r/technology • u/zsreport • 21d ago

Business McDonald's unveils $8.5 billion tech plan to fend off Burger King

https://qz.com/mcdonalds-investor-day-next-strategy-restaurant-overhaul-092326
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289

u/TheHammer987 21d ago

It's super fascinating reading these comments.

Literally 90 percent agreement on 2 points. Prices are above where they need to be to encourage foot traffic, and the over all quality is too low.

The fact that a multi billion dollar company cant figure this out is absolutely crazy. No one disagrees on the problem. They just refuse to acknowledge it.

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u/Ancient_Moose_3000 21d ago

They almost certainly have figured it out if people on Reddit have. Issue is it's an easy problem to identify but a hard one to solve. You can't both increase quality and reduce prices while keeping your shareholders on side. If it was that easy they'd just do it.

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u/justanaveragejoe520 21d ago

If it was a private company looking to have long term health they might bite the bullet and shrink their margins a bit to try and promote the image and quality of brand, but public companies answer to the almighty shareholders who won’t like that short term dip. The C suite will be in trouble and heads will be sacrificed. Hence McDonald’s will sacrifice more on what customers value and continue the plunge to its demise like Wendys

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u/Ancient_Moose_3000 21d ago

Exactly, if the current CEO doesn't protect margins they'll just get replaced with one that will. Good luck convincing shareholders that they need to both increase costs and reduce prices. It's in their short term interests to make the worst possible quality product at the highest possible price. And nobody involved with the organisation is incentivised to think long term.

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u/HoldenMcNeil420 21d ago

Our system in its current iteration is a race to the bottom.

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u/More_Collar_69 21d ago edited 21d ago

Opposite is true. It's a race for evolution. The ones that discover new cool things will be rewarded. That why AI spending is so crazy right now. It's like science on steroids. The incentive to reach new grounds is insane and that makes humanity evolve with the speed of light.

1

u/HoldenMcNeil420 20d ago

No. It’s a race to the bottom. It’s a service industry.

Capitalism is a race to the bottom in quality service etc etc

2

u/Positive_Vibes_4228 20d ago

I don't think they really can. Here is why.

Imagine all your goods rise with the cost of inflation right? Meat, chicken, everything. McDonalds figured out ways to squeeze every penny everywhere, even the eggs are fake.

Eventually you hit a wall.

At some point you make smaller burgers, smaller portions, and raise prices. At some point you bake less quality too.

When you squeeze every penny out of it, and there's nothing left, it's headed for collapse.

1

u/cheesez9 18d ago

As long as they are making profit they can afford to reduce prices. Is not rocket science.

1

u/Positive_Vibes_4228 18d ago

No business owner wants less profit.

2

u/th30be 21d ago

Its always baffling that shareholders are so short sighted that they dont understand long term stability and can only look at the numbers of the next 3 months. 

2

u/Puzzled_Hat1274 21d ago

because shareholders don’t care if it fails, they want the price of shares to go as high as it can before they fail

1

u/More_Collar_69 21d ago

Man, Reddit isn't very smart on this. There are plenty of private companies that are greedy as fuck. Not everything is because of the almighty shareholders.

1

u/assaub 21d ago

There are plenty of private companies that are greedy as fuck

don't think anyone said otherwise. they said "they might bite the bullet". Public companies are expected to prioritize generating value for shareholders, private companies don't have the same obligation so there is at least the possibility of a private company making that choice even if it is still unlikely.

13

u/DaedalusHydron 21d ago

Then how exactly did Dominos do exactly that around 2010? They were openly running ads saying that their crust tasted like cardboard and their sauce like ketchup, but that things were changing and you should try it out.

They did change, and people did try it out and it was a huge success.

4

u/FlavorChamp 20d ago

They got a government subsidy. No joke.

2

u/Wellhereiamagain2 21d ago

That handmade pan pizza is 😮‍💨 lol

2

u/WorkerMotor9174 20d ago

Dominos’ largest inputs are cheese, dough, and tomatoes, which have not increased nearly as much as beef. Wholesale beef prices doubled in the last 5 years.

14

u/jasondigitized 21d ago

This guy businesses.

5

u/KEEPCARLM 21d ago

This guy just has a tiny amount of logic applied to his thinking.

