McDonald's Expands Fresh Beef Push as Burger Chains Seek Edge

(Bloomberg) -- McDonald's Corp. will start using fresh beef for its quarter-pounder hamburgers across the U.S., moving away from frozen patties in one of its biggest operational shake-ups in years.

The world's biggest restaurant company is in the process of switching to fresh beef for its Quarter Pounder and specialty Signature Crafted sandwiches at most U.S. locations, the company announced Monday at a restaurant near its headquarters in Oak Brook, Illinois. The chain has about 14,000 locations nationwide.

Three years into a sales resurgence, McDonald's is seeking another way to entice customers and fend off competition. In offering fresh beef, it's taking a page from Wendy's Co., which has long touted its use of hamburgers that are never frozen.

The move also gives the company a marketing angle that doesn't hinge on promotions and discounts -- a major focus of the industry. McDonald's and rivals such as Taco Bell have increasingly relied on dollar menus to drive sales this year.

The company also began offering breakfast during lunch and dinner hours in 2015.

Chris Kempczinski, McDonald's U.S. president, said the fresh-beef shift is “the most significant to our system and restaurant operations since all-day breakfast.”

While McDonald's reported a 4.5 percent jump in U.S. same-store sales in its most recent quarter, rivals still may be biting into its market share. On March 2, McDonald's shares plunged the most in almost 10 years after RBC Capital Markets analyst David Palmer said the chain's revamped dollar menu hasn't caught on with diners. Palmer cut his prediction for comparable sales growth, saying the new menu doesn't have a  “hero” item to attract the budget conscious.

Share Decline

The stock's decline brought its loss to about 12 percent this year through Monday's close. The shares gained 41 percent last year. 

The company hopes the fresh meat will speed up service by cutting preparation times once employees are fully trained: Executives said on Monday that the beef will take about a minute to cook, compared with two minutes for frozen patties.

While the fresh meat could attract diners, it may also pose a food-safety risk for franchisees, who operate about 90 percent of McDonald's U.S. stores. In 2016, when the company tried selling fresh patties in some of its locations, Chief Executive Officer Steve Easterbrook acknowledged potential hiccups.

“There's a different food handling required, clearly, when you're dealing with fresh product than with frozen,” he said last year. The meat also has to be stored and transported differently by suppliers, Easterbrook has said.

The company has paid attention to “every little detail” to avoid any mishaps, Kempczinski said. Employees are required to handle the beef with gloves, and it's kept in the back of big coolers to ensure it stays cool.

McDonald's has taken other steps to improve its food since Easterbrook took the helm in 2015. McDonald's removed artificial preservatives from Chicken McNuggets and breakfast items such as scrambled eggs. The chain also began using real butter, instead of margarine, in breakfast sandwiches and took high-fructose corn syrup out of buns.

“We've got a lot of other plans on food,” Kempczinski said. “With a system of our size, you have to take it in bite-size chunks.”

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Jonathan Roeder

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