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What's Eating McDonald's? (And Why Aren't More of Us?)

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The Golden Arches continue to lose their shine.

McDonald's (MCD) disappointed investors on Monday by posting uninspiring performance metrics for the month of November. U.S. comparable sales declined 0.8 percent, continuing a problematic trend that initially reared its ugly head when the world's largest fast food chain posted negative comps in October of last year. McDonald's has been posting monthly ups and downs, and the end result is that comparable sales have inched a mere 0.1 percent higher through the first 11 months of the year.

McDonald's growth isn't keeping up with inflation, and it's certainly not keeping up with market expectations.

Bucking the Trend

This was supposed to be a time for McDonald's to shine. It has always been a haven for cheap eats, but it has spent the past few years broadening its offerings to appeal to folks hungry for more than just one-buck burgers.

From the McCafe rollout that features fruit smoothies and fancy coffee beverages to a menu that embraces premium chicken sandwiches and gourmet burgers, these should be days of growth. The employment picture is improving, and gas prices have held steady enough that no one should fret about queueing in a long drive-thru lane.

Clearly, that's not what's happening: The average established McDonald store didn't ring up as much in sales last month as it did last November.

"November's performance was supported by breakfast, chicken menu choices and expanded value offerings," McDonald's explained, but that only meant that everything else is going the wrong way.

"Ongoing competitive activity and relatively flat industry traffic trends negatively impacted performance," the chain concluded, but that also was an incomplete statement.

Eatery trackers Black Box Intelligence and People Report team up every month to put out the November Restaurant Industry Snapshot, and that shows a far more favorable perspective. The snapshot shows that restaurant industry same-store sales actually rose 0.8 percent in November, and that's at odds with the mirrored decline at McDonald's that it's apparently blaming on industry trends.

McDonald's has a problem, and it's trying to do something about it.

Driving Through 2014

"As consumer expectations and the marketplace continue to evolve, we are making investments in our menu, restaurants and service to strengthen our connection with customers and build our business for long-term profitable growth," McDonald's explains.

We already knew this.

During an investor presentation last month, the chain laid out its plan for 2014, which entails introducing deeper prep tables across all of its U.S. locations and incorporating a third drive-thru window at new sites.

The larger prep areas will allow McDonald's to stock more fresh ingredients, giving customers more flavor options. Naysayers will argue that this will only make things more complicated, giving the chain's front line more opportunities to mess up orders. But McDonald's has to do something. The registers are stagnant.

The third drive-thru windows will only go in at new or rebuilt eateries, giving drivers placing complicated orders a different place to wait that won't hold up the line for the others.

These are the two initiatives that McDonald's was referring to when it expressed its intent on Monday of "rebuilding its underlying business momentum by strengthening key elements of customer service and leveraging the breadth of menu choices..."

It's a novel approach, but McDonald's needs more than just new ingredients or a place to park the person requesting a Big Mac cut in half, no pickles, with the special sauce on the side. It needs to reshape consumer perception, and that's something that's never easy to find on a deep prep table.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our newsletter services free for 30 days.

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Sandi

Perhaps McDonalds needs to revisit their menu as Burger King did. A veggie burger please!

December 17 2013 at 11:53 PM Report abuse rate up rate down Reply
singhgeorge12

I have not receive a increase in my salary in the last four years and I do not know when or if I will ever receive one all my bill see a increase twice ,trice or four times or the year as the season change ,I have not had a big Mack I the last two or more years ,I do not know when I will be able to afford one !

December 17 2013 at 7:55 PM Report abuse rate up rate down Reply
hhengineeringinc

they might sell more with a real menu to decide from, only a quarter of the stuff is showing on the menu that they display, i then gravitate towards the dollar menu that has things listed out. their new mochas are listed as just that but they sell them hot,cold, as a shake. without knowing this i probably went to the duncan donuts a dozen times instead. they are not getting their new menu out there

December 12 2013 at 3:25 PM Report abuse rate up rate down Reply
jrkdds2256

when you go to the restroom there flush twice. it's a long way back to the kitchen

December 12 2013 at 1:10 PM Report abuse rate up rate down Reply
garypmcc

McDonalds is shooting itself in the foot. I eat there twice a week. In one day ALL the prices went up 10 cents on EVERY item. I got the "double cheeseburger" from the value menu. In the past couple of months the price has gone up from $1.39 to $1.69 and the sandwich is microscopic. The cheese is NEVER melted and usually cold. To ad insult to injury the store was recently remodeled.They placed the GIANT UNREADABLE menu in a place where you can't see it before you order. Stupid. Any of the combo meals cost $8. I can eat at several local burger joints for that and get more and better food. I'm not a health nut nor a foodie. McDonalds needs to take several pages from In n Out and shorten the awkward menu and improve the food items. Yes, I do want it FAST. But I also expect value and something edible.

December 12 2013 at 1:02 PM Report abuse rate up rate down Reply
ragbrairat

I know why I(and many of my friends) won't patronize McD's. It's the same reason we won't shop at Wal-Mart,corporate greed!! I do my absolute best to only shop at places that pay a living wage, like CostCo. It means a lot more meals prepared at home, but that's not a bad thing. They just don't seem to get it, I would gladly pay more for a product if it was made by employees that aren't on the dole so their corporate overseers can make billions in extra profit.

December 12 2013 at 12:11 PM Report abuse +1 rate up rate down Reply
TAMI

last time I ate there with my husband and kids it wasa little over 35.00 for the big mac combos. REALLY? at McDonalds? No thanks. Same goes for Burger King. Not interested in that kind of food anymore. If I want to eat bad, I'll eat Pizza and a salad, much cheaper for a family of 5

December 12 2013 at 12:06 PM Report abuse rate up rate down Reply
a_girl34

Whoever wrote this article really doesn't get it. There are two big, giant, obvious reasons people are pulling away from McDonalds.

1) the nation wide protests against unfair wages has been humiliating for the entire industry. With the intro of Obamacare, people are starting to get a clue about how much poverty wages cost us in taxes. McDonalds should be paying their employees enough for food, housing and insurance so have to.

2) Honestly, the foods kinda gross. We were all willing to put up with it during the recession when we were too broke to eat anywhere else, but with the economy doing better people will be returning to the higher quality, casual dining/fast food restaurants, like Panera and Chipotle.

December 12 2013 at 12:04 PM Report abuse rate up rate down Reply
tdehoff

McDonalds problem is that they have overpriced everything except the dollar menu items. Big Mac meal will set you back over $7. For that $7 I can get a local resturant/bar/grill meal that will be better and supports the local economy etc.

December 12 2013 at 11:50 AM Report abuse +1 rate up rate down Reply
cobaltmuscle

I worked @ McDonald's when I was 16. Much different world then now. We actually used to cooks burgers on site, make shakes from scratch. NOW, corporate greed has dictated an industry of "fast food" with numbers and corporate trending! Mcdolnald's doesn't even taste the same. I had Mcdonald's about 3 months ago, first time in 6 years. Had a Filet O Fish & fries. The fries are becoming shoestrings....much thinner than previously. It was ok. I don't care for any of their "food" any longer. Doesn't taste like food. Making REAL food Micky D's, thats were it's at!

December 12 2013 at 11:33 AM Report abuse +1 rate up rate down Reply