McDonald’s Investor Day was held on Wednesday, with a focus on the company’s long-term future. However, the closer horizon could bring more turmoil, CNBC reported.
At the beginning of the year, McDonald’s CEO, whose Polish name is Kris Kempczinski, indicated that the company expected a mild to moderate recession in the United States, and a deeper and longer recession in Europe. “Here we are a year later, boy was I wrong?” – Kempczinski said during the investor day.
Read also: What does it take to own your own McDonald’s restaurant? The manager told me step by step
Although a recession has yet to come, Kempczinski reminded investors that lower-income consumers are pulling back on spending, something also noted by, among others, Walmart.
McDonald’s may derive most of its revenue from upper- and middle-income customers, but lower-income customers who only buy a Big Mac and fries make up an important part of its business.
Competitor’s advertising spending
Since the pandemic, McDonald’s has moved away from using limited-time menu items to attract customers. Instead, marketing focused on the brand itself, such as selling core menu items through promotions based on celebrity favorites. This approach has led to strong growth in same-restaurant sales in recent years (like for example), even as inflation has put pressure on customers’ wallets.
The fast food giant spends much more money than its competitors on marketing and advertising to maintain its brand recognition. McDonald’s specializes every year More than $4 billion in marketing investmentswhich is three to four times more than its closest competitor, Kempczinski told investors on Wednesday.
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However, some competitors will soon increase their promotional spending. Some fast food chains will rely on limited-time offers and menu items to drive traffic. McDonald’s may have to decide whether increased traffic in the short term is worth the potential long-term consequences.
“It will be interesting to see how [McDonald’s] He adapts to a more potential promotional environment and whether he is willing to sacrifice the short term to continue to have an impact [długoterminowe] “Brand positioning,” wrote John Tower, an analyst at Citi Research, quoted by CNBC in notes to clients.
Accelerated expansion
The company’s goal is to achieve a global reach of at least 50,000 by 2027. Location What It Means The fastest expansion in history. However, history shows that aggressive expansion usually does not end well for McDonald’s. Sales often decline when new restaurants cannibalize customers at existing locations, which hurts the franchisor’s profitability and distracts from other parts of the business, such as menu innovation.
Read also: McDonald’s is entering a completely new market. You will sell…shoes
Many analysts point out that developing a restaurant chain in 2024 and beyond may not be the best idea, considering continued economic and consumer uncertainty.
Managers reassured investors. “We’ve learned the lesson of quantity over quality… Over the past year, we’ve been going from country to country, literally city to city, to make sure we’re sure where we see growth opportunities and how we can actually get them.” Teams that are on the field to be able to execute it,” Kempczinski said.
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