According to some analysts it could happen. Here’s why.
Numbers Do Not Lie
When it comes to hamburgers sold, the news for McDonald’s is not good now and has not been good for several years. Up to a few years ago the company only saw annual sales growth of 1% to 2%.
Then things got worse. Growth has been flat for the past few years. Blame it on fast casual chains producing gourmet, made-to-order burgers using fresh ground beef and selling customers on quality versus speed and price.
More importantly, those fast casual chains have won over Millennials, a group that makes up 25% of the U.S. population and whose buying power equals $2.45 trillion per year.
McDonald’s formula of turning frozen patties into burgers that are kept in warming cabinets provides no competition for the made-to-order offerings of others in the space. The company’s goal of delivering food products to customers within 90 seconds of the time the order is placed prevents sandwiches being made-to-order.
Burgers still account for about 20% of McDonald’s total sales of $8.6 billion in the U.S. so the way those burgers are made and how they taste matters a great deal. To make things worse, McDonald’s burgers came in last in a recent Consumer Reports taste survey.
Building A Better Burger
McDonald’s has put together a “sensory” panel to help it refocus on flavor. Some of the solutions considered and tried so far include using fresh instead of frozen beef, utilizing different cooking techniques and an ordering system that accommodates made-to-order customized burgers.
The new ordering system, called Crafted Sandwiches allows customers to create their own sandwich, add guacamole, bacon and other options. A premium sirloin burger has also been added to the mix.
Results have been mixed in tests so far. Crafted Sandwiches have not been a runaway hit but some observers think that’s more because it’s a new product line – and not because customers don’t like the offering.
Ultimately discussion shifts to others in the space and whether any of them can knock McDonald’s off the number one spot.
Public companies chasing McDonald’s on the QSR Top Fifty list include Starbucks Corp (NASDAQ:SBUXD) in the #2 slot, Yum Brands Inc.’s (NYSE:YUMC) Taco Bell at #5, Wendy’s Co. (NASDAQ:WENC), which uses fresh beef, at #6, Dunkin’ Brands Group Inc. (NASDAQ:DNKNC) sitting at #7, another Yum Brands entry, Pizza Hut at #9 and Panera Bread Co. (:PNRAN/A) which occupies the #10 slot.
Will one of these companies eventually push McDonald’s out of the top spot or will MCD ultimately perfect a better burger and convince all those Millennials that dining under the golden arches is actually the cool thing to do? The answer is yet to come.