McDonald's released it's first quarter earnings report on April 22, and although we've pondered what changes could be coming for the brand, we now have a look at how some of the company's earliest changes under CEO Steve Easterbrook turned out. From increasing profits thanks to all-day breakfast to increased scrutiny on the drive-thru and kitchen staffs to refranchising efforts across the nation, McDonald's appears to be in the midst of a resurgence.
First, a correction. Last week, I wrote about a planned Missouri location that could be the future face of the brand. It turns out those dreaming of eating all-you-can eat fries at the new store will need to keep dreaming: the company quashed those reports, noting that it would be a promotional deal to help celebrate the opening of the St. Joseph, MO, location. However, it appears that most of the other reported amenities will remain, solidifying it's status as the first fast-casual McDonald's within the nation.
Now, with that out of the way, we can focus on some more relevant pieces of information. All-day breakfast was seen as a hit by consumers, investors and the company from the beginning, but the effect it had on sales was not immediately available. We now have those numbers, as the company reported a 35% increase in first-quarter profit thanks to the extended breakfast menu, alongside other tweaks that eliminated poor performers (Goodbye, McWrap!) and boosted sales deals (Hello, McPick 2!).
It appears that the success of the all-day breakfast menu is spurring the chain to investigate it further. Customer demand for the company's McGriddles (sandwiches made of a combination of bacon, sausage, egg and cheese between two "soft, warm griddle cakes with the sweet taste of maple baked right in") led to it being added to the all-day menu in certain test markets.
McDonald's is also assessing whether the expanded menu slows down food preparation times, a common concern among franchisees at the onset of the all-day breakfast. The company isn't just testing food preparation: it's using a number of "mystery shoppers' to see how the drive-thru fares, which accounts for nearly two-thirds of U.S. customers. "Honestly, that's the biggest thing we're getting right," CEO Steve Easterbrook said.
By 2018, the company expects to refranchise nearly 4,000 restaurants, part of a long-term goal to become 95% franchised. The company noted that it expects to open 1,000 restaurants in 2016 (a stark departure from the news of closures in 2015), including nearly 400 locations in affiliated and developmental-licensee markets in 2016. It appears the successful changes are fueling growth for the company.
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at firstname.lastname@example.org to talk about anything food-related.
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