
McDonald's (MCD) continues to try to find a way to put a charge into sales in Japan after a recent series of stumbles. The latest moves involve a 24-hour breakfast menu and promoting its "60 seconds service." The big picture: The company hasn't been able at to adapt successfully to the significant shifts in dining preferences and spending habits by consumers in Japan following the 2011 earthquake and tsunami. [View news story]
It's obvious that the people running McDonald's in Japan have never worked in a McDonald's restaurant.
Taco Bell (YUM -0.3%) expands on testing a new dollar menu initiative that could place it in closer competition with the value propositions at McDonald's (MCD -0.1%), Burger King (BKW -2.9%), and Wendy's (WEN +0.7%) in the U.S. Analysts see the move as well-timed with the burger chains likely to struggle a bit to hold the line on prices in the face of escalating beef costs. [View news story]
While owning the slogan "Dollar Menu" served McDonald's well for 7 or 8 years McDonald's franchisees labeled it a dinosaur several years ago. Being locked into the $1.00 price point is going to make future adjustments for back door increases very difficult. Maybe it's time for McDonald's to let go of those loss-leader customers and focus on guests who will spend $5 or $6 for a meal.
McDonald's Has A Cultural Clash And May Soon Get Help In Solving It [View article]
While the service should be faster inside at McDonald's the idea that McCafe could be a stand-alone business is misguided. McDonald's now lumps almost all of their drinks under the McCafe brand so sales are substantial but fancy coffee drinks are a pathetic part of that business. Franchisees tell us they don't sell enough espresso drinks to pay for the electricity to run the espresso machine. And that's after wasting a billion or two in advertising espresso drinks. Let's not pretend McCafe is the next Starbucks.
Is there more to McDonald's (MCD -0.7%) move to test selling chicken wings that meets the eye? Hedgeye's Howard Penney notes the traditional business model of the restaurant operator will be under margin pressure with beef prices set to soar to record highs in 2013. [View news story]
How long can these chains keep beef sandwiches on the 99 cent / Dollar Menu? Answer - not much longer
McDonald's Profit Margins Are Going Down [View article]
"Has McDonald's reached their price break point?"
In a sense, Yes. Any discussion about inflation at McDonald's is distorted by the continuation of the Dollar Menu. If franchisees try to raise prices on the core menu more and more customers turn to the Dollar Menu. We are now at the point where raising prices on Big Macs causes the average check to go down.
Bah, humbug! McDonald's (MCD) wants franchisees to stay open on Christmas after a push to keep selling burgers on Thanksgiving helped lift November same-store sales. According to internal estimates, the extra revenue haul for Christmas could reach as high as $84M if stores take the plunge. [View news story]
McDonald's Lagging Competitors But Looks Ready For Turnaround [View article]
McDonald's does sell a lot of coffee because of their huge drive-thru breakfast traffic. But the espresso part of the McCafe launch has been a flop for the start covered up by the success of the following shaved iced drinks. The typical McDonald's does not sell enough espresso drinks to pay for the electricity to run the espresso machine. So there's no magic in McCafe and branded coffee in stores will be kind of silly. And, does that take some breakfast business away from the franchisees in the area?
The restaurant sector is on watch after a profit warning from Darden Restaurants points to weakness, not in Europe or China, but at home in the U.S. While increased promotional activity in the sector is behind part of the slip from Darden, the bigger question is why are sales so weak for big players if consumer confidence is supposedly bouncing back? [View news story]
The restaurant sector is on watch after a profit warning from Darden Restaurants points to weakness, not in Europe or China, but at home in the U.S. While increased promotional activity in the sector is behind part of the slip from Darden, the bigger question is why are sales so weak for big players if consumer confidence is supposedly bouncing back? [View news story]
The Darden article mentions Q2, is that calender or Darden's version of Q2? If it was April. May, June that was a long time ago and means little here at the end of the year. But I echo David's comments on the economy, this is not a recovery. And restaurants have hit the wall on passing on food inflation to customers. Menu prices can go no higher in this economy.
Own McDonald's For The Rental Income, Not The Burger Sales [View article]
First, one must understand there is no connection between those restaurants where McDonald's Corporation owns the real estate and those where they operate the business as contributors to the corporate bottom line (McOpCo). These are two different kinds of "ownership".
And, we can't say "McDonald's still owns the property in the vast majority of cases." because we don't know how much of the real estate McDonald's owns. We only know they "control" all of the real estate, either as tenets (subletting to franchisees) or as owners.
