By Geoffrey Thomulka,
Money and Investing Writer
The first quarter of the year did not go the way McDonalds (NYSE: MCD) would have hoped.
They showed a $400 million decrease in profits in one quarter, more than the famous franchise lost in all of 2014.
It seems as if McDonalds is losing its customer base due to the nutrition in its food and the level of competition that is being fueled by competitors.
Whatever the reason, McDonalds is in financial trouble. In late January of 2015, CEO Don Thompson resigned for purpose of retirement following poor sales to start the year.
Many are of the opinion that if he had not retired, he would have been removed by the board.
Steve Easterbrook took over as the new CEO.
His appointment will be critical to the success of the franchise moving forward.
Easterbrook insists that the company has remained too conservative over the past decade because they have been a cornerstone of the fast food market.
McDonalds’ front office now believes change is not only a good idea, but a necessary one as efforts to move the bottom line into the black continue.
McDonalds will be unveiling a new strategic plan for growth on May 4.
Reasons for McDonalds’ apparent slump may lie with its competition.
It comes as no surprise the connotation of McDonalds is not healthy and good for you.
McDonalds food has a reputation for being unhealthy as they have been under the scrutiny of FDA investigations involving the sources of their chicken and beef – and no one can ignore the “pink slime” anti-McDonalds slanderers claim they use.
Competitors who claim to have healthy choices and are trying to take market share away from McDonalds are at the root of the problem.
The enormous growth of Chipotle (NYSE: CMD) seems like a huge slap in the face to them because the McDonalds Corporation sold off Chipotle almost a decade ago.
People prefer to go to Chipotle because they believe they are eating healthy food and the overall experience seems to be more holistic.
Profits may also be going other fast food competitors who are poaching away market share.
For instance, a direct competitor of McDonalds, Taco Bell seems to be doing well.
Recently, Taco Bell launched a line of breakfast foods aimed at taking away business from the bedrock of the fast food breakfast industry – McDonalds.
Wherever McDonalds may be losing money, they need to identify it quickly and find a way to remedy it.
They have already warned shareholders for the month of April that they are expecting negative growth for the fourth month in a row.
And if that doesn’t seem to be enough, they have announced the closing of 350 stores worldwide, mostly in the United States and China.
McDonalds has thrived overseas, but with the strong growth of the dollar, overseas profits are not as great as they once were.
In any case, McDonalds better hope that the plan they release on May 4th will have immediate and long term growth in mind to make sure they stay profitable as a franchise.
A version of this article appeared in the Tuesday, April 28th print edition.
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