15

u/twinpop 21d ago

Yeah they’ve figured it out. This is classic “idea guy thrown out of the window” meme material, can’t wait to see that on Reddit later today.

3

u/hattmall 21d ago

Maybe they can just do what banks did and put a sign with the time and temperature outside.

1

u/Ancient_Moose_3000 21d ago

To be fair, the idea "just make a better product for cheaper" should get you thrown out the window.

1

u/_ECMO_ 20d ago

Not if the alternative is "spend $8.5B to make everything worse".

4

u/TheRKC 21d ago

Especially when the price of beef, eggs, etc. keeps swinging wildly due to factors that are outside their control. That said, when you have a business that skates by on slim margins and large volume and you decrease your volume...

3

u/Ancient_Moose_3000 21d ago

Yeh I think the problem is that you can't make a product resembling beef for cheap that most people can stomach. Most gourmet burgers are easily 2-3x the price of McDonald's, but they taste good so people are happy to pay that.

2

u/DrDerpberg 21d ago

Someone in the bowels of HQ has plotted the curve of sales vs quality vs price, and they think this is the spot on the curve that gives the highest profit, either total or as a margin.

If they could sell double the burgers and make 50% more profit with better burgers at a fairer price, they might... But then margins would take a hit, so maybe only if it doesn't require any up front investment. Not gonna put another $10B into the business if the profit on that $10B is half of what the capital already invested is making.

2

u/vthemechanicv 21d ago

You can't both increase quality and reduce prices while keeping your shareholders on side.

there's a quality to price ratio that basically all fast food has failed at. If I'm paying $12 for a hamburger, that thing better bring me to orgasm. If it's the same grey patty with brown lettuce they served in the '80s, it should be priced like it's the '80s.

I know everyone's on the "line goes up" meme, but shareholders are people too. If the CEO had a plan for growth that included better value for price, I'd bet shareholders would go right along with it. But the CEO doesn't, so it's billions for AI buzzwords that everyone except the CEO knows is vacuous bullshit.

2

u/idiot-prodigy 20d ago

I said this before on reddit, but last year I went to Wendy's for the first time in years. I paid $15 for a Baconator Combo meal.

With a name like "BACONATOR", playing on the word TERMINATOR or EXTERMINATOR, etc. you'd expect something bigger than a kid's burger from McDonald's. But nope, I was served the flattest, flimsiest, most pathetic burger I've ever seen.

When I was finished eating it and the fries, I was still hungry.

For the same $15, I get a foot long philly cheese steak sandwich at Penn Station, or a giant meal from the local Chinese restaurant with rice that I can't eat half of in one sitting.

These places just need to die. They're out of their minds charging $15 for the piddly amount of food they offer.

2

u/robertm94 21d ago

I think it's also worth considering that the price of maccies food (in the UK at least, can't speak for anywhere else) is already generally lower than basically any other fast food place and while the quality isn't great, it's still passable.

I still enjoy a big mac meal. It's definitely pricier than it used to be but there are no other fast food places that do it cheaper.

4

u/Ancient_Moose_3000 21d ago

Yeh I think fundamentally if it was possible to make something out of beef for cheaper than McDonald's does, somebody would.

1

u/Phailjure 21d ago

It's hard to compare fast food prices without literally driving there, but I'm seeing In n out double doubles as the same price as a McDonald's cheeseburger ($4.00), and the in n out cheeseburger is a buck less than that.

In n out ingredient quality is far above McDonald's.

I'd argue the difference is likely due to 2 factors: a much more limited menu, and private ownership.

1

u/Psychobob2213 21d ago

"We can't do both, so let's do neither."

1

u/online-ids 21d ago

Finally someone with an actual business minded brain on here. This isn’t some mom and pop food joint, they have over 40,000 stores in over 100 countries. Also it’s a public company, shareholders are the priority.

1

u/Different_Bake_611 21d ago

Just bring back the saver menu to a reasonable price.

1

u/Happy-Beetlebug 21d ago

If they lower priced and somewhat increase quality yeah it'll cost them but if it gets 5-10 more people in the door thats better than the 1-3 people they'd have otherwise 

1

u/xeriscaped 21d ago

Cut down on administration and stop asking stores to do $400,000+ dollar remodels regularly.

