Fast Food is Cheap

I was reading a very interesting article in The Wall Street Journal today. The headline was "McDonald's Sales Keep Growing," and they reported that of the 30 companies that make up the Dow Jones Industrial Average, only McDonald's and Walmart have been able to have a higher stock price now than 1 year ago. Hmmmm. What do they have in common? They are both "value-oriented," which translates to, "It's cheap!" With our current down economy, customers are looking for things that are cheap. In fact, November sales increased 7.7% globally and 4.5% up for the fast food giant.

Instead of eating at sit-down restaurants with a higher price tag (like Chili's and Applebee's), people are going to McDonald's for a cheaper meal. McDonalds has 31,000 locations around the world, so even when one store isn't doing well, another store is thriving. They have also extended their hours in many stores which has resulted in more revenue. What I found particularly interesting about this story was that Wendy's, KFC, Taco Bell, etc. are not doing well in this economy. What is it about McDonald's that can survive even the worst economy?

One reason McDonald's does well is their breakfast. They have been serving breakfast for a very long time, and many people are not aware of breakfast being served at other fast food restaurants. People also love their chicken and the Dollar Menu.

McDonald's is watching costs. They have discontinued offering the double cheeseburger on the Dollar Menu and now charge $1.19 for it. Instead, they replaced it with a Mcdouble burger which only has one slice of cheese on the Dollar Menu. Cutting the cheese must translate into cutting costs. It is a fine balance between making the food affordable for consumers but also still posting a profit. Seems Ronald has that all figured out.

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