Each time McDonald's announces how much money it's making, the company is forced to share an embarrassing truth: Americans are eating less and less of its hamburgers, chicken nuggets, and french fries.
McDonald's inability to reverse its struggles in what is still the fast food behemoths's largest market has left the company scrambling. But instead of fixing problems, the company produced a decidedly ineffective strategy, which appears to be the result of a misunderstanding of why and when people purchase food at the eatery's more than 14,000 outlets in the United States.
In a detailed discussion of the company's conundrum, Fortune describes the approach McDonald's has chosen as a "barbell strategy," in which the fast food company has doubled down on its cheaper options (often dollar menu items) while also marketing healthier or higher quality—and thus more expensive—offerings.
The problem is that McDonald's more expensive items are getting too expensive. A Big Mac now costs nearly $5, or roughly twice what it cost in 2002. That price point is likely untenable for the company, since it nearly touches those offered by higher-end chains. The result appears to be the migration of McDonald's customers, Fortune notes.
As the premium products creep closer to the pricing of restaurants like Panera Bread and Chipotle—a relatively new class of eatery labeled “fast casual”—and even approach designer burger joints like Shake Shack and Five Guys, McDonald’s risks losing customers.
Indeed, food companies like Chipotle, which charge a bit extra for the promise of better ingredients have found a huge and growing customer base. Even the Federal Reserve has acknowledged the trend. "Restaurant sales climbed, especially in the quick-service segment. Consumers shifted away from hamburgers, towards chicken, pizza, and Mexican food," the bank said in its most recent Beige Book Report.
But McDonald's problems aren't merely coming from a misplaced bet that Americans are willing to trade a five dollar bill for a Big Mac when they can spend a comparable amount and consume a better regarded burger (McDonald's hamburgers, mind you, are among consumers' least favorite, according to a recent study by Consumer Reports). The company has introduced initiatives promoting cheapness, like the "Dollar Menu & More," which launched in late 2012, and included items like the Bacon McDouble. But the focus on affordability hasn't panned out either.
The company's response to the disappointing results appears to be more of a doubling down than a backing away.
"Today's consumers increasingly demand more choice, convenience and value in their dining-out experience," Don Thompson, McDonald's President and Chief Executive Officer, said in a statement. "We are working to bring the McDonald's Experience of the Future to life for our customers to better deliver against these evolving expectations."
If the company's latest change is any indication, the experience of McDonald's down the road might look a lot more like what you can get at Chipotle now. The company announced on Monday a plan to test a new "Create Your Taste" program, which will allow patrons in some 2,000 restaurants around the country to build their own hamburgers. No burritos—yet.