McDonald’s, the world’s first and by far largest modern fast food chain seems to be losing its unquestioned supremacy over the market it worked so hard to create. Maybe the King (Burger King) that is, will finally have its day in the sun considering its recent acquisition of Tim Hortons.
In a press release issued by McDonald’s on September 9, the company claimed that its global same-store sales, (a term used to describe the profit being derived from established franchises in comparison to newly opened franchises) fell a staggering 3.7 per cent in August. In addition to this, McDonalds’ American franchises, long considered the backbone of the McDonald’s Corporation, also experienced similar falls with its same-stores sales figures dropping 2.8 per cent.
Following reports of McDonalds’ economic troubles, Don Thompson, Chief Executive Officers released the quote below which did little to comment on the growing concern over McDonalds’ poor sales figures. “During August, McDonald’s global business faced several headwinds that impacted sales performance”.
As a result of McDonald’s poor sales in August, shares for the corporation also fell 4.7 per cent, a point that makes it evident that investors are becoming weary of McDonald’s. Additionally, there is the Chinese scandal surrounding McDonald’s tainted meat. In July, a reporter in Shanghai snuck into the Shanghai Husi Food plant, a subsidiary of the OSI Group an American food production corporation. Once inside, the reporter began filming and captured images of not only tainted meat being used, but additionally captures the workers using expired meat products as well.
Following this, the Shanghai Municipal Food and Drug Administration launched a full investigation into the processing unit and discovered that not only had the company been using expired meat products, but that it also had sold nearly 3000 contaminated boxes of beef.
In Europe, or Eur-Asia as Russia would prefer, Russia closed down five McDonald’s restaurants in August due to its alleged sanitation violations. This however followed Russia’s announcement that it would be placing an embargo on Western beef, poultry, fish and dairy.
In North America, McDonald’s is not faring much better According to a ranking from Consumer Reports in which McDonald’s burgers placed last for its burgers falling below all other burger chains.
Are McDonald’s economic woe’s merely the dying of a franchise or something bigger all together? Marc Faber Swiss, investor and publisher of the Gloom Bloom and Doom report, commented in an interview with CNBC that McDonald’s failing value could be reflective of a much bigger picture.
“Nobody knows for sure” what will cause stocks to collapse, but “the earnings may disappoint. We had, essentially, very poor sales from McDonald’s. Now, McDonald’s is a very good indicator of the global economy. If McDonald’s doesn’t increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power.”