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Fast Food Slows Down as McDonald's, Wendy's Take a Hit

Posted by Dale Buss on November 8, 2012 02:17 PM

Turns out that consumers around the world can't and don't just keep simply trading down in their eating habits as incomes and economies keep slowing or remain sluggish. Many just stop going out to eat altogether. Exhibit A: McDonald's just reported its first monthly decline in same-store sales from year-to-year, for October, since 2003, when the company in general was struggling.

This result — a 1.8-percent dip in global revenue at "same-store" restaurants open at least 13 months — reflects broadly on the state of the global economy, because if there's one thing that unites us as a species, it's eating cheap and fast food. Yet even though it's been promoting lower-priced menu items, McDonald's relevant revenues in October fell by 2.2 percent in both the United States and Europe, and by 2.4 percent in the region encompassing Asia, the Middle East and Africa.

It isn't clear how much of the bad number may reflect some kind of general slump in the fast-food proposition, in any market. But the European result isn't that surprising because the continent is sliding into recession again because of eurozone woes and consumers' loss of confidence that politicians and bankers can fix them. Cooling in China is one big reason for the drop in the Asian region.

So the U.S. results might raise the most eyebrows at McDonald's headquarters in Oak Brook, Ill. Three potential factors include McDonald's lack of recent "new product news" in the U.S., "an uptick in competition in the U.S.," and a drag from Hurricane Sandy, said Sterne Agee analyst Lynne Collier. Speaking of that competition, Wendy's reported higher revenues at "same" stores but lower profits mostly for accounting reasons. Its third-quarter increase of 2.7 percent in revenue at restaurants open at least 15 months — the sixth straight quarter of such growth — was welcome in view of the chain's concerted efforts to move a bit upscale with higher-quality ingredients and menu items.

Meanwhile, Burger King also has been beefing up its offerings and marketings, including a brand-new twist for the quick-hamburger sector: home delivery. It has been slowly and rather quietly expanding its test of home delivery from a few mid-Atlantic states to the southern Florida territory close to its Miami headquarters.

Yet despite struggles to keep customers in the fast-food sector, some eateries that are classified as "fast-casual" operators — a bit slower to serve, with more expensive menus — have continued to do well, including Starbucks and Chipotle.

Still, McDonald's remains the industry bellwether. And so even its competitors are sort of hoping the Golden Arches is turning things around in November.


Jeff Burdick United States says:

My belly aches sympathetically for McDonald’s over this news. But it could be worse, as the following funny fake news story about McDonald’s “cloning program” makes clear. Now if the company would just do something about its “clowning program,” maybe they can truly turn things around. Enjoy: bit.ly/RNUyLN

November 10, 2012 06:59 AM #

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