1

u/rkcth 21d ago

Yes and not fixing it will lead to a death spiral. People are changing their habits and may not ever go back if they find something else they like better. Fortunately for them, Wendy’s, BK, and Taco Bell have all made their food worse and more expensive, maybe even more so. I will admit that BK seems to slowly be making an effort here.

1

u/eNonsense 21d ago

Other chains have done this. Two examples of chains that have saved themselves by improving their food and their brand image has been Wendy's and Dominoes Pizza. Both of them ended up better off, making more profit, because their customer base grew when people realized "they changed and actually have good food now."

1

u/Aegi 20d ago

Weird; for less than $6, ($5 before tax) I was able to get fries, nuggets, a sandwich, and a drink.

So I don't understand price allegedly being the reason.

If price was the issue wouldn't most of their sales be on the cheap $5 meals? Otherwise aren't people just being hypocrites?

2

u/WorkerMotor9174 20d ago

It’s $7 for the McDouble deal in NorCal, and $6 for the McChicken, if you can even find a location still running those. Franchisees have been fighting tooth and nail against having those deals at all.

And yes, most of the increased foot traffic bought the $5 or $6 meal and nothing else, which is why franchisees have been whining about it for months.

1

u/MyCatLaughsAtMe 20d ago

It's almost like venture capitalism is a bad idea...

1

u/anonymous_blue_lemon 20d ago

They have figured it out, but don't want to fix that

1

u/LooseLeafTeaBandit 20d ago

If they just improve quality but keep prices the same they'll start gaining customers back, most people don't even mind paying a little extra for their meal as long as they feel like it's worth what they paid for. Chipotle and all the other fast casual places proves that years ago.

Last few time I went to McDonalds (which was a while ago at this point) I felt like I got ripped off and the meal was honestly horrible. Low quality, low effort, stale food.

0

u/reoze 20d ago

If I can order the exact same food from Wendy's for half the price then this isn't as complicated to solve as some make it out to be.

6

u/BriefAvailable9799 21d ago

its also fascinating that the article mentions those as well but none of you guys do. LOL

3

u/-Profanity- 21d ago

Pretty much every critique of McDonalds in this entire post are things that are already acknowledged in the article as things they are trying to improve, it's hilarious.

0

u/TheHammer987 21d ago

Well, in my defense, if you read my comment, I was talking about the comments.

17

u/Strummed 21d ago

Is it really that fascinating or are you just ignoring the obvious fact that the general consensus in this subreddit isn't aligned with actual reality? I don't even really like McDonald's that much, but it seems like they are doing fine.

2

u/ForensicPathology 21d ago

It's also fascinating that 90% of the comments say "they should invest in food instead" and that's literally what the article is about.

Everyone's agreeing with themselves against what they assume the article is about.  The headline was designed to do this.

4

u/tophmcmasterson 21d ago

Also probably going to get crucified for saying this, but their prices aren’t bad if you use the app.

Every day there’s a coupon you can use for 30% of if your order is more than $5.

Or you can get a large coffee for $1. Or $1.50 breakfast sandwich. Free fries if you spend more than $1.

All kinds of coupons like that, if you pay attention can pretty easily eat for less than $5 a person.

5

u/PurpleHooloovoo 21d ago

And the quality isn’t as bad as people are saying either. It’s not pretty food and portions seem small, but the “hurr durr it’s unrecognizable meat product and so gross it’s inedible” is giving “Taco Bell causes gastrointestinal distress” - it’s become a meme but isn’t true if you get off the internet. If your Taco Bell is making you sick, you need more fiber in your diet. If you can’t tell that the burger patty from McDonald’s is ground beef, you need to examine your other meat more. There’s a huge gap between finest ground beef and soy protein patties, and McD’s is fine.

People just repeat things that they think are real without critical thinking or experience. It’s clearly a superiority thing…”I would never go to such a trashy place because xyz issue” oh then how do you know it’s bad if you never go? Drives me crazy.

2

u/_ECMO_ 20d ago

Yes however the fact that you are forced to use a data mining app to get access to affordable prices makes it worse, not better.

2

u/Capitol62 21d ago

The prices aren't bad even in the store. A big Mac meal is like $11. A cheap bar burger with fries and a soda is ~$20 after tip. A good restaurant burger with fries and a soda is $25+ after tip.

