Two all-beef patties, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun don't seem to have the customer appeal they once did.
McDonald's (NYSE:MCD) has been struggling, and its burgers are holding back the once-dominant chain. Though the eatery has well-loved French fries, a recent YouGov survey showed that only 7% of the American people think Mickey D's has the best burger. That places the fast-food juggernaut behind obvious choice Five Guys, which promotes the quality of its burgers, but also rivals Wendy's (NASDAQ:WEN) and Burger King (NYSE:BKW).
That's troubling news, because no matter how many fried chicken variants, coffee drinks, salads, wraps, and other items McDonald's offers it is still at heart a burger chain. If customers see a McBurger on par with the offerings at Arby's, a chain that primarily markets its roast beef sandwiches, then Ronald McDonald, Grimace, and the rest of the gang (I'm looking at you Mayor McCheese) have a big problem.
How bad is it for McDonald's?
In the United States, McDonald's has been on a losing streak.
In August, U.S. comparable sales decreased 2.8% amid continuing broad-based challenges, including sluggish industry growth in a highly competitive marketplace, the company reported. Sales have fallen on a month-over-month basis in the U.S. since November 2013.
Why are burgers so important?
Though McDonald's sells many food items, its signature offering has been the Big Mac almost since its invention in 1967. The chain originally just sold burgers and fries, and its identity remains tied to those original offerings.
If the public sees the McDonald's burger as inferior, then it's likely to consider visiting another chain. Five Guys, and to a lesser extent Burger King and Wendy's, have marketed their burger as superior -- just looking at the Five Guys guys product make clear this is true. Add the many regional or smaller chains that offer a burger that looks more like what you make on your home grill and it's not hard to see why people are rejecting the thin, grayish patties McDonald's peddles.
Just in case you question the survey results above, Consumer Reports also tested burger quality and had even worse news for the Golden Arches:
The chain, which serves flash-frozen patties made with 100 percent USDA-inspected beef, touts them as free from "preservatives, fillers, extenders, and so-called pink slime." Such a pledge might be comforting, but it's hardly a rousing endorsement. McDonald's own customers ranked its burgers significantly worse than those of 20 competitors, including Hardee's, White Castle, and Carl's Jr. No other house specialty scored as low.
When you score lower than White Castle, with its paper-thin patties, then you have a real problem.
Can McDonald's turn it around?
Rejiggering the menu, adding fancyish coffee beverages, and other tweaks have done little to reinvigorate McDonald's sales. Customers expect a higher-end product for a reasonable price (blame Chipotle (NYSE: CMG) for that), and that's simply not what McDonald's does.
It's no longer good enough to be fast and cheap. It's also important to represent quality, and McDonald's is so ingrained as being the opposite of quality that the company must make some major changes. Throwing around the word "Angus" and adding barbecue sauce won't work anymore.
The company needs to borrow a page from Domino's Pizza (NYSE:DPZ) which admitted its signature product needed work with its "Pizza Turnaround" campaign. The chain embraced the criticism, made fun of itself, and showed it was willing to listen to customers. It then made a big deal of the improvements it enacted. Never mind that the changes took its bad pizza to barely serviceable. People bought the hype because the changes were real.
McDonald's can do the same, but it must admit that its burgers are broken and that no amount of special sauce can fix them.
Daniel Kline has no position in any stocks mentioned. He prefers making his own burgers. The Motley Fool recommends Chipotle Mexican Grill and McDonald's. The Motley Fool owns shares of Chipotle Mexican Grill. 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.