McDonald's profits and shares have skyrocketed after making this one simple change.
Things weren’t looking too good for McDonalds over the past two years, and the company needed to act fast. According to a report from the Chicago Tribune, McDonalds made a single simple change to their menu that resulted in a 6.1 percent leap in share prices over just the past few months.
It appears that McDonalds probably should have made this switch long ago – one of the biggest customer gripes is the early end of breakfast service. People love the company’s egg and sausage McMuffin breakfast sandwiches, but people who arrived after 10:30 were out of luck. Now, breakfast will be served in most franchises all day.
The idea to roll out all-day breakfast at locations across the nation was a key piece of the company’s overall plan to turn performance around after a lagging two years. They started testing the daylong breakfast at certain locations across the country in May, and were totally rolled out by the middle of October. McDonald’s set the record for the biggest rollout of a new menu in the history of the fast food industry.
According to CEO Steve Easterbrook, the company’s hard work while rolling out the new breakfast menu resulted in 14,000 restaurants nationwide gaining the ability to serve breakfast throughout the day. The company posted their third-quarter earnings earlier this week, reporting huge gains over the past two years.
Easterbrook took the post as the CEO of McDonald’s in March, and his plan to turn the company around seems to be going great. According to R.J. Hottovy, an analyst from Morningstar, McDonald’s is also in the process of testing a number of other new menu items in limited capacity, but it remains to be seen if they will be chosen for sale in all McDonald’s stores.
The transition to a 24-hour breakfast service setup wasn’t all smooth sailing. Numerous franchises reported that the rollout of the new menu happened too fast, which resulted in customer confusion and delayed supply orders. A recent survey of McDonald’s franchise owners conducted by Mark Kalinowski, an analyst with Nomura, revealed that a number of owners believed the rollout of the new menu was rushed and disorganized.
Both customers and franchise owners have been calling on the company for all-day breakfast for years, but it wasn’t until Easterbrook began as CEO that the company was able to make it happen. McDonald’s has removed some of its less-popular items on the lunch and dinner menus to make room for the new breakfast options. You can say goodbye to McWraps for now.
McDonald’s removed an average seven items from their menus. In order to ensure locations remain stocked with ingredients and to keep orders flowing, this was a necessary change. Easterbrook asserts that there is an additional seven low-selling items that could be removed from restaurants around the country, pending sales data from this quarter. As options for food customization increase, the company is getting rid of menu items that are similar to each other already.
In past years, the company has taken offered a wide range of menu items, but made little effort to let customers know that they could customize their orders. The new strategy is likely to continue to bring more customers through the doors overall – the company’s sales have jumped for the first quarter in nearly two years.
Reports on social media suggest that the company hasn’t finished smoothing out the new setup entirely. Complaints about lack of breakfast availability have surfaced, but hiccups are to be expected in the first few months of new service. Especially across 14,000 restaurants.
Some franchises have reported a drop in sales as people are substituting breakfast items for more expensive cheeseburgers and dinner meals, but sales of Egg McMuffins have increased by double-digit percentages.
McDonald’s also swapped out the margarine in the breakfast sandwich for butter, which has received overwhelmingly positive response from customers. According to Kalinowski, franchises can expect to see an average 1.5 jump in sales each quarter, and a full percentage over the course of the next year. Established locations had their sales increase by 0.9 percent in the third quarter of this year as a result of the changes made by Easterbrook.
Investors are confident that the company’s new strategy is a good thing for McDonald’s bottom line. Easterbrook declined to project too far into the future, but he remains confident that all-day breakfast will continue to drive sales at locations across the country.
The press release outlining the details of the menu shift can be read here.