The golden arches have become tarnished, but an activist investor pushing for change just might be able to polish them up once more.

Last Friday hedge fund Jana Partners revealed it had taken a sizable 842,000-share stake in McDonald's (NYSE:MCD). Although it hasn't yet filed statements with the SEC hinting at what its intentions are with the fast-food chain, its history is one that suggests the Golden Arches are in for a shake up.

This summer the $11-billion hedge fund took a position in pet-food supplier PetSmart and demanded it put itself up for sale. It also convinced Apache to sell its international holdings and drill for oil and gas solely on U.S. soil, and it won a seat on Walgreen's board to help it cut costs and examine the products it sells.

McDonald's would certainly fit the bill of a company in need of having the cobwebs shaken out.

After surviving the recession by attracting consumers with its value proposition, it's faltered more recently via a combination of changing consumer tastes and missteps by management. Just as consumers started responding to the fresher ingredients offered by fast-casual concepts like its one-time protege Chipotle Mexican Grill (NYSE:CMG), McDonald's was introducing more complicated menus and introducing too many new products, which caused franchisees to balk at the costs. This could be the first year in over a decade that sales at restaurants open for a year or more fall.

This year is on track to be the first one in over a decade that same-store sales come in lower than the year before. Data: McDonald's quarterly SEC filings

Indeed, some have seen a correlation between the anemic results and the time CEO Don Thompson assumed the helm in July 2012. Trailing revenues of near $28 billion are barely ahead of the $27.6 billion it generated that year, though operating expenses are 5% higher, net income is 7.5% lower, and per-share profits are down 5% even though outstanding shares are off 2.6%.

So, where might Jana Partners look for improvements?

McDonald's management says it welcomes all investors, but Thompson himself might start feeling a bit insecure. But beyond C-suite changes, here are some of the options it could pursue:

  • Continue or accelerate McDonald's menu simplification plans
  • Speed up the ordering process, such as the 60-second guarantee it recently began testing in Florida
  • Amp up refranchising of company-owned restaurants, as both Burger King Worldwide (UNKNOWN:BKW.DL) and Wendy's (NASDAQ:WEN) have done, since McDonald's own plan unveiled earlier this year underwhelmed Wall Street
  • Further rollout its "build your burger" fast-casual concept
  • Create a real estate investment trust for its properties

It's also quite possible Jana just sees McDonald's as a beaten-down stock that still represents a good investment. Jana's holdings in the fast-food restaurant amount to less than 1% of its total outstanding shares, and even though it wrangled a seat on Walgreen's board with a little more than a 1% stake, McDonald's could just be a beaten down stock that's still generating substantial cash flow.

The hedge fund's tag line is "ignore the crowd," and though Jana's founder Barry Rothstein used to be a follower of "jockeys" rather than "horses," ultimately he focuses on the cash businesses produce. He says "in cases where we can't find an absolute superb jockey, we'll still invest if the cash flow is there." 

That's as good a statement as any for an investment in McDonald's. Jana Partners might not want to upset the apple cart here, with a depressed environment and a dividend currently yielding more than 3%, the hedge fund has in McDonald's a good prospect for doing so.