Losing the Taste For McDonald’s, By Julie Jargon

Analysts and franchisees aren’t lovin’ McDonald’s very much these days. Goldman Sachs analyst Michael Kelter says McDonald’s appears to be losing customers, based on a survey of 2,000 consumers. “It has not had strong innovation for the past few years, it is losing advertising share of voice and it is the restaurant consumers are least likely to recommend to their friends/family,” he said in a note to investors.

Ouch.

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Claudio Papapietro for The Wall Street Journal

McDonald’s draw is weakening, Goldman analysts conclude.

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The burger giant has been struggling as customers have cut back on restaurant visits and as rivals have improved operations. Other fast-food chains have been increasing their ad spending at a faster rate than McDonald’s, Mr. Kelter notes, thus diminishing McDonald’s “voice” in a crowded, hyper-competitive market.

McDonald’s ranked last in a list of 23 fast-food chains in terms of food quality, healthfulness and customers’ willingness to pay more for the food than is currently charged, according to the Goldman survey.

The company didn’t respond to a request for comment. Its shares were down about 1% Tuesday at $93.65 and are up just 6% on the year, a third of the gain of the S&P 500.

McDonald’s menu has become crowded with new products, which has slowed service.

When McDonald’s reports its third-quarter results on Monday, analysts are expecting relatively flat same-store sales in the U.S. and globally.

Franchisees are concerned, too, according to a survey Janney Capital Markets analyst Mark Kalinowski conducted of 29 U.S. McDonald’s operators representing 183 stores. “More products lead to SLOWER SERVICE TIMES. You CANNOT have 150+ products and give 60-90 second service,” one franchisee commented in the survey, which withholds the operators’ identities.

Many of the franchisees remarked that the chain’s new Mighty Wings promotion is costly and at approximately $1 per wing, priced too high for many consumers.

“Mighty Wings are proving once again that we can’t sell premium items in large numbers because we still have the Dollar Menu,” another franchisee said.

Another said, “I think McDonald’s has reached its apex.

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Losing the Taste For McDonald’s, By Julie Jargon
http://blogs.wsj.com/corporate-intelligence/2013/10/15/losing-the-taste-for-mcdonalds/?mod=e2tw
Sunday, October 20, 2013 As of 6:19 PM GMT
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