A McDonald's fast food restaurant in Manhattan, New York, on July 6, 2024.
Beata Zawrzel | Nurfoto | fake images
After a challenging second trimester, McDonald's Executives told restaurant operators and analysts they are refocusing on how to win back consumers with deals as they pushed for an extension of their $5 meal plan platform.
In a memo to the U.S. system obtained by CNBC on Monday, the company's U.S. president, Joe Erlinger, said McDonald's had a difficult time convincing diners of the affordability, adding that he expects “industry and competitive challenges” to continue throughout the year. Erlinger He encouraged traders to look ahead to build momentum for the year ahead, adding that “channeling a long-term mindset is crucial” to the company’s success.
“It is possible to reverse the narrative and reestablish our position as a leader in value and affordability, but it cannot be achieved overnight,” he wrote. “It will be achieved through sustained and coordinated actions that demonstrate to the customer that we are on their side.”
The company on Monday reported results that missed analysts' estimates on revenue and profit. Same-store sales declined across all segments, including its key market, the United States, where they fell 0.7%. The company had forecast challenges last quarter and shares rose on Monday after the results came out.
Erlinger also acknowledged areas where the company was “not meeting expectations” in the U.S. this quarter. He noted that same-store customer numbers were negative for the fourth consecutive quarter and that the decline in the number of items per transaction was at or above account averages.
“We continue to lose traffic share among lower-income consumers,” he wrote. But he added that trial rates for the value meal launch were higher among lower-income consumers, and sentiment around McDonald's value has begun to improve.
The company will extend its $5 menu beyond its initial four-week window in most of its U.S. markets as the fast-food giant says the offer is driving traffic back to restaurants. In a memo to the U.S. system obtained by CNBC last week, executives wrote that nearly all business units, which encompass 93% of its restaurants, voted to extend the promotion beyond its original end date at the end of this month. The memo said most locations will extend the promotion into August, or plan to vote on whether to do so.
In Monday’s memo, Erlinger apparently hinted at upcoming decisions about expansions and future value offerings. On the call, executives said franchisees in the U.S. are in a strong financial position to invest in the value offering and that they are now working with owners to assess its overall profitability.
In the memo, Erlinger wrote: “Value and affordability have been part of our DNA since we first opened our doors, but we have an affordability gap to close and must continue to take steps that show our customers we are listening… We have a solid plan for the second half of the year, but there are several important decisions to make that will prepare us to compete and build further momentum over these final five months and into 2025.”
McDonald's did not immediately respond to CNBC's request for comment.
