Reporter's Notebook

By The Numbers: McDonald’s’ Slower Growth in 2012, Challenge Ahead

 

Growth in comparable-restaurant guest counts at McDonald’s slowed for the second consecutive year in 2012, and that likely was a factor behind smaller year-over-year improvement in comparable-restaurant sales.

That development jumped out at me while I was looking over 2012 results for the world’s largest restaurant chain released Jan. 23 by parent McDonald’s Corp. I came to be reading that document and earlier disclosures by the Oak Brook, Ill., company while conducting research for NRN’s 2013 Top 100.

In 2012, McDonald’s reported, its namesake chain’s U.S. systemwide sales rose 4.2 percent, to $35.59 billion, on a 0.4-percent increase in domestic restaurants, to 14,157 locations. Sales had risen by 5.5 percent the year before, as the store base increased by 0.5 percent.

During the past three completed fiscal years, McDonald’s’ domestic systemwide sales grew at an average annual rate of 4.7 percent, while its U.S.-store expansion chugged along at an average yearly pace of 0.4 percent.

Such a performance illustrates how building comparable-restaurant guest counts and average checks through new product offerings, marketing muscle and price increases, if any, can move the sales needle in times of little or no store expansion. But, as it turns out, McDonald’s has been increasingly challenged to maintain momentum in comparable-restaurant guest count growth.

McDonald’s reported that the rate of growth in comparable-restaurant guest counts at U.S. restaurants fell from 5.3 percent in 2010 to 3.3 percent in 2011, and further decelerated to 1.9 percent in 2012. The rate of growth in domestic comparable-restaurant sales climbed from 3.8 percent in 2010 to 4.8 percent in 2011, before slowing to 3.3 percent in 2012.

On a worldwide basis, the company reported, its chain’s 2012 systemwide sales increased by 2.7 percent, to $88.29 billion, compared with prior-year growth of 11.1 percent. The chain’s net restaurant count expanded by 2.9 percent in 2012, to 34,480 locations in 119 countries, versus growth of 2.4 percent a year earlier.

Worldwide, the McDonald’s system’s growth in comparable-restaurant guest counts slowed from 4.9 percent in 2010 to 3.7 percent in 2011 and to 1.6 percent in 2012. McDonald’s reported that the rate of worldwide comparable-restaurant sales growth increased from 5.0 percent in 2010 to 5.6 percent in 2011, but fell back to 3.1 percent in 2012.

McDonald’s' recent history of slowing growth in comparable-restaurant guest counts,  if not halted, has implications for 2013 sales building efforts because continued deceleration would force the chain to increase its average check to maintain comparable-restaurant sales growth at recent levels. But such check building, if necessary, might require a deft touch after two years of higher averages in the U.S. and at least three years of ticket growth in the chain’s other major operating regions – except Asia/Pacific, Middle East and Africa, which saw some check erosion in 2012.

Don Thompson, McDonald's Corp. chief executive, recently summed up the challenge in 2013 by noting that the chain must work the menu and attract more guests, “but we need to make sure we don’t price ourselves outside people’s pocket[books]."

NRN editor Mark Brandau earlier reported other key 2012 performance results for McDonald’s Corp. and the McDonald’s system, along with comments by Thompson and other McDonald’s executives about what they expect in the months ahead. Read @Mark_From_NRN’s account at http://nrn.com/latest-headlines/mcdonald-s-sales-challenges-will-continue .

Analyzing the performance of industry leaders is what NRN does to better understand the universe its covers and turn out annual Top 100 and Second 100 studies that are a must read for many. More about the Top 100 and some of the data it presented in 2012 can be found here: http://nrn.com/industry-data/us-top-100 .

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