McDonald’s is dead, long live McDonald’s.
Fans of the British Empire know that my opener suggests that McDonald’s Corporation (NYSE:MCD) isn’t about to die; rather that it may be dead in its present form, but MCD lives on with a seamless transition into its new form.
Well, maybe not exactly seamless … MCD is in a pickle, so to speak.
I was one of many who believed that McDonald’s would never have to change. Why should it? MCD has offered a relatively consistent product for decades. One zillion served and all that jazz.
McDonald’s had to pivot here and there, offer a few more healthy items, introduce a rather brilliant strategy of offering coffee, and innovate the menu a bit.
Yet, a funny thing happened to the Golden Arches along the way. Times changed. I don’t think MCD anticipated how big the change would be, nor its impact. So, by way of encompassing a discussion of those changes and how McDonald’s stock must now adapt or die, let’s take a look at what MCD needs to do.
#1: Create a Bold New Vision
I’m not suggesting that McDonald’s abandon its entire business model. However, MCD has to recognize that the restaurant industry has changed.
If you’ve ever been to Chipotle Mexican Grill, Inc. (NYSE:CMG), then you know that “fast food” now includes relatively healthy options — prepared just as quickly as MCD — and encompasses different types of cuisine.
The competition is only going to get worse. Concept restaurants aren’t new, but fast food concepts are relatively new. McDonald’s needs to somehow stay true to what people know it for — burgers, fries and shakes — and yet create a new image.
Carl’s Jr. has made a niche by advertising its “gourmet burgers” with “pure Angus beef.” MCD needs to make a similar move without significantly disrupting its price point, if possible.
McDonald’s needs to reformulate its milkshakes so that they are now featured as having some kind of specific ice cream brand.
In short, MCD needs a new vision.
#2: Simplify the McDonald’s Menu
I never used to get confused by something so routine as a MCD menu, but I have been for years. It’s too big. I pull into the drive-thru and it’s “uh …uh …uh.” McDonald’s has added 40 items since 2007.
I think MCD needs to simplify its menu to mirror something like Chipotle’s. McDonald’s needs to look at how In-N-Out Burgers operates. I think MCD needs to make itself simple again.
#3: Renovate McDonald’s Stores
We have already seen some renovations at some MCD stores, and I would like to see more. Some McDonald’s stores have been redesigned with a more contemporary feel. I think MCD needs to move into the 21st century with new designs. Although, franchisees are going to have a fit about renovating.
#4: Look to Burger King
Restaurant Brands International Inc (NYSE:QSR) — the company that resulted from the merger of Burger King and Tim Hortons — undertook a pretty big turnaround and is now killing it.
What is the one big reason? Simplifying the menu.
#5: Hire a Crisis PR Firm
Once a new plan is in place, MCD needs to hire a world-class crisis public relations firm, as well as a few boutique players.
The message needs to be that McDonald’s is changing for the better. All your old favorites will still be there, but MCD is hearing the feedback loud and clear and responding accordingly.
In other words, McDonald’s needs some killer marketing.
In the meantime, MCD stock holds its own. McDonald’s is only 6% off its high. Things may get worse before they get better, but long-term investors may want to bank on a real turnaround.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities.
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