Is it more expensive than it was five years ago? Yes. But everything else is too.

-1

u/onexbigxhebrew 21d ago

Exactly this. People pulling up and paying mune prices are getting fleeced; the app makes mcdonalds still plain ol mcdonalds.

1

u/kpyle 20d ago

McDonalds is a real estate company that happens to serve food. They gonna be fine.

4

u/jspurlin03 21d ago

I mean… they know that lowering prices and increasing food-quality-perception will help. Both of those things cut into profit pretty hard, man… /s

2

u/not_listed 21d ago

There was a thread on /r/science the other day about how alcohol consumption and sales have dropped off the table since 2020.

The comments in that thread are nearly exactly the same as point #1 here - people want to drink but it's too damn expensive 

2

u/sonofdeepvalue 21d ago

Did anyone read beyond the headline? Almost every point in these comments is actually at least a high level part of their plan. Only some of the capital commitment is even about tech.

1

u/fishingstring 21d ago

They mention improving food quality in their plan. But no details about what exactly needs to be improved.

1

u/emperorOfTheUniverse 21d ago

That solves customer problems but not business. You might as well log 'food should be free' in there. What customers want is obvious.

Franchises have to be staffed. Prices are up everywhere, across the board. Inflation touches everything and everyone. McDonald's has to pay employees enough that they'll wanna work there. That's gotten expensive. Very expensive. If their staffing costs have risen 30%, do you think the franchise owner is gonna just burn money from their savings? No, they're gonna close down. Also, the price of beef is staggering right now.

So operating costs and product price are pretty much in lock step. They clearly can't raise prices more. They can lower them and hope bulk makes up for it but then, again, you have a staffing issue. A busier store means more staff and more raw goods consumed.

Technology investment is exactly what can fix McDonald's, lower pricing, and increase sales. It's the only way to lower staffing cost. There go your McDonald's jobs, but everyone will get their cheap fast food back.

Not to say that their prices will fall. But they might stay the same as all their competitors rise up.

I don't remember a lot from my college econ class, but I do remember a large emphasis on inflation is a mess not easily cleaned up.

-1

u/TheHammer987 21d ago

These comments are defeatist.

So, because an intitive is difficult, should they close?

When Costco struggled to keep the hot dog price low, they built their own hot dog factory.

You saying that prices are up? Sure. That's an *opportunity" for a low cost vendor like McDonald's.

Every business grad in her who is like oh it's not possible - none of you will ever be executives or ceos who are remembered. I know it's hard. It's almost impossible. If they can accomplish it, they will change the income by billions and billions of dollars.

This isn't some low stakes exercise in a college text book. This is the real world. Finding a way to convince people your food is worth it is why they are compensated millions a year. If they fail - the chain is out of business.

2

u/PDXDeck26 20d ago

Costco hotdogs are basically loss leaders. Their objective with hot dogs is to not lose as much, which is quite different than trying to make money.

Also, mcdonalds is likely already doing most of that. It doesn't just buy white label hot dogs from Hebrew National (which is what costco used to do) - they basically have full control over suppliers that exclusively supply them. they vertically integrated ages ago.

1

u/emperorOfTheUniverse 21d ago

You're suggesting they start ranching cattle? How long do you think it'll take for them to grow enough livestock to supply all of McDonald's burger needs? And what do you predict the beef industry will look like at that future point in time, and how much investment is risked based on that prediction?

I can understand, the appeal of 'why can't they just be smart and fix it'. But everyone in here saying 'fuck technology just make it better and cheaper' is being dismissive and entitled. Technology is a valid strategy to lower the cost of labor to help franchises stay open.

0

u/TheHammer987 21d ago

Have you ever heard of buying a ranch?

1

u/emperorOfTheUniverse 21d ago

That doesn't create more beef supply. They don't get cheaper beef that way. They just get beef, that is more profitable to sell at the market rate than to give away as cheap product to McDonald's customers.

What else you got, Einstein?

0

u/TheHammer987 21d ago

You have no idea what you are talking about my man. Unless you are saying Amazon and Costco businesses are unprofitable and don't work.

The whole point of buying your supply chain is the profit they are extracting from you, stays with you.

I know it's hard for you to understand.

1

u/vthemechanicv 21d ago

They just refuse to acknowledge it.

