How menu changes have shifted McDonald's fortunes(Read article summary)
2015 was a stellar year for sales at McDonald's thanks to serious menu changes, such as the all-day breakfast.
McDonald’s had a good year in 2015 – a really good year.
McDonald’s shares rose 25 percent in 2015, outcompeting fast food rivals such as Burger King, Taco Bell, and Wendy’s and even faring better than popular casual restaurants such as Panera. The company’s shares are 2 percent below their all-time high – all the more impressive given that Dow Jones Industrial Average is down almost 8 percent.
When Steve Easterbrook took over as CEO of McDonald’s about a year ago, he knew the restaurant chain needed to spice up tired menus in order to compete with new crowd favorite burger joints such as Five Guys and Shake Shack.
“Our operational growth-led turnaround is focused on appealing to customers in the areas that matter most to them – great-tasting, high-quality food, convenience and value,” Easterbrook said in an October statement.
While there are some McDonald’s classics that are required in each restaurant, franchisees are allowed to experiment site-specific items to appeal to local tastes. Currently, McDonald’s is testing macaroni and cheese in Ohio, breakfast bowls in California, and sweet potato fries in Texas.
And McDonald’s has done away with the Dollar Menu under Easterbrook’s leadership, replacing the value list with McPick 2, where customers can choose two food items from a list for $2.
But adding an all-day breakfast menu may have been McDonald’s savviest move yet this year.
A December study by the market researcher NPD Group Inc. found that 30 percent of customers who ordered breakfast menu items after the traditional 10:30 am cutoff hadn’t visited McDonalds at all in the month before the October roll-out.
“That’s pretty significant,” NPD restaurant analyst Bonnie Riggs who conducted the study told The Wall Street Journal.
And not only did the breakfast menu draw in new customers, but the same customers also bought more than just McMuffins. Among the the post-breakfast, breakfast food consumers, 61 percent purchased more than just breakfast foods during their visit and they typically visited the restaurant during lunch hours, typically McDonald’s slowest-growing meal time.
But driving all of the recent changes has been the result of an ideological shift, says the company: an exciting menu is now more important than speed.
“Operational efficiency has actually moved down in the ranks of priority because we want to focus most of all on the food,” Lance Richards, vice president of menu strategy, tells the Chicago Tribune. “There’s an openness to really going after the consumer that’s so refreshing. I think there’s some bright days ahead.”
Easterbrook has promised hormone- and antibiotic-free chicken and milk in all McDonald’s restaurants within the next two years. The company also plans to test menu items not typically associated with fast food, such as kale and quinoa.
McDonald’s says the growth won’t stop here, as they are projecting another 5 percent sales growth in 2016.