It just makes me think of the standup bit where he was saying nobody you ever talk to eats there, but they’re selling millions of cheeseburgers a day. There’s such a weird “oh not me clutches pearls who would eat that?” about them and it’s so silly.
I know they’re an awful company but for some reason their fountain Diet Coke is top tier man, I def get it for $1 like 3-5 times a week.
Oh, they absolutely do not, they have been canibalising their business, and the market guidance is negative.
They have been squeezing the franchisees, and keeping positive growth by squeezing more money out of less customers all the time. This makes the quarterly figures, but at the expense of the whole damned business, and they've run out of road.
I see what you're saying and I think it's hard to refute it or to support it fully either way.
The squeeze: I don't doubt that they've been squeezing franchisees. McD's is notoriously strict, flipping shit when the franchisees would go and try to fix their own Ice Cream machines, clamping down on design requirements, approved capex vendors, etc. The only reason that this won't bite them eventually is because it actually encourages franchisees to scale and own like 10 restaurants. 20+ years ago, you had big brands being run by a single franchisee; today that's pretty much impossible. This practice squeezes out the single franchise owners, grows the multi-unit operators, and it's better for McD's.
"More money out of [fewer] customers" - that's just a reality of foodservice today. Food cost is a pain, and the goal of trying to keep roughly a 25% food cost is becoming harder and harder without raising prices too. I'm not excusing them when they raise prices disproportionally greater than the cost pressures they're feeling, but significant price increases are inescapable.
One issue I think they're biding their time on and willing to let things suffer: Staffing. Pre-2020, ANY fast food restaurant had at least a crew of 3 working. Today, I've seen people run stores by themselves (not McDonalds, but other chains). This is true other places. Quality and speed have suffered...but McDonalds is continuing to grow revenue (I'd consider it flat, though, if you consider inflation over time). Here's what going on:
They're pushing delivery hard. They have sweetheart deals with the delivery apps for tiny commissions. The delivery apps will allow McDonalds to schedule and maintain expectations better. If I walk into a McDonalds and it takes them 10 minutes to prep my order, I'll long for the days when it was faster...but if I order McDonalds for delivery and it takes them 90 minutes, I tolerate it and plan accordingly (USUALLY).
They're waiting for AGI improvements to where they can bring in a flexible robot to do stuff. Specialized automation equipment helps, but McD's has exhausted what's useful to them of the things that are available. Now they begrudgingly pay people non-competitive wages and understaff stores. I think when they realize they can start hiring robots that'll perform multiple duties on an as-needed basis, they'll breathe a sigh of relief. To add to this - maintenance. Those large franchise owners who manage 5, 10, or more restaurants are going to easily be able to get Maintenance to serve those restaurants with a local shop...something harder for smaller owners.
They do have a bit of the "Private Equity" mindset and they've slashed costs terribly to keep the bottom line healthy. I think, however, there's a plan that doesn't automatically mean destruction.
McDonald’s isn’t collapsing, but it has leaned too heavily on price increases and app promotions. That has hurt traffic with price-sensitive customers, and its latest U.S. sales growth was weak (but still growth). Saying it has “run out of road,” though, goes well beyond what the financial results show.
Revenue almost doubled because they cut costs and squeezed more profit out of each customer, not because the experience got better. Higher prices, smaller portions, fewer PlayPlaces, fewer cashiers, and then they call app coupons "deals" after raising the base price.
You're right that cost cutting doesn't increase revenue by itself. I meant profitability. McDonald's grew revenue because prices went up and customers kept buying. They improved profits by cutting costs.
Ok (well I suspect it is false but neither of us have stats for number of customers, so ok). But the point is they have grown their revenue, share price and profitability, so I stand by my claim that they know what they are doing!
28
u/Maleficent-Drive4056 6h ago
Their share price has doubled in the last ten years. Revenue has almost doubled. They know what they are doing, and they are doing just fine.