McDonalds has recently announced that they will close 700 locations (1). If this a preview of what’s to come, the franchise may very well be facing its last days.
Over the years, more and more locations have been reported of underperforming. Although the company is trying to stay relevant by revamping their menu. Their all-day breakfast and “create your taste” custom burgers have complicated kitchen operations without necessarily bringing in more money.
The franchise hopes to implement digital ordering kiosks to speed up their fast food system. The problem is, fast food is becoming an irrelevant system.
McDonalds has around 14,300 locations in USA, which is about twice as many as Burger King. They are still opening new locations around the world.
Despite their best efforts, Nomura analyst Mark Kalinowski’s survey revealed aproximatley 30% of McDonalds operations are insolvent- meaning franchisees are accumulating debts they cannot pay back.(2)
The burger chain’s business efforts are only serving as a band-aid for a bigger problem. Younger generations are choosing more and more to eat at healthier sit-down restaurants. McDonalds cannot compete with newcomers like Chipotle if they do not improve quality of food and customer service.
Chipotle’s choice to serve non-GMO meat brought significant market value to the company. They aren’t alone. Boutique burger chains and on-the-go food companies are investing more and more into non-toxic, organic food. The American diet is simply not aligned with the burger giant anymore.
If McDonalds can’t keep up with the times, it may very well be the end of an era.