When you think healthy, fresh, and tasty, McDonald’s is probably the last thing on your mind. Yet even though Chipotle ($CMG), Panera ($PNRA), and other billion-dollar chains offer better food for price comparable to a McDonald’s value meal, hundreds of millions of people worldwide still flock to the golden arches. After all, there’s just something about a cheap, cholesterol-filled burger and fries soaked in beef fat that you can’t really replicate anywhere else.
This wasn’t always the case. In the last decade or so, the company lost customers to the Chipotles and the Shake Shacks of the world. These chains offered equally meals made with fresher, better ingredients that some might consider quasi-healthy. McDonald’s tried everything and anything to fight these newer, hipper competitors, only to see more customers leave.
Two years ago, the fast food chain decided to serve breakfast past breakfast time. This simple tweak to McDonald’s operations sounded simple, but it actually worked. Their sales and stock value increased as investors jumped for joy at the news of people ordering pancakes at 5 pm.
The company wasn’t in the clear yet. They had to keep bringing more people back. Here’s how they did that.
McDonald’s breakfast is still super popular for breakfast, lunch, and dinner.
Just think of all the times someone went to McDonald’s to get breakfast, only to be told they stopped serving breakfast. That was a missed opportunity to make money for the company. Now that the company made breakfast available at all times in every McDonald’s location, they’ll never miss that sales opportunity again. In fact, they’ve seen new and repeat customers in the last year-plus just for their late-day breakfast options.
People love the Big Mac, so McDonald’s made more of them.
The Big Mac, if memory serves me correctly, consists of two beef patties, some vegetables, sauce, cheese, and a hamburger bun-and-a-half. It’s one of the chain’s most popular menu items, but for some people, it’s a mountain of food. That’s why McDonald’s created the Mac Jr., a smaller Big Mac that’s basically a cheeseburger. This way, people who don’t want to eat a massive pile of meat can eat a less intimidating version of the company’s signature meal.
The company also started offering a bigger Big Mac for customers with a more voracious appetite. Dubbed the Grand Mac, this menu item consists of one-third of a pound of beef, among other ingredients. While this flies in the face of “healthier” options that helped McDonald’s competitors in recent years, it’s in demand enough to be on all McDonald’s menus.
Customers (and investors) like options, and it’s helping McDonald’s sales.
The company’s sales per store increased when they offered three Big Macs instead of one, all-day breakfast, and cheaper drinks. Customers have a variety of options and portion sizes, which gets them to make repeat visits to McDonald’s. Though these options aren’t healthier by any means, they’re still attractive enough to woo millions more customers than before.
Wall Street is also happy about the company’s newly expanded menu options. Though the company’s revenue is down by 4% in their first fiscal quarter (compared to last year), $MCD is up over 8% in the last five days, and up 16% since the beginning of the year. This likely means that investors have faith in the company’s ability to increase sales and compete with other chains.
Should you invest in McDonald’s?
The fast-food chain proved that they know how to sell unhealthy food in an increasingly health-conscious world. If they continue pleasing new and repeat customers, then their value will likely increase further. If you believe in the company’s ability to sell one-third of a pound of beef in a calorie-counting world, do your research before investing. If you think the company’s fat-filled products will eventually catch up to them, consider investing their “healthier” competitors.