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Following yesterday’s (Thursday 26 July) announcement of McDonald’s Half Year 2018 results, Cassius Prempeh, Foodservice Analyst at GlobalData, a leading data and analytics company, offers his view on the company’s current progress:

“Stakeholders would be wise not to judge the performance of McDonald’s entirely on their dip in revenues for this quarter. Falling revenues should not overshadow the chains progress in other areas such as the freshness of their ingredients, sustainability of business practices and technological advancements. Correct implementation across all stores takes considerable time and monetary investment, so stakeholders ought to have a long term view in mind amidst periods of slow growth.

“Yet again, McDonald’s enjoys an earnings increase of +7.14% over last year’s quarter 2 figures. This marks approximately 11 quarters of growth in the past 3 years for the QSR giant despite real revenue falling -11.6% to $5.35bn. It must be kept in mind that the fall in revenue has come about as a result of McDonald’s restructuring the layout of their stores, introducing new energy into their business strategy. The company has trimmed down the amount of company owned restaurants which instead, have become franchises. This double edged sword reduces operating costs for the parent company whilst also generating less revenue due to the company taking percentages of revenue from franchises rather than taking the whole share.

“In recent years, the growth of McDonald’s can largely be attributed to their integration of technology. The strategic decision to welcome technological change rather than resist it, is one that is helping its consumers to better receive the convenience that they are looking for within QSR channels. To this end, McDonald’s continues to invest significant capital into its store layouts, interactive kiosks and delivery partnerships, all with the intention of streamlining their processes. The idea is that the less time consumers spend waiting, the more regularly they would shop resulting in a higher transaction average per day.

“McDonald’s is right to follow healthy & sustainable eating trends that grips today’s consumer. In order to jump on this potentially profitable trend, McDonald’s have trialled fresh beef and are looking at abolishing plastic straws. Whilst these promises have brought good press for the chain, producing fresh food and paper straws on a daily basis on such a scale is not a simple task and can run up operating costs as a result. If the fast food behemoth fails to strike a balance between speed, cost and quality, the costs and trade off in the form of customer distress could negate any potential rise in net income in the future.

“The pressure to deliver on environmentally sustainable straws is mounting from competition such as Starbucks and Pizza Hut. Failure to find an alternative will draw scrutiny from the public eye. Issues have already been seen with the recalling of salads across 3,000 of its US stores this quarter after complaints of sickness in about 100 people. Naturally, McDonald’s took a small hit from this recall with domestic stores underperforming compared to some of their international stores.

“We recognise the chains efforts to modernise their business to remain a leader within the fast food market, and also acknowledge that the issue with fresh, sustainable practices is not an issue unique to McDonald’s, but an industry wide problem. We remain optimistic in the chains ability to maximise efficiency through their technological refurbishment across stores.”