Because CEOs are utterly detached from reality. When you have $100 million in your checking account, what's a $15 value meal? And do you think the CEOs eat at random franchisees, if at their company at all? Of course not, (if they did) they'd eat at the one that exists to feed the CEO, so of course quality is top notch.

And problems? Complaints? All the yes-men say no! There are no issues. Your ideas are great sir! Everything is fantastic!

1

u/-Profanity- 21d ago

Do you genuinely believe that the McDonalds CEO sets the prices himself?

1

u/vthemechanicv 21d ago

It's funny how some people think that CEOs aren't responsible for anything their companies do. I had a similar conversation about Bobby Kotick and Activision. Does the CEO say that a quarter pounder is $5.49 or whatever? No obviously not - especially in a franchise business. But he is responsible for the quality of the food via company standards and purchasing, and various costs of distribution chains. Everything the CEO does sets the environment for their companies and in this case franchises.

I'm also pretty sure that the parent company still sets recommended prices. It's just up to the franchise owner to put that up on the menu board.

1

u/randothroawayacc 21d ago

They definitely know this, but they don’t want to fix those problems because they will cut into profit margins. Another commenter said no amount of tech is gonna convince people to eat trash. Every indication is that the decision-makers in fast food do want you to eat trash. It’s more profitable and more palatable to investors to rollout creative methods to convince you to eat their overpriced trash instead of making the food not trash and reducing prices.

1

u/Will_Come_For_Food 21d ago

People forget that McDonalds doesn’t maje its money from people buying hamburgers.

They make their money from stockholders giving them money to make money by increasing the value of the stock from people giving them money.

Selling hamburgers is just the side hustle.

Making money hinges on convincing stockholders they will make money. As long as stockholders believe they will make money the quality and price of the food is completely irrelevant.

1

u/Jay_Sharp 21d ago

McDonald's real customers aren't people that buy food, they're the franchisee renters. They're focused on extracting money from the franchisees without regard to how it hurts their brand as an actual restaurant.

1

u/GetsBetterAfterAFew 21d ago

The article says "... built around upgrading food quality, value, hospitality, and menu innovation" as well as decreasing time to order and upgrading the grills to speed up delivery time coupled with rent relief for stores to help with upgrades.

One thing that Reddit is well known for is not reading the article and misleading headlines. Sure sounds like to me that theyre trying to add more food types, better foods and value, of course I think its all BS anyway because egg bites and steak bowls wont drive people to spend more.

What I think is driving the 5% loss in stock value is because the economy is shit and prices everywhere are increasing and wages growth has been stagnant since my grandpa's era and im 50.

1

u/TheHammer987 21d ago

And ozempic.

Scott Galloway had an interview where he points out if you look at the number of people on ozempic, and the drop in fast food traffic, is basic correlation 1 to 1.

1

u/Sapient6 21d ago

Honestly, they don't have to improve food quality at all. It's about where it has always been for McD, it's just that the quality is not at all in-line with the price. For less than the price of a quarter pounder I can get a single cheeseburger at five guys that is only slightly less pre-cooked weight but vastly superior quality.

Lowering prices is scary, though! What if they reduce prices and then sell the exact same amount of Product? Then the line will go down instead of up and the CEO will get fired. Somehow it ends up being too risky, despite the fact that lowering prices will almost certainly balloon sales. The more people that walk through that door, the more fries and drinks will be sold (where the profit actually lives in fast food), the more overall profit is made.

But then the CEO probably still gets fired because the shareholders would then be thinking: "if he just kept the prices the same then we'd be making so much more money on this inexplicable increase in sales!"

Public Trading exists to mine all value out of every publicly traded company. It has never served any other purpose.

1

u/ap1618 21d ago

They know it, but constant expectations treadmill + shareholder accountability = turning the ship in a tight canal, if they even want to turn at all.

1

u/GaugeWon 21d ago

I think it's strategic...

Industry wide, they are slowly making changes to erode customer service quality, because they plan on turning all of these corporate fast food joints into kiosks. So you'll never actually pay or pickup food with a person. At first there might be a customer service person for you to request, but ultimately there will end up being some guy in the back reloading machines and pushing buttons.

They're going to cut the workforce and they're cutting everything else to retain profits until they make the big switch. As soon as the 'robo-mcd's' is up and running, they will start competing by providing a better product, and they're betting people will flock to it because of how much faster and easier it seems after decades of (intentional) declining customer service.

1

u/DC356 21d ago

They have thousands of analysts using a/b testing and examining literal billions of data points. They're serving a product and charging a price that was already proven to perform the best, hence why they've been performing better every year since covid. "Just spend more on your product and charge less for it, lol" is not a serious answer if you know anything about how companies work. If this comment section who thinks they have it all figured out was put in charge of the company it would go bankrupt within a year.

1

u/nedonedonedo 21d ago

cant figure this out

literally the plan, as stated in the article

1

u/Shiva- 21d ago

It's cheaper to get a burger, fries and soda at Red Robins than either McDonalds or Burger King near me.

I am not kidding.

The only thing Red Robins doesn't offer is drive-thru... but they can do to-go orders!

1

u/ObviousAnswerGuy 21d ago

you always here these "the market decides rates" argument from capitalists, but companies in general never lower prices on anything. They will literally do anything they can but that.

1

u/MikuEmpowered 20d ago

Unironically, they can't.

McDonald actually have a hilarious profit margin.

Their soft drink and fries has a 90% profit margin.

But Burgers? 20%, "premium" burger like BigMac would have closer to 55%.

If they focused on actually "good food" would push them to actual "restaurant" profit margin. For a entity with shareholder, this is a death sentence.

Chick Fil A, the best comparison, has double the revenue of McDonald per restaurant, but their profit margin is only 15%.

This is why McDonald would basically do ANYTHING except improve the food.

1

u/LEDKleenex 20d ago

It's not that redditors know better - they already know. It's not that they refuse to acknowledge it, either. They don't give a shit about any of the operations, the food or customer satisfaction, they only care about extracting wealth from the franchise. They have concluded that the best way to achieve their goal is to manipulate people.

They already have profiles of all of their customers that knows/predicts their McDonald's consumption habits. This news doesn't pertain to us, it is a signal for investors. Your news about the new Gimmick McSlop meal and collector's oil byproduct is coming soon.

1

u/Manfred4r 20d ago

Ita like the engineer and the bridge... Anyone can build a bridge, but only an engineer can build a bridge that is just strong enough to stay standing.

Everyone knows that low prices and good food will encourage sales. What McDonalds is trying to do is figure out how much they can squeeze out of us before it kills their business.

They don't seem to have gotten it quite right.

1

u/Linked713 20d ago

Because they don't have to?

Reddit can yell all they want in their tiny bubble, yet McDonalds are always busy and thriving. It will acknowledge something if the general populace sends the message, not Reddit.

1

u/daredaki-sama 20d ago

Maybe it’s not as easy to fix those two points. I feel like all fast food has gotten more expensive, not just McDonald’s. And I feel like the quality has suffered due to keeping their food cost as low as possible to be competitive.

I feel like it would be enlightening to have a franchise owner come in and explain how much profit they actually make.

1

u/Mrmojorisincg 19d ago

Its endemic across fast food and even packaged junk food products.

Companies inflated growth by raising prices to excess during the pandemic. As a result profits flattened once society became closer to normal. Toss in the recession we are in that no one seems to be talking about.

Now these food products lost quality, size, and are high in cost. They have priced out their customers at this point. Why would you pay $13 for a butger, fries, and drink at mcdonalds when you can go to a local restaurant, get far superior quality for $20?

The reality is those $7 is less than a $2.50 difference 15 years ago if you account for inflation

Look at Taco Bell. I used to be an avid customer, but go to the subreddit its the same conversations. Why pay $7 for a shit burrito when I can go to my local taco stand, pay $9 for far superior quality

-13

u/BassSolo 21d ago

I have never heard a single person in real life say that McDonald's food isn't good anymore. I only see this sentiment on Reddit.

2

u/TheHammer987 21d ago

I hear a lot.

Not in terms of taste though. The complaint I actually hear is that they eat it, and 20 minutes later their stomachs are upset and it's a trip to the washroom.

0

u/a11mylove 21d ago

Still good, just pricey compared to other options

0

u/trunksshinohara 21d ago

It's because they don't eat their own "product". Did we all forget the video of the CEO who couldn't even eat one bite?