McDonald’s has a plan to win back customers after visits plunge
CNN
By Nathaniel Meyersohn, CNN
New York (CNN) — Americans around the country avoided McDonald’s last week after an E. coli outbreak left dozens of people sick. But McDonald’s is confident that $5 value meals and Big Macs with chicken will help it win back customers.
On Wednesday, the day after the E. coli outbreak was announced, customer visits to McDonald’s dropped 6.4% across the country and 24% in Colorado, where the outbreak was most prevalent, according to Placer.ai, which tracks foot traffic to restaurants and retailers.
More customers stayed away from McDonald’s in the following days. By Thursday, visits to McDonald’s dropped 9% nationwide and 31% in Colorado.
On Friday, visits declined 10% around the country and 33% in Colorado.
McDonald’s declined to comment on the Placer.ai data. On Tuesday, during McDonald’s quarterly earnings call, finance chief Ian Borden said there has been an “impact in the US business as a result of the food safety incident” and sales and customer visits dropped.
But the company believes the worst is behind it, and it has strategies to win back customers.
McDonald’s said Tuesday that it would rely on its $5 value meal promotion and “food innovation” like the new Chicken Big Mac. It may also shift advertising, if needed, to emphasize the safety of its food.
“We stand ready to do more if we need to to make sure that we are bringing the full resources of McDonald’s to bear to re-engage” customers, CEO Chris Kempczinski said Tuesday.
Food safety concerns can impact restaurants for an extended period.
But RJ Hottovy, an analyst at Placer.ai, expects McDonald’s to recover quickly because the company was able to identify the source of the outbreak, communicate it to health officials and the public, and implement preventative measures.
Hottovy believes that McDonald’s will increase promotions to get customers into restaurants as it tries to recover from the traffic slump and focus more advertisements on the safety of its food and supply chain to reassure customers.
E. coli outbreak
McDonald’s will resume selling Quarter Pounders in all of its restaurants this week after the Colorado Department of Agriculture said the company’s beef patties used for the Quarter Pounder tested negative for E. coli. The customers who got sick ordered that particular burger.
Kempczinski reiterated Tuesday that slivered onions from a Colorado Springs facility were the likely source of contamination, and McDonald’s removed them from its supply chain and stopped using onions from this facility indefinitely.
He assured customers that it’s safe to eat at McDonald’s.
“We are confident we can return Quarter Pounders to menus,” he said on an earnings call. “I‘m relieved that this situation appears to be contained, and I remain confident in the safety of eating at McDonald’s.”
US health officials said Friday that the number of illnesses linked to McDonald’s Quarter Pounders had risen to 75 — up from the initial report of 49 — including one death. Those numbers could go up again, as it can take weeks for officials to determine whether an illness is part of an outbreak.
McDonald’s business slumps
The E. coli outbreak has overshadowed McDonald’s business and came as the chain was struggling to win back customers put off by higher prices. The average price of McDonald’s menu items is up around 40% over the past five years.
McDonald’s announced Tuesday that sales at restaurants open for at least one year ticked up 0.3% in the United States during its latest quarter, but fell 1.5% globally. The quarter ended on September 30 and did not include sales following the announcement of the E. coli outbreak.
The results were an improvement from McDonald’s previous quarter, when sales dropped 0.7% in the United States. The bounceback at American restaurants was driven in part by McDonald’s $5 value meal promotion. McDonald’s also had some hugely successful limited-time specials, including a Crocs partnership and a series of nostalgia-heavy collector’s cups.
The company said Tuesday that the $5 meal has drawn customers back into McDonald’s and it plans to extend the deal into December.
Still, Kempczinski said McDonald’s had “fallen short of our expectations” this year.
Visits to fast-food restaurants overall have slowed down, he said, as customers reject eat cheaper meals at home.
“Consumers, especially those in the low income category, were choosing to eat at home more often,” he said.
McDonald’s (MCD) stock was flat during early trading Tuesday.
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