No, you didn’t hear it wrong yesterday — to the thrill of McGriddle addicts everywhere, McDonald’s Corporation (NYSE:MCD) is testing all-day breakfast service in some markets beginning next month. Although MCD stock didn’t budge much on the news (likely due to the fact that it’s only a test and not guaranteed to roll out en masse), there’s no denying the idea of availability of the McDonald’s breakfast menu at all hours of normal operation had a compelling ring to it on Monday.
The litmus test is, does this still seem like a good idea the morning after? As is too often the case with an actual McDonald’s breakfast meal, this plan may well end up leaving MCD investors with the equivalent to a queasy stomach.
McDonald’s Breakfast Now Available for Lunch & Dinner
It’s just a limited time and limited scope test, to be sure. Only hash browns and certain breakfast sandwiches will be available after normal serving hours have ended for the McDonald’s breakfast menu. McDonald’s spokesperson Terri Hickey made it clear by explaining, “We look forward to learning from this test, and it’s premature to speculate on any outcomes.”
The obvious follow-up question: Why?
Answer: As it turns out, enough of the fast-food restaurant’s customers have said they desired breakfast menu options all the time. In an effort to rekindle sales growth and remain relevant in an increasingly competitive fast-food market after five straight quarters of domestic year-over-year sales declines, McDonald’s is pulling out all the stops by responding to the request.
Investors who’ve kept close tabs on MCD stock over the past year will understandably be confused by the new initiative.
The company has frequently contended it lacks the needed grill space to handle lunch and breakfast menus at the same time. Indeed, it was only in Deceember the company explicitly announced it would be cutting back on the number of menu items by January of this year. Then-CEO Don Thompson made a point of saying at the time:
“We are streamlining our merchandising menu board and product offerings and in addition to making it easier for customers to order their favorite products. This will reduce complexity in our restaurants which in turn should enhance accuracy and speed of service.”
Interestingly, and perhaps on a related note, Thompson “retired” at the end of January. Apparently the company’s San Diego locations managed to find more grill space in the meantime too.
What’s it Mean for MCD Stock?
Kudos to McDonald’s for at least being willing to try new things to get its growth back on track. And, kudos to the company for listening to the market to make those plans. Round-the-clock breakfast is a magnificently bad idea, though.
While the company decidedly floundered under his leadership, Don Thompson was at least right about one thing — the mechanism for using people to make and serve food from a relatively big menu and then put it in customers’ hands was in itself more than most restaurants could manage to do well. Even adding a small handful of breakfast sandwiches and hash browns to the menu is going to make the job even more difficult for workers.
But, what about all those customers who are clamoring for round-the-clock breakfast food at their nearby Mickey-D’s?
They’re out there, to be sure. They may not be out there in numbers that fans of this McDonald’s breakfast initiative would like to believe, though.
In the field of marketing psychology, the term “selection bias” is used to describe a survey that is intended to, but doesn’t, paint an accurate portrait of a target market. By limiting the surveyed population to a specific type of customer or stratification of the customer base, detailed information about those customers may be discovered, but those customers may be anything but typical.
Self-selection bias is a form of selection bias where a survey’s results are skewed because the only people who participated in the survey or focus group are those who have an agenda or goal. Those customers who don’t have an opinion either way — even if they’re the majority — are likely to not participate in the survey or focus group at all, just because they don’t care.
Was the driver behind this breakfast menu trial the result of selection bias, or self-selection bias, from just a handful of consumers who really, really want McDonald’s breakfast items made available all day long? The company didn’t say. It’s a distinct possibility, though, which in turn means this test could show all-day breakfast service isn’t nearly as in-demand as some seem to think it is.
Either way, current owners of MCD stock, as well as regular patrons of the restaurant, better hope this test in San Diego goes badly. Otherwise, it’s just one more thing for the company to get wrong in its stores.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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