Don't break the buck. That's the message franchisees are hammering home to McDonald's (MCD +0.3%) over pricing for new promotions such as a Grilled Onion Cheddar Burger and Fish McBites. While the mother ship wants to deliver value to customers with more pricing under a dollar, operators fear margins will disappear. [View news story]
Franchisees don't always need sales increases to increase profits. A month or quarter with flat sales can be very profitable if prices are set properly and product is not deep discounted. But this is the classic tug-of-war in the franchise business. The franchisor make their profits as a percentage of top line sales with no expense and no risk. The franchisee hopes to make a profit on the bottom line after paying all expenses and taking all the risk.
Efforts to unionize fast-food workers ramp up this week with organized protests in the works at McDonald's (MCD -0.3%), Taco Bell (YUM +1%), and Wendy's (WEN -0.4%). Though the activity is catching some headlines, unionization efforts seem more likely to fizzle than generate higher costs for restaurant operators. If the Black Friday protests at Wal-Mart are any indication, it may be business as normal despite all the sound and fury. [View news story]
McDonald's figured out how to keep the unions out 30 years ago. Today the unions are weaker and more inept than they were then. Investors do not need to worry.
Tidbits from McDonald's (MCD +0.5%) earnings call: 1) CEO Don Thompson expects growth in the restaurant industry to remain subdued for the rest of 2013. 2) The company will look to boost sales with new products (Fish McBites and $1 Grilled Onion Cheddar Burger) and longer store hours. 3) Commodity cost inflation of 1.5% to 2.5% for this year is forecast. (webcast) [View news story]
McDonald's (MCD) continues to try to find a way to put a charge into sales in Japan after a recent series of stumbles. The latest moves involve a 24-hour breakfast menu and promoting its "60 seconds service." The big picture: The company hasn't been able at to adapt successfully to the significant shifts in dining preferences and spending habits by consumers in Japan following the 2011 earthquake and tsunami. [View news story]
Taco Bell (YUM -0.3%) expands on testing a new dollar menu initiative that could place it in closer competition with the value propositions at McDonald's (MCD -0.1%), Burger King (BKW -2.9%), and Wendy's (WEN +0.7%) in the U.S. Analysts see the move as well-timed with the burger chains likely to struggle a bit to hold the line on prices in the face of escalating beef costs. [View news story]
McDonald's Has A Cultural Clash And May Soon Get Help In Solving It [View article]
Is there more to McDonald's (MCD -0.7%) move to test selling chicken wings that meets the eye? Hedgeye's Howard Penney notes the traditional business model of the restaurant operator will be under margin pressure with beef prices set to soar to record highs in 2013. [View news story]
McDonald's Profit Margins Are Going Down [View article]
In a sense, Yes. Any discussion about inflation at McDonald's is distorted by the continuation of the Dollar Menu. If franchisees try to raise prices on the core menu more and more customers turn to the Dollar Menu. We are now at the point where raising prices on Big Macs causes the average check to go down.
Over The River And Through The Woods... To McDonald's? [View article]
Bah, humbug! McDonald's (MCD) wants franchisees to stay open on Christmas after a push to keep selling burgers on Thanksgiving helped lift November same-store sales. According to internal estimates, the extra revenue haul for Christmas could reach as high as $84M if stores take the plunge. [View news story]
Is McDonald's Back On Track? [View article]
McDonald's Lagging Competitors But Looks Ready For Turnaround [View article]
The restaurant sector is on watch after a profit warning from Darden Restaurants points to weakness, not in Europe or China, but at home in the U.S. While increased promotional activity in the sector is behind part of the slip from Darden, the bigger question is why are sales so weak for big players if consumer confidence is supposedly bouncing back? [View news story]
The restaurant sector is on watch after a profit warning from Darden Restaurants points to weakness, not in Europe or China, but at home in the U.S. While increased promotional activity in the sector is behind part of the slip from Darden, the bigger question is why are sales so weak for big players if consumer confidence is supposedly bouncing back? [View news story]
Own McDonald's For The Rental Income, Not The Burger Sales [View article]
And, we can't say "McDonald's still owns the property in the vast majority of cases." because we don't know how much of the real estate McDonald's owns. We only know they "control"
all of the real estate, either as tenets (subletting to franchisees) or as owners.
Don't break the buck. That's the message franchisees are hammering home to McDonald's (MCD +0.3%) over pricing for new promotions such as a Grilled Onion Cheddar Burger and Fish McBites. While the mother ship wants to deliver value to customers with more pricing under a dollar, operators fear margins will disappear. [View news story]
Efforts to unionize fast-food workers ramp up this week with organized protests in the works at McDonald's (MCD -0.3%), Taco Bell (YUM +1%), and Wendy's (WEN -0.4%). Though the activity is catching some headlines, unionization efforts seem more likely to fizzle than generate higher costs for restaurant operators. If the Black Friday protests at Wal-Mart are any indication, it may be business as normal despite all the sound and fury. [View news story]
Today the unions are weaker and more inept than they were then. Investors do not need to worry.