Tuesday, October 21, 2014

McDonald’s Responds to Decline With Cost-Cutting

McDonald’s posted earnings that showed another step down in its U.S. market presence. In explaining its earnings, McDonald’s said it was losing many of its U.S. customers to Chipotle. This makes sense when you think about it: Chipotle might not be as friendly or pretty as McDonald’s, but its ingredients are slightly better, the food tastes better and is served faster, the restaurant is cleaner, and the prices are essentially the same.

McDonald’s could fight back by improving its food, but that would not be the McDonald’s way. It could look for another way to stay relevant to its customers, but perhaps it thinks it has already tried everything during the past five years of decline. The more radical changes that could improve customers’ view of McDonald’s are too outside-the-box for the fast-food chain to even consider. Instead, McDonald’s says a new round of cost-cutting is just ahead. This cannot be the right answer. Surely the quality of either the food or the customer experience will suffer, driving more customers away.