OAK BROOK Ill. Not even McDonald’s is immune to rising unemployment in the United States and deep price discounting throughout the quick-service sector.
The No. 1 burger chain reported Wednesday that global same-store sales rose 2.2 percent in August, including a 1.7-percent gain in the United States, where the majority of its 32,000 corporate or franchised restaurants are located. Same-store sales rose 3.5 percent in Europe and fell 0.5 percent in the Asia-Pacific, Middle East and Africa region.
The result lapped strong year-ago results in August, when global same-store sales rose 8.5 percent and U.S. same-store sales increased 4.5 percent. Still, the latest August result decelerated from July’s same-store sales gain of 2.5 percent for the United States, leading many observers to note that rising U.S. unemployment and price wars have taken a toll on fast feeders.
Many quick-service chains, including Arby’s and Burger King, have been hit with reduced guest traffic and slowed sales as the U.S. unemployment rate continues to climb near 10 percent, reducing the need for convenient or quick meals among workers and cutting breakfast traffic during commuting hours. In addition, heavy discounting, from 99-cent items, $1 sandwiches or $5 meals, have proliferated through fast food in attempts to lure in customers, hurting average checks and margins.
Many analysts had expected more from McDonald’s in August, as it introduced its Angus Third Pounder sandwiches — its first new sandwich in eight years — and its McCafe premium espresso-based beverage line. Still, the low-single-digit results are expected to top the quick-service sector as other chains dip into negative territory, analysts said. The changing quick-service landscape may mean slowing sales for numerous chains in the near future, they noted.
“McDonald’s U.S. same-store sales are now heavily reliant on new food news, with the multi-year same-store sales tailwind from remodels, extended hours, and cashless transactions now in the rear-view mirror,” securities analyst Jeff Farmer at Jefferies & Co. said in a research note. “With unemployment taking its toll on fast food traffic, we expect the segment to see several additional months of very aggressive discounting and value promotion.”
McDonald's will continue pushing its premium Angus burgers and announced Wednesday a new promotion aimed at commuters. Beginning Sept. 13 and running throughout the remainder of the month, McDonald's will offer commuters in Atlanta, Baltimore, Chicago, Dallas, Denver, and Washington, D.C., a free transit pass and a coupon for a free Angus Third Pounder, while supplies last. The chain has dubbed the campaign ÒTry Free, Ride Free.Ó
In addition, McDonald's has started a "Flavor Battle," that includes a national DJ competition and chances for voters to win prizes. Three national DJs, each of which represents a McDonald's burger, will battle for consumer votes online at McDonald's 365Black.com website from Sept. 7 through Nov. 22.
The chain's well-known Monopoly promotion also is planned for the near future, and reports have said a tie-in with the new "The Jay Leno Show" on NBC is in the works.
Contact Sarah E. Lockyer at [email protected].