(Bloomberg) – McDonald’s customers have said goodbye to salads. Stock investors should be glad they’re gone.
A pandemic-related menu overhaul at McDonald’s Corp. eliminated more nutritious menu options such as grilled chicken sandwiches and fruit and yogurt parfaits. The world’s largest catering company is slashing offers to move customers through queues and drive-thru faster and with fewer staff – a critical necessity as restaurants struggle to attract and retain customers workers.
These items are unlikely to return any time soon, which should bolster profitability, said BTIG LLC analyst Peter Saleh. Although increased spending on raw materials and wages has weighed on restaurant margins in recent quarters, faster service and higher sales may help offset that. McDonald’s says it has reduced its drive-thru wait times by about 30 seconds over the past few years, thanks in part to menu discounts. This has a notable impact for investors: the restaurant’s margin, a key metric that factors in operating costs, is expected to improve to 16.2% in the second quarter from 14% in the prior period, according to estimates compiled by Bloomberg.
“With the labor shortage, you try to keep your menus as streamlined and as simple as possible,” Saleh said. “For a lot of these restaurants, their menus are bloated with some of these new items and then you cut them to gain speed.”
Restaurant owners are happy with the new strategy, which has reduced some healthy items due to longer preparation time and lower demand. “Our streamlined menu allows for speed,” said the National Owners Association, a large group of McDonald’s franchisees, in an email seen last month by Bloomberg News. An efficient car lane is key to sales growth, according to the group: “We like fast drive-thrus, happy customers and happy teams.” Franchisees operate approximately 95% of McDonald’s locations in the United States.
McDonald’s shares have fallen about 9% so far in 2022, less than the S&P 500 index decline. The stock has 27 buy ratings from Wall Street analysts, with 11 taken and a single sales recommendation.
The losers, of course, are health-conscious consumers whose options are now limited. Salads, which McDonald’s first introduced decades ago and which made up a very small percentage of sales, are still available in some local markets, but are no longer listed on McDonald’s website. There are no plans to bring them back nationwide at this time. Also gone: the 250-calorie Egg White Delight McMuffin, launched to much fanfare in 2013 as part of a nutrition push with Olympic gold medalist Gabby Douglas. In comparison, a regular Egg McMuffin contains 310 calories.
McDonald’s always offers apple slices and oatmeal with fruit. But it’s clear the fast-food chain, which has been criticized for not offering more nutritional options, is focusing on staples including burgers, fried chicken sandwiches and desserts, like a new McFlurry made with chocolate covered pretzels. The company’s “Favorites Under 400 Calories” menu, launched in 2012, is no longer. Offerings such as kale salads and wraps with cucumbers and tomatoes have come and gone over the years.
The Chicago-based company says its menu is fueled by customer appetite. “Our transition to a limited menu, involving the removal of dozens of less popular national and regional items from menus, has helped streamline operations for our restaurant team while improving our customer experience,” McDonald’s said in a statement. a press release sent by e-mail. “We continue to evaluate our menu through this lens to improve order accuracy and speed.”
Since Covid-19 upended everyday life, restaurant menus have been reduced by more than 10% on average, according to industry researcher Datassential. Last year, nearly 60% of restaurants removed items, particularly in the appetizer, dessert and beverage categories, up from 37% the previous year. Burger King, for example, also got rid of salads, removing them from the chain’s national menu in December.
Meanwhile, consumers are growing weary of cooking at home, which has helped restaurant sales. But companies will have to work to keep diners’ attention. McDonald’s healthy options, while never a big revenue driver, have helped the company stand out, according to Tom Cook, director of restaurant consultant King-Casey.
“You always need to have something, news to drive traffic, especially these days,” said Cook, who worked with McDonald’s in the mid-2000s to help introduce a handful of new salads. including one with apples. He said leafy green starters were a big deal at the time – even though management knew they would never compete with burger sales. The goal with the salads was to appeal to women and especially mothers with children, he said.
“Here’s a case of knowing that it will never be popular and won’t sell much, but we’re going to make it a big story to communicate that we’re healthy,” he said. “It was a very high priority.” Fast forward to today, and “they’re probably saying, ‘we don’t really need it,'” Cook said.
Of course, the menu cuts also included indulgent dishes such as the McChicken cookie and a bacon, egg and cheese bagel with over 500 calories and half a day’s worth of salt. But McDonald’s appears to have gone further than some of its peers in reducing low-calorie options. For example, Wendy’s Co. and Chick-fil-A Inc. always have salads and grilled chicken on their national lineups.
The story changes to some extent for McDonald’s overseas. Australia offers oat milk, and salads are still on the menu in countries like Italy and the Netherlands. Locations in the UK offer cucumber sticks. But the disappearance of healthy articles from most of the chain’s 13,000 U.S. sites is “a huge step backwards,” said Lindsay Moyer, senior nutritionist at the Center for Science in the Public Interest, a food watchdog and health.
“You have to wonder if McDonald’s has almost given up on pretending to have something for people who want healthier items,” she said.
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