McDonald’s Corporation (MCD): We Can Save It by Killing Grimace

McDonald's CorporationGrimace may be one of the endearing McDonaldland characters, but too many grimacing employees at McDonald’s Corporation (NYSE:MCD) may also be the undoing of the world’s largest restaurant operator.

Mickey D’s posted uninspiring quarterly results on Friday. Earnings fell short of Wall Street expectations for the third consecutive quarter. Comps were negative. Revenue, operating income, and profitability were essentially flat.

The first three months of the year haven’t been great for chains in general. Even market darling Chipotle Mexican Grill, Inc. (NYSE:CMG) clocked in with a surprisingly mortal 1% increase in same-store sales. Yes, comps at the ballyhooed burrito roller failed to keep up with inflation.

There’s an argument to be made that restaurant operators are struggling since payroll tax rates moved higher in January after a two-year break, but Mickey D’s saw its comps turn negative in October of last year, months before paychecks got slightly smaller.

But let’s get back to that first point. Before the stock tumbled late last year, monthly comps had been consistently positive since 2003, and there’s a reason to believe that surly hires may be at the root of the problem.

The Wall Street Journal recently reported that executives are concerned about a growing number of customer complaints. McDonald’s reportedly alerted franchisees during a webcast last month that the number of gripes calling out rude or unprofessional employees is increasing.

I argued that the chain’s expanding menu could be the culprit, suggesting that fancy beverages and exotic menu variations could be confusing customers, slowing down service, and resulting in more messed-up orders.

Unhappy customers probably wouldn’t be such a big deal if business was booming, but clearly there’s a problem if global revenue climbed a mere 1% and operating income fell 1% in Friday’s quarterly report.

Tastes change, and McDonald’s Corporation (NYSE:MCD) may have thrived with positive comps during the recession simply because it was a reliably cheap place to eat. Now that the economy’s improving to the point where patrons are trading up from the Mickey D’s drive-through, the fast-food behemoth may be trying too hard to woo customers with mango pineapple smoothies and frappe mochas.

There’s nothing wrong with premium beverages, and investors will see that when Starbucks Corporation (NASDAQ:SBUX) reports on Thursday. Analysts see the baron of baristas posting double-digit growth on the top and bottom lines. However, McDonald’s Corporation (NYSE:MCD) may not realize that in trying to be a jack of all trades, it’s losing sight of the basics that made it a global leader.

Does anyone really believe that McDonald’s Corporation (NYSE:MCD) employees are suddenly less friendly than before? Isn’t the problem actually that customers are more dissatisfied with their orders?

McDonald’s Corporation (NYSE:MCD) is working on a fix. It’s implementing a new system in which a dedicated employee at the opposite end of the order counter will be tasked with handing out orders, fulfilling last-minute requests, and actively correcting any orders that come out wrong.

That’s a good start, but McDonald’s Corporation (NYSE:MCD) has to do more to avoid disappointment in the first place. A simplified menu would be a good place to start.

After all, the Grimace that I remember growing up was always smiling.

The article We Can Save McDonald’s by Killing Grimace originally appeared on Fool.com and is written by Rick Munarriz.

Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill, McDonald’s, and Starbucks.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!