CHINA TOPIX

12/23/2024 12:25:03 am

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McDonald’s to Revamp Image and Menu to Aid Declining Profits

McDonald’s Corp has received multiple bids for its stores in China and Hong Kong.

(Photo : Reuters/Nir Elias) The US based fast food chain company is likely to pocket up to $3 billion from the auction.

McDonald's is overhauling its corporate image and means to serve its target market, which is largely due to the staggering profit growth for the third quarter this year.  The popular chain of fast food suffered a 30 percent net income decline as of September 30 collectively in stores in Europe, Asia, and United States.

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Competition has become tougher with other specialty food restaurants such as Chipotle Mexican Grill, Panera Bread Co., and Five Guys offering customized menu and fresh ingredients. 

To improve customer service, McDonald's placed additional staff on peak hours and revamped management posts for the second time in two years.  Also, McDonald's Chief Executive Don Thompson announced on Tuesday the simplification of its product offerings by removing low-selling ones starting January 2015.

McDonald's gave leeway to 21 regional stores to introduce products appeals more to the market using indigenous ingredients.  The plan is conjunction with the "McDonald's Experience of the Future" effort, which also aims to provide customers more avenues to pay digitally.

In a statement, Thompson recognizes that the success of McDonald's lies in its ability to provide customers varied choices while maintaining the stance in a continuously growing and highly-competitive food industry.  The food chain is also planning to offer organic products on some targeted markets.

McDonald's suffered 9.9 percent fall in profits in the Asia-Pacific, Middle East, and Africa regions as of the last quarterly record due to a recent brand image crisis in China.   In Russia, the government shuts down more branches while others are subject to extensive inspection, a scenario that is linked to U.S. sanctions in Ukraine conflict.

It will take another six to nine months before the issue in China slows down, according to Thompson.  But McDonald's has already taken measures to counter the risks such as the launching of a social media campaign that encourages the public to ask important questions on food preparation and other matters.

Jack Russo, an analyst at Edward Jones, argued that injecting organic ingredients in the menu won't help as much in reviving sales.  He predisposed that McDonald's could entail 70 percent more in sales slowdown.

The trick is on healthy food options, but the ability to attract middle-income customers back to their McDonald's, Russo added.

Overall, revenue plummeted to US$6.99 billion from the expected US$7.18 billion, the worst since 2007, according to Sanford C. Bernstein.

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