CHICAGO — Breakfast represents a major opportunity at McDonald’s Corp. as more competition emerges during the daypart, said Kevin M. Ozan, executive vice president and chief financial officer.
“There's been a lot of new entrants into that space,” Ozan said during a July 26 earnings call. “So, there’s not many players that are growing comp guest counts at breakfast or really in most of the dayparts. But new entrants have kind of caused a scattering, I’ll say, of the existing guest counts among just more units.”
This has resulted in fewer visits from regular customers, he said.
“It’s not losing customers; it’s losing customer visits,” Ozan said. “So, it’s customers that may not be visiting us as often as they were historically. And if we can regain some of those additional visits, especially at breakfast time, which is, as you know, a very habitual ritual, and so if we can get those customers coming again at breakfast time, it would be a huge benefit.”
Comparable sales at McDonald’s US restaurants grew 5.7 percent in the recent quarter, the highest since the launch of All Day Breakfast in the fourth quarter of 2015, Ozan said. Value deals and the switch to fresh beef for quarter-pound burgers contributed to the strong performance.
“Since switching to fresh beef for our quarter-pound burgers just over a year ago, our sales results and positive customer response confirm it was the right strategic move,” Ozan said. “In the first half of 2019, we sold over 55 million more quarter-pound burgers compared to last year. A combination of both deal offers and line extensions, featuring bacon and deluxe builds on our classic Quarter Pounder with Cheese helped boost sales.”
A contributor to sales growth was the limited launch of international items in US restaurants. The Worldwide Favorites menu included the Grand McExtreme Bacon Burger from Spain, the Tomato Mozzarella Chicken Sandwich from Canada, the Stroopwafel McFlurry from the Netherlands and Cheesy Bacon Fries from Australia.
“Strong average check growth from both product mix and pricing continues to fuel our top line in the US,” Ozan noted. “We’re seeing success with offerings that increase average check, traffic and cash flow, such as our current Worldwide Favorites LTO. However, returning the guest count growth in the US remains a top priority in the street fight for market share.”
Stephen J. Easterbrook, president and CEO, discussed how the restaurant company has evolved with changing market and consumer dynamics over the past four years.
“Returning to our growth company was going to require big, bold steps and greater personal accountability,” Easterbrook said. “Menu success will be determined by the fast beating the slow, by choosing progress over perfection and moving with a sense of urgency, so we set out on a journey to become faster, smarter and more responsive to changing consumer expectations.”