All-day breakfast boosts McDonald’s Q4
March 2015 was the beginning of a revamped business structure for McDonald’s as former CEO Donald Thompson retired and Steve Easterbrook replaced him as president and CEO of McDonald’s.
Easterbrook worked to reorganize McDonald’s into four separate markets by July 2015 so the company could be better managed.
This change in combination with the introduction of an all-day breakfast menu in the United States was an attempt to put McDonald’s back on the map with competing restaurant chains such as Chipotle.
For years, McDonald’s said it would not do it because it was impossible to manage the breakfast and dinner menu with the amount of staffers on hand.
On Jan. 25, 2016, fourth-quarter and full-year global sales were announced for 2015. The October launch of the extended breakfast menu was a hit for McDonald’s across the United States.
Fourth-quarter results showed U.S. sales increase by 5 percent. Operating income also rose 30 percent due to a sale of restaurant property.
Sales in the United Kingdom, Canada and Australia increased 4.2 percent at the end of 2015 because of a positive response to menu changes in those markets. Russian and Chinese sales increased by 3 percent.
The rest of Asia and Europe saw a 5.9 percent increase in sales. Full-year global sales also increased by 1.5 percent although revenue and operating income dropped.
Mark Kalinowski, an investment analyst at Nomura, said breakfast was a big reason why company sales were up at the end of the year. “Clearly, all-day breakfast is helping bring back lapsed customers and may even be bringing in new customers who wouldn’t normally be going to McDonald’s.”
Easterbrook has a positive attitude for 2016. In the financial results press release, he said: “We took bold, urgent action in 2015 to reset the business and position McDonald’s to deliver sustained profitable growth. We ended the year with momentum, including positive comparable sales across all segments for both the quarter and the year—a testament to the swift changes we made and the early impact of our turnaround efforts. We enter 2016 committed to managing the business for the long term and aligned as a system around the critical imperative that we must run great restaurants each and every day for our valued customers.”
Kevin Ozan, McDonald’s chief financial officer, shares the same optimism as Easterbrook. He said, “In November, we announced financial goals in conjunction with our business turnaround plan. We outlined plans to refranchise about 4,000 restaurants by the end of 2018 and reduce our net annual G&A spending by $500 million, the vast majority of which will be realized by the end of 2017. These targets are designed to enhance long-term shareholder value while supporting the work underway to reignite our business results.”
In 2016, McDonald’s also wants to work on bringing back former customers because the last two years the number of guests dropped 4.1 percent and 3 percent respectively.
This can be done with more changes to the menu like bringing back value items that were a platform for late-night munchies. Two years ago, McDonald’s changed the “Dollar Menu to the “Dollar Menu and More.” Instead of all the items costing $1, some cost up to $5. “Some of the challenges we’ve had in the [United States] have been somewhat self-inflicted,” Easterbrook said during a conference call in July. “We moved away from the ‘Dollar Menu’ and didn’t replace it with significant-enough value in the eyes of consumers.”
With the hype of all-day breakfast dying down, Easterbrook realized that the way to keep customers continually amped up to visit McDonald’s is to keep making changes.
The company wants to improve food quality and introduce more promotions to guests. People who downloaded the McDonald’s app for their smartphone, which became available for public use last July, and registered an account have already been introduced to advertisements that are trying to reel in more sales. A deal being offered is getting a sixth cup of coffee free after purchasing five.
As soon as 2016 kicked off, McDonald’s launched another new promotion called the “McPick 2.” This is a limited-time offer that lets customers choose two items from the “Dollar Menu and More” for $2.
They can choose two of the following: a McDouble, a McChicken, small fries or mozzarella sticks. Easterbrook said that judging from sales, the McDouble and the mozzarella sticks were doing well.
McDonald’s has numerous goals they are looking to accomplish in 2016 and beyond so they can have more customers “lovin’ it” than ever before.