McDonald's sales plunge in the US. Why customers aren't lovin' it.
McDonald's and other traditional fast food chains continue to leak customers to fast-casual brands like Chipotle. The creation of dollar menus by McDonald's, Wendy's and others may be one reason for the slide, especially among Millennials.
A McDonald's restaurant is pictured in Encinitas, Calif. Sept. 9, 2014. McDonald's Corp on Tuesday reported declining sales at established restaurants across all regions in August, the fifth monthly drop since CEO Don Thompson took the helm in July 2012, and warned a China supplier scandal would cut into profits.
Mike Blake/Reuters
McDonald鈥檚 sharp 2.8% decline in same-store聽聽for August announced this morning is indicative of a continuing shift in eating behavior, according to research from New York City-based Brand Keys. It finds that QSR brands continue to leak customers鈥攐f all ages鈥攍argely to fast-casual brands.
The creations of dollar menus by many top QSRs may be one reason for the slide, especially among Millennials. Among this age group, 53% agreed with the characterization of traditional QSRs鈥� fare as 鈥渄ollar food.鈥� Says Brand Keys Founder and President Robert Passikoff, 鈥淵ou don鈥檛 build brands or loyalty on the basis of price. That only works for commodities.鈥�
Brand Keys鈥� research examined attitudes and behaviors of 1,000 consumers in each of three generational cohorts鈥攂aby boomers, Gen X, and Millennials鈥攃oncerning fast food and fast-casual restaurants. QSR visits by baby boomers were down 18% compared with a year ago. Brand Keys says boomers want 鈥渜uality food鈥� and find it more often at fast-casual concepts.
Gen Xers show an 11% decline in QSR visits with an equal increase in fast-casual visits. 鈥淭he Gen X group is more pragmatic about their decisions about eating out, so they seem to be more vulnerable to value positioning,鈥� according to Passikoff. 鈥淏ut they鈥檙e skeptical about brands, too, and are looking聽not聽for price-value but value for dollar. They feel the fast-casuals offer that, too, equal to and more often better, than the fast food brands.鈥�
QSRs鈥� greatest customer leakage comes from the ranks of Millennials, which show a 20% decrease in QSR visits. Additionally, 42% reported increased visits to fast-casual restaurants. Passikoff says this group is both the toughest to reach via traditional media and the most difficult with whom to build brand loyalty.