Call of the Day: Double downgrade at McDonald's
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Miami Herald
6 hours ago
- Miami Herald
McDonald's shares key pricing decision customers won't like
A few months ago, my son and I were at Bradley Airport outside of Hartford, Conn. We wