In the name of research and journalism, I just had to go into a McDonald's (NYSE: MCD ) and try the Mighty Wings. Walking in with already low expectations, there was a chance of a pleasant surprise. While it's absolutely true that the experience was anecdotal, there was something in particular that exists chainwide that may make you wonder if McDonald's has lost its touch with its customers.
It's been reported that McDonald's is sitting on 10 million pounds of frozen leftover Mighty Wings from an original batch of 50 million. The franchisees have been complaining that the wings are too expensive, among other things, especially when they have a dollar menu on the board right next to the wings.
Other complaints include that the wings were too spicy, they looked too much like the Chicken McNuggets, and that the economy is too soft for such a premium item. Now I'll add my own complaint from my experience. To emphasize, it's not so much a complaint about the product but more on the why-didn't-management-think-of-that front.
No blue cheese?
I ordered my Mighty Wings and asked for blue cheese. The boy behind the register breathed an apologetic sigh and said, "I'm sorry, but we don't have blue cheese. Everybody has been asking about blue cheese too." While Mighty Wings aren't technically Buffalo Wings, I get that, how did management not see it coming from a galaxy away that customers would ask for blue cheese with something that had the word "wings" in it?
I mean, seriously? I'll live without my blue cheese, but McDonald's lost millions and millions of dollars' worth of sales by not offering one of the most basic and popular condiments that normally accompanies any type of spicy wings. With "everybody" asking for blue cheese, McDonald's management should have been proactive and had the condiment already available.
It's not even about the Mighty Wings. The lack of blue cheese isn't the problem. It's a symptom. If management is so blind that it couldn't see that "everybody" would ask for such a basic item, it begs the question: Just how out of touch with consumers is McDonald's?
No wonder McDonald's sales have been sliding. In the third quarter when the company launched the Mighty Wings, U.S. same-store sales only gained 0.7%. This occurred while McDonald's offered its popular Monopoly game promotion which always spikes sales. In October, same-store sales were only up 0.2%. Then in November, they slipped down 0.8%.
Competitors Jack in the Box and Sonic
It's easy for McDonald's to simply blame the economy, but not all fast food chains are suffering. Take Jack in the Box (NASDAQ: JACK ) for example. Not only did Jack in the Box's earnings blow up 26% last quarter, its sales have gotten stronger ever since then. CEO Linda Lang pointed out that in the last six weeks of the quarter, its sales accelerated higher each week.
Jack in the Box saw its sales continue to accelerate after the quarter ended for at least the next seven weeks up to the last conference call. For the current quarter, Jack in the Box expects a 1.5% to 2.5% increase in same-store sales. The chain continues to grow in the same economy where McDonald's is starting to shrink. Jack in the Box credited the success in part to increased breakfast and late-night menu sales. The company figured out what the customer wanted and it delivered it, instead of ordering 50 million pounds of expensive wings and hoping customers would just eat them as they were.
Meanwhile, The Wendy's Company (NASDAQ: WEN ) is also showing McDonald's how to make customers happy. In its last quarter, Wendy's reported a same-store sales gain of 3.2%, a level it seems like McDonald's can only dream about at this point. The Wendy's Company credits its success in part to the launches of the Pretzel Bacon Cheeseburger and the October Pretzel Pub Chicken sandwich. Both sound kind of delicious, don't you think? As a bonus -- they both have cool-sounding names compared with "Mighty Wings" which reminds me of "Mighty Mouse," and the last thing you want to be thinking of when you visit a restaurant is rodents.
Foolish final thoughts
If you thought the Mighty Wings were bad, watch out for the upcoming promotional discount on the leftover 10 million pounds of wings, possibly covered in freezer burn. The seemingly downhill direction McDonald's is going is more than a little worrisome. Fools may want to consider sitting McDonald's out for now until it figures out who its customers are again and what they want. How will you know when that happens? Ask the kid behind the register at your local restaurant. He seems to know more than the out-of-touch executives.
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