McDonald’s same-store sales declined 8.7% in the second quarter of last year, the worse of the pandemic. They turned positive in the third quarter, and improved in the fourth. In the first quarter of this year they took off, rising 13.6% and 13.7% on a two-year basis.
By now the explanations for such improvements are well known. Stimulus payments provided a massive lift for the industry in the first quarter—just about everybody did well and recovered whatever they lost in the same period a year ago and then some.
At McDonald’s, the chain’s drive-thrus—typically well-placed thanks to the company’s historically brilliant real estate team—proved a huge benefit. Consumers flocked to them and ordered bunches of Quarter Pounders and Crispy Chicken Sandwiches and Egg McMuffins.
But at least some of the credit for the company’s resurgence came a year ago, when the Chicago-based burger giant decided to do something drastic: Slash items from its menu, including All Day Breakfast.
“Driving customer visits begins with committing to the core menu,” Joe Erlinger, president of McDonald’s USA, told investors on Thursday. “Early in the pandemic, the U.S. business removed dozens of menu items. As a result of this focus, our drive-thrus got faster, margins grew and customer satisfaction improved.
“Put simply, our restaurants became easier to run and more profitable.”
That also gave the company room to add other items. Last year the company introduced Spicy Chicken McNuggets. They worked so well McDonald’s brought them back in February, which provided a sales lift and a preview for the introduction of the chicken sandwich, which thus far has performed better than expected.
McDonald’s has been improving the service times in its drive-thrus for a couple of years now, but the menu cuts helped that even more—enabling the company to serve more customers through them while ensuring fewer cars drive away without making an order.
It helps that the company does not have all its dining rooms open—and notable that the chain is being deliberate in reopening them even as more states allow for dine-in sales. A workforce shortage is certainly providing a disincentive to reopen those areas. But the lack of a working dining room allows the restaurants to focus on that window to provide speedier service.
But those menu cuts are notable. When the company’s sales were in recovery mode last June, Blake Casper, chairman of the National Owners Association, noted that the group’s priority was to keep its more limited menu permanent. And he noted the drive-thru speed as evidence.
“The limited menu and ease of operations are allowing our teams to focus and provide blazing fast service,” Casper said at the time. “Our teams are doing amazing work in our drive-thrus.”
There’s a bit of irony in all this. McDonald’s for much of the past couple of decades has operated as destination for a broad array of consumers, and it has added a steady stream of products to its menu to cater to them. After a while, that menu became massive.
All Day Breakfast, introduced in 2015 to great fanfare, helped lift sales temporarily at a time when the company needed the win. But it was cumbersome to make McMuffins and biscuits and hotcakes alongside burgers and chicken sandwiches.
Operators have been pushing hard for years—long before All Day Breakfast—to cull items from its menu, with only limited success.
The pandemic finally forced the issue, as McDonald’s and other fast-food chains—notably Taco Bell—cut menu items to improve profitability and simplify operations. In the end the operators were proven right. Sales have only improved in the quarters since. And now the company has the space to add new items it has always wanted, like that sandwich, without causing operational problems.
In the end, simplicity wins.