McDonald's downsizing menu
by Monica Watrous
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OAK BROOK, Ill. — McDonald’s Corp. is removing eight menu items next month as part of aggressive actions to reboot the business in the United States, where sales have stumbled significantly over the past year. The fast-food chain said its complex menu slowed drive-thru times over the past few years. The company also is cutting five combo meals.
Executives discussed the menu changes on Dec. 10 at the company’s investor meeting. Eliminated products will be lower sellers and items that require more time to make.
“So, some of you are thinking, okay, man, so you’re going to take away the Filet, the Mac and the Quarter,” said Don Thompson, president and chief executive officer. “No. What this is is … if you’ve got three varieties of a certain platform, a certain sandwich, if you’ve got one of those that is not moving as much, and there’s a high-trade potential of that third one moving into the other two, then you can streamline and eliminate that.”
McDonald’s is whittling its core offerings to make way for a customizable model called ‘Create your taste.’ The build-your-own burger option will increase variety for customers while eliminating the need for more menu items, company executives said. The platform includes new toppings and sauces that customers may choose to add to a sandwich.
“I think that one of the beauties of this ‘Create your taste’ idea is the ability, in the future, is that we don’t need to have a big menu board to offer variety,” said Mike Andres, president of McDonald’s USA. “The variety is really determined by the customer themselves individually, independently. We can offer these high-quality ingredients made any way. It could be a hamburger, it could be a chicken sandwich, it could be whatever you were looking at with different ingredients.
“And so I think the future suggests that we can continue to really simplify our base menu. And we all recognize that 80 percent of our sales are coming from a very small subset of the menu,” he added. “And in the future, the new product news can really come around this customization idea, so there’s a lot of benefits to pursuing this.”
Part of the menu changes include a move toward products and flavors that are only offered in certain markets. The chain will give regional managers more autonomy to pull from the company’s pipeline and introduce such local tastes as a chorizo burrito, cheddar bacon onion sandwich, a clubhouse burger or mozzarella sticks.
“So, there will be this opportunity for a local market to plus-up, if you would, by getting that local flavor and taste,” Thompson said. “It may be that out of three sandwiches, two of those really resonate in that area, and two resonate in East coast or West coast; but they may be two here that are different than the two over here. And so those kinds of things are the pieces that come together to help us with the menu aspect.”
The company said it has added more than 100 items over the past decade, creating complexity both in operations and in ordering. McDonald’s executives hope the pared-down menu will eliminate confusion for its customers.
“It’s even a larger opportunity in the US because … you don’t want a customer to be confused as they are coming through the drive-thru, especially if you are advertising a premium-based sandwich, and the customer says, ‘You know what? I didn't even go to the premium-based sandwich; there was so much on the menu board, I just ordered what I normally order’. What you just did was defeat the marketing that you put forward and all of the media messages,” Thompson said.
McDonald’s isn’t the only chain making moves to streamline the menu. Rival Burger King reported stronger sales after adopting a simpler approach to innovation with “fewer, more impactful launches” last year. The scaled-down menu model also has proven successful for such brands as Chipotle Mexican Grill and Five Guys Burgers, whose unfussy selection appeals in particular to millennial consumers.
For the nine months ended Sept. 30, net income at McDonald’s Corp. was $3,660.3 million, or $3.69 per share, down 13 percent from $4,188.9 million, or $4.16 per share, in the same period a year ago. Revenues were $20,869.1 million, down 1 percent from $21,012.5 million.