Can McDonald's Regain Lost Customers?

McDonald's is losing customers. Is this the beginning of the end?

Jan 31, 2014 at 10:00AM

On Jan. 23, global restaurant chain McDonald's (NYSE:MCD) released the form 8-K that summarized its performance for 2013. While currency-adjusted revenue and net income increased 2% and 3%, respectively, other metrics such as declines in comparable guest counts serve as a possible warning for stormy waters ahead for McDonald's and its shareholders. It also means that competitors Yum! Brands (NYSE:YUM) and Wendy's (NASDAQ:WEN) may smell blood and move in for the kill. 

Losing customers

Last year McDonald's comparable guest count declined 1.6%, 1.5%, and 3.8% in the U.S., Europe, and Asia/Pacific, Middle East, and Africa, or APMEA regions respectively. The only segment to expand was the "Other Countries & Corporate" segment, which includes "operations in Canada and Latin America as well as Corporate activities," which saw its comparable guest count increase a meager 0.7%. Fewer guests mean lower opportunities to make a sale. Also, it's worrisome that McDonald's guest count slowed down in the U.S. when the American economy actually expanded 2% during that time frame. Moreover, underpenetrated markets should see a robust expansion in comparable guest counts as company popularity increases in the newer regions. Its clear that McDonald's needs to get creative in bringing back its customers.

Getting back on track

As we begin 2014, global comparable sales for the month of January are expected to be relatively flatWhile near-term challenges remain, we are intent on strengthening our brand to further differentiate McDonald's and become an even bigger part of our customers' lives. We have an outstanding brand, the best franchisees, suppliers and employees in the industry and distinct competitive advantages along with the right strategies to deliver sustained, profitable growth over the long term.  

This quote from McDonald's CEO Don Thompson indicates that challenges are here for now and will continue until McDonald's can catch up with the times by enhancing the customer experience. Besides new products and even better customer service, the company is also testing technologies that enable things such as mobile payments, according to Businessweek. He does indicate that the company possesses the resources to overcome these challenges. I

Looking ahead
It's expected that Yum! Brands and Wendy's will report earnings next month. In the middle of January 2014, Yum! Brands gave guidance that suggests it is finally moving on from its avian flu troubles in early 2013. Yum! Brands' same-store sales grew an estimated 2% for its China division in December.  Yum! Brands expects an EPS decline of "high single digit to low double digit" for full-year 2013 versus 2012. Over the long term, its relatively underpenetrated Chinese and Indian territory  and planned massive domestic expansion of Taco Bell should add shareholder value.  

Wendy's expects a year-over-year improvement in its operating income as a result of reimaging and refranchising efforts. Contrary to McDonald's, Wendy's expects same-store sales growth of 2% in North America for 2013.

On the whole, McDonald's should prioritize bringing its customers back in the door. Perhaps mobile technology will do the trick. Obviously, McDonald's faces global market saturation. Most of the future total return for McDonald's shareholders will probably come from dividends versus capital gains. McDonald's may work best in an income-oriented retirement portfolio. Yum! Brands' diverse portfolio of businesses such as KFC, Taco Bell, and Pizza Hut will give it an edge over McDonald's; if one type of business doesn't work out, then it can focus on the ones that do. Over the long term, Wendy's and its franchisees only operate 6,500 stores, giving it a great deal of expansion room versus McDonald's and Yum! Brands. McDonald's is not done, but don't expect robust gains anytime soon.

More stocks for an income-oriented portfolio
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

William Bias owns shares of McDonald's. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers