McDonald’s Corp. reports Q3 sales and earnings on Friday. In advance, Nomura restaurant analyst Mark Kalinowski lowered his forecast for Q3 same-store sales to +0.2% from +1.62%. The Q4 forecast was lowered a full 1% to -2.0%.
Kalinowski’s survey of 30 McDonald’s franchisees (accounting for 271 stores) finds their Q3 comp sales lowest in the Northeast (-2.1%), highest in the West (+3.2%) with the South marginally positive and the Central region marginally negative.
These franchisees voice familiar gripes that corporate execs aren’t in sync with operators’ problems or needs. Asked Q3 sales and their Q4 outlooks, franchisees worry about lapping the strong Q3 showing last year in the ramp up to All Day Breakfast’s introduction.
Weather is on their minds as well. Says one operator, “Everything in the next six months depends on weather. No matter what we advertise or what we do we’re still up against a warm winter from last year.”
A common complaint is that McDonald’s corporate focus is on transaction counts rather than on unit-level profitability. “We are discounting almost everything from drinks to many item on the regular menu,” one operator complains, adding “It is all about top-line sales, not running profitable restaurants. That is why operators needs several restaurants today, as the return on their investment dwindles.” Another says simply, “Kick the discounting addiction. Focus on profitable sales, not just customer counts.”
“More national advertising of core menu,” suggests one operator. The imminent introduction of the Mac Jr. and possible retail sale of Mac Sauce, show the company is thinking core already.
“Stop fussing over transactions and focus on QSC [quality, service, cleanliness] and profits,” is one operator’s suggestion for improving same-store sales.” Another advises that McDonald’s try “something incredible with our fries. Like add a sauce: cheese, garlic…something to energize our incredible fries.” Of course, McDonald’s already has tried Gilroy Garlic Fries in the San Francisco area.
And then there are the continuing calls for simplification. “We have messed up what we are about—convenience (translation: customers get in and out quickly)—because we continue to ad complexity on top of complexity, that I’m not sure we can deliver the single biggest reason that people come to McDonald’s,” is the view of an operator who sees a tech solution. “I’d probably fast-track the app that we were told a year ago would make it personal, convenient and quick by allowing order/pay before walking in the store and allowing our staff to get ahead of the curve.”
One operator believes the National Labor Relations Board (claim that McDonald’s Corp. is liable its franchisees actions as a joint employer “is giving them an excuse to disengage from operations and cut corporate labor.” Another says, “Corporate is cutting their costs with layoffs and changing corporate training. All those costs are being shifted to operators’ restaurants.”