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

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

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

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!