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The world’s most famous burger chain will shrink its number of US restaurants for the first time in decades in what is being described as a symbolic contraction for the now vulnerable looking giant.
Not since 1970 has McDonald’s closed more stores that it has opened, however this year will mark a historic change as the company loses sales to direct competition. In fact it’s the only major burger brand whose sales are in decline; Burger King, Wendy’s, Jack in the Box and Popeyes are all growing.
Indirect competitors such as Mexican fast-food restaurant Chipotle have also taken a share of McDonald’s dominance with business models marketing themselves as serving fresh, high-quality ingredients.
The restaurants closing will be a mixture of franchise and company-owned locations, however McDonald’s spokeswoman, Becca Hary, said the reduction would be “minimal” in comparison to the estimated 14,300 restaurants in the US. According to Hary, the reduction is part of a strategic review which is intended to pave the way for future growth.
Here’s more behind the McDonald’s brand.
Current McDonald’s CEO, Steve Easterbrook, was born in Watford and is the first British-born CEO of the company. He first joined McDonald’s in 1993 but left for a period in 2011 to take up roles as chief executive at Wagamama and later at Pizza Express. His appointment as CEO is significant given the apparent paucity of marketers in boardroom roles.
Easterbrook is said to be looking to Chipotle’s business model for ideas on how to battle declining sales. Former McDonald's global CMO Larry Light even claimed Easterbrook was obsessed Chipotle.
Ironically McDonald’s has itself to blame for the success of one of its biggest fast-food rivals. McDonald’s invested in Chipotle in 1998 which helped the chain grow from 14 locations to nearly 500 within seven years. The chain now has more than 1800 locations and recorded same-store sales growth of 17 per cent last year. By 2005, McDonald's had a 90 per cent stake in Chipotle's business however the company saw it as a distraction and divested its stake.
The first McDonald’s restaurant was run by brothers Dick and Mac McDonald in San Bernardino, California. In 1954 Ray Kroc visited the restaurant and was so impressed by their efficiency of their operation that he pitched his vision of creating McDonald’s restaurants across the US.
Previous McDonald’s CEO Don Thompson was paid $9m last year.
At 40 per cent, the majority of the company’s revenue comes from Europe, mostly the UK, France, Russia and Germany while 32 per cent comes from the US.