Jan

5

 "Millennials regard McDonald's as unhealthy, outdated and downmarket"

I Noticed the dismal quality and service on a road trip in 2013, were I tried all the "new" menu items and found them worse than sub-par.

Ive noticed that many of the Downtown McDonalds (Chicago) are underclass hangouts nearly 24/7, to the extent I would not take my kids to one, period. Even the neat "Rock n Roll McDonalds" was recently hit by a flash mob, as you can see here.

I was happy to see the rumor that the Ackman might be targeting the stock, would love to see a shake-up including (first thing) removal of the failed CEO before things get worse. And I'd bet that there is a mountain of bureaucracy to cut.

Gary Rogan writes: 

The first article seems like a not-too-subtle Shake Shack PR piece. The Shake Shack propaganda is suddenly everywhere, helped by the slow news period when the IPO was announced and its NYC roots. The hamburger marketplace is just crap, pure and simple. It's saturated (with fat and otherwise) and a lot of exploration of alternatives has occurred due to the age and low barriers to entry of the basic concept. There is not that much to be done about McDonalds unless someone serendipitously hits some goldmine with some random menu item or trend. It may make sense for them to be associated with the urban delinquents if a lot of them congregate and eat there. Or maybe go full Angus and get the upscale clientele. Probably six of one, half a dozen of the other. There are better places to fish for both growth and value.

Ed Stewart writes: 

I agree, it was definitely a Shake shack PR placement. However I also agreed with most of the criticism it offered of McD, including the notion that niche, more targeted business models are more workable given the transformation from a relatively homogeneous population.

At this point I don't think the underclass is big enough to sustain a chain as big as McDonalds in the USA. The issue is that when they become a critical mass, they start to lose everyone else. Plus, the antics increase operating costs — stores with that situation become tainted very quickly.

Chipotle has been a great success for investors, but it is a health disaster. It's amazing that it is mentioned as one of the new "healthier" options.

Gary Rogan writes: 

I guess I'm simply looking at the present situation and not seeing much of a nationwide opening, either in terms of "fixing" McD or some deterministic success for a wide-footprint competitor.

McD and pre-existing large competitors have penetrated every nook and cranny of the US market (and quite a bit of the world's). This is not new. McD historically has been somewhat experimental as replicating local menu item additions and any other gimmicks on a wider scale.

There are "upstarts" like In-N-Out that are actually more than half-century old that have expanded greatly in the west and are still rapidly expanding. Should any gimmick like serving wine with your burger work anywhere they will copy it in a nanosecond or someone else will. Yes, it's possible that there is some solution either for an existing player like McD or a new entrant that will produce a Chipotle-like effect nationwide, but knowing in advance that anything in particular will work in the nationwide, and more so in the world-wide market seems like a risky bet.

As a rule, restaurants fail. Fast restaurant expansion plans usually fail. Once in a blue moon something succeeds and your availability bias will always move you in the direction of pointing at it and saying "See!", but it's still risky to predict a great success no matter what they do.


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