Investing in McDonald's (NYSE: MCD)

Jeff Siegel

Written By Jeff Siegel

Posted October 23, 2014

MCD4This week, after posting its fourth straight quarter of declining U.S. same-store sales, reps for McDonald’s Corp. (NYSE: MCD), said they now may be looking to sell more organic food to stem the loss of customers to chains known for better-quality fare.

While I applaud management for recognizing the advantages of integrating organic and local food into menus, I don’t think it’ll work.

Don’t get me wrong. I would love nothing more than to see McDonald’s put the kibosh on the toxic slop the company serves. But it’s that toxic slop that allows McDonald’s to stay in business.

Cheap Food, Fast

People don’t go to McDonald’s for healthy food or a superior gastronomical experience. They go there because the “food” is cheap and fast.

Sure, plenty of folks love nothing more than diving face-first into a Big Mac and fries. With the right combination of additives and chemistry, you can make even a piece of cardboard tasty.

But the truth is, most people who eat at McDonald’s don’t care about healthy or sustainably-produced food. And this is a reality that McDonald’s should embrace, not run from.

Sell Cheap Food

McDonald’s has not only been a mainstay for American consumers, but it’s business practices have really shaped how most restaurant food is produced and processed these days. Efficiencies, smart growth and aggressive marketing is what make McDonald’s a force. And I don’t think that has to change.

Certainly from a sustainability point of view, I would love nothing more than to see McDonald’s embrace the same philosophy that has made Chipotle (NYSE: CMG) so successful. But if I were a shareholder, I’d be skeptical of such a move.

If McDonald’s really wants to get back on track, it needs to do what it does best: Sell cheap food.

Don’t worry about organics, low-fat offerings and salads. If you want that stuff, you’re not going to McDonald’s. Besides, McDonald’s salads and low-fat offerings are still insanely unhealthy.

If the company wants to make any changes, it should start by tidying up its retail presence.

Clean up the place! Make the aesthetics more pleasing and modern. The company definitely has the right idea with this restaurant it built in France. Take a look …



Also worth noting is that in France, customers spend twice as much for a meal compared to U.S. customers. About $9 a meal. That’s more expensive than a burrito at Chipotle!

McDonald’s should also incentivize its employees to up the ante on customer service. In other words, have them not act and speak like a bunch of disinterested zombies. Besides, it’s in their best interests to do so anyway. After all, a good number of fast food jobs are already dangerously close to being outsourced to robots.

I suppose there are any number of changes McDonald’s could make to better serve its customers. But higher-priced, healthy offerings are not the way to go. The company is not going to convince health-conscious consumers to “give McDonald’s a try,” and if its current customers don’t see low prices, they’re gone.

While I certainly would never want to dissuade any company from offering local, organic options, it would be dishonest to suggest that embarking on such an adventure would be anything but a failure for McDonald’s.

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