McCafé and Happy Meals are the top candidates McDonald’s franchisees name when asked what should be cut from or simplified on the chain’s menu. Janney Montgomery Scott restaurant analyst Mark Kalinowski’s most recent survey of franchisees led him to lower his estimate of December same-store sales to -2.1%. McDonald’s Corp. will announce December sales and Q4 earnings on Friday. Kalinowski also lowered full-2015 and full-2016 EPS projections by 5¢ each. “Sales decreases are the new norm,” said on operator.
The 30 domestic franchises (representing 198 stores) surveyed said December comps on average were -2.1%. The estimate for January was -1.7% as some said sales had improved a bit. McDonald’s has said it will begin simplifying its menu but some operators expressed frustration at what they see as a too-slow pace. “Significant menu simplification is not happening as far as I can tell,” one operator told Kalinowski. “Any operator could have, and many did, say that this needed to happen two years ago. Everyone who is paying attention, both inside and outside McDonald’s, recognizes this as a problem, but nothing changes.”
What menu items would franchisees eliminate or downsize? Some responses:
“Eliminate the McCafé line. Downsize Happy Meal choices.”
“Downsized? Happy Meals are a chore to ring up with all the options. Perhaps corporate should make a decision on what a Happy Meal is and stop with complicating the choices.”
“Eliminate espresso drinks but keep the rest of McCafé.”Read the Full Article