McDonald's Is Planning To Revamp Its Value Strategy To Revive US Sales

Earlier this year, McDonald's expanded its value offerings, introducing a lineup of at least 10 items under $3. But many franchisees, who have latitude to set their own prices, didn't adhere to recommendations from third-party advisers, which hurt results, Chief Executive Officer Chris Kempczinski said on the company's earnings call on Aug. 4. McDonald's also pulled back on app-only offers and ended a buy one, get one for $1 promotion.

McDonald's has already announced a multiyear plan to become a go-to dining destination that expands its appeal beyond those looking for a fast, cheap meal. This includes higher-quality food, such as hand-breaded chicken, and changes to the restaurants designed to make them feel more open. The Chicago-based company is also looking to offer friendlier service, and it wants all customers to be greeted when they enter its locations.

As part off those efforts, McDonald's is pausing spot restaurant visits through March 31 for some franchisees in favor of targeted training aimed at improving diners' experience, according to the memo. Staff will participate in sessions on hospitality and ensuring menu items are always prepared right.

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"There's more work to do in these areas," McDonald's said in the message. "A customer's last visit is often what determines whether they will return, which is why every interaction should reflect the best of McDonald's."

The Big Mac seller is facing fierce competition from Burger King, which last quarter grew at a faster pace thanks to a revamp of its signature Whopper and ongoing restaurant remodels. That chain, which is owned by Restaurant Brands International Inc., has also appointed a manager in charge of addressing any issues diners have during their visits.

McDonald's US sales declined in July and August, according to debit- and credit-card data tracked by Bloomberg Second Measure. The upcoming investor day, scheduled for Sept. 23, "could prove a crucial clearing event" for management to prove that it has a credible plan, Jefferies analyst Andy Barish said in a recent investor note.

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"For the stock to rebound, management will have to convince investors the recent same-store sales slowdown is fixable (soon)," Barish wrote.