Should McDonald's simplify its menu?
The hamburger chain is struggling this year, overshadowed in the US by Five Guys and other chains with far more limited offerings.
"Simplifying the menu rather than expanding it would be one positive step in the right direction, as well as toning down the company's overall complex strategy," write the investors from Hedgeye.
Just look at who's winning the burger business right now. "Companies like Five Guys and Shake Shack are slowly creeping in and taking away share from MCD," Hedgeye writes.
Post continues below.
So McDonald's needs to be more like Five Guys? Very little chance of that happening. What we're instead seeing is a divergence of sorts in the fast-food business. Five Guys and Chipotle Mexican Grill (CMG) are making it big with quality ingredients that take time to prepare. The menus at both establishments are very simple, and people know that while there isn't much to choose from, what you get will taste very good.
The traditional fast-food industry, meanwhile, is scrambling to find new, exciting menu options to bring people back. The strategy has worked very well for Taco Bell, which became the turnaround story of the year largely because of its Doritos Locos Taco.
McDonald's hasn't had one of these lightning strikes in a while; the last gimmick that struck gold was its McRib sandwich. It needs another hit, something to stop the people driving by on their way to Five Guys.
Burger King (BKW) is looking for a new phenomenon as well, but as beef prices hit sky-high levels this year the chain began trying to sell people on chicken. New items coming this fall include an Italian basil chicken sandwich, popcorn chicken, a breakfast burrito and a raspberry smoothie -- none of which sound all that exciting.
So would a simpler menu help McDonald's? Only if the company used those cost savings to radically improve taste and quality. But that would mean dramatic changes to everything from ingredient sourcing to distribution methods to final preparation. And some customers would certainly revolt against systemic change on such a grand scale -- and the price increases that would undoubtedly follow.
The smarter path for McDonald's is to focus on healthier foods. It's emphasizing menu items that are fewer than 400 calories -- a nice tie-in to the Olympic games and a logical reaction to soaring beef prices. It needs to capture those families who are trading down from casual restaurants, and selling itself as a healthier option is key.
More from Top Stocks
- GM loses big bucks on each Chevy Volt
- JCPenney to resume free kids' haircuts
- Investors don't know what to make of Greece
I don't like going to burger places except fast food. The whole point is I'm either there for lunch and need something inexpensive and fast or it's to pick up a quick dinner on the way home with a kids meal. No matter the quality (and some aren't as good as they're made out to be), driving somewhere for an overpriced burger isn't worth it. If I want something better than fast food, I can save burgers in my fridge/freezer and cook them myself. It costs less and just takes a little time to make - time that I'd waste driving and waiting for the food.
There's nothing wrong with going out every once in a while for something like this, but not on any kind of consistent basis. Too much food for too much money.
mcD's current cardboard, carbs & corn syrup line-up... up against a decent burger from In & Out such as the Double Double with real fresh potato fries & chocolate milk shake???
mcdonalds doesn't need to simplify it's menu, they just need to do something to get more people in. the competition is doing well because they are different. 5 guys makes better hamburgers. they are more expensive, but they are better. and they are better enough to justify a not too big difference in price. I think mcdonalds needs to innovate. come up with something new - like taco bell did with their doritos taco. try some new burgers with better toppings maybe.
and I'll bet if mcdonalds served their breakfast menu all day long, they'd do well with it. I know I'd eat there more often if I could get their breakfast menu for lunch.
Mc D needs better food there McSteak was great then gone
the reason McRib does so good when it is avaible is that it tastes great the rest needs every thu=ing on it to cover the meat taste
The stores also seem to have problems properly cooking "premium burgers" currently on the menu. When properly cooked, they, at least, look and taste more like the classic American burger.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.