McDonald’s Opted For an Eye-Opening Strategy That’s Making Customers Think Differently About the Chain
The company’s Q1 results are oddly healthy. How it got there is even odder.
PHOTO CREDIT: Getty Images
Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek.
How do burger chains make profits?
They somehow give customers a lot of filling -- and often fried -- food for as little money as possible.
And they make the joy of providing it come from the almost instant manner in which it arrives after being ordered.
It's so American.
Burger chains traded on that for years. Until, that is, many customers began to realize there were other tastier -- and, occasionally, healthier -- options.
Today, though, McDonald's announced surprisingly healthy numbers.
Same-store sales rose by 5.5 percent. The cabal of shiny-shoed analysts -- who normally beat popes for infallibility -- expected a mere 3.8.
It would be easy to imagine that one thing inciting this surge of gold at the Arches is the recent Dollar Menu, which wasn't really that much of a (One) Dollar Menu.
Indeed, some reports have suggested as much.
There's another aspect, though, that I suspect is more powerful.
Creep a little deeper into the numbers and you'll see that McDonald's actually raised many of its prices.
This the chain justified this not only because some of its costs went up, but by making some of its food a little (more) alluring.
Its gourmet burgers, for example, don't merely sound as if they're a touch fancier. They don't merely taste as if they're a touch fancier and cause some of your fellow diners to believe that you're flying McDonald's Business Class.
These gourmet offerings also bring with them a much higher margin.
Moreover, as McDonald's starts to roll out burgers that contain actual fresh meat, you're likely to see franchisees charge more for them.
After all, fresh meat is better, right? So if it's better, you can charge more.
Especially as the economy is doing quite well. At least for many people.
It's a tantalizing idea that McDonald's might finally be catching up to the notion that people don't want the same old frozen fare forever.
Goodness, one of the company's most recent successes is a kale salad. If that isn't chi-chi, what is?
Yes, it could be that the signs blaring cheap-cheap-cheap still entice many customers into the restaurants.
However, once they get there, they're beginning to see something a little different and choosing to spend a little more.
If the economy tanks, of course, this could change.
But McDonald's appears to be altering expectations, especially as it finally embraces technology with delivery and mobile ordering.
Gosh, what if its delivery people start to use those blessedly irritating electric scooters in the Bay Area?
I don't think tech types will ever go to Shake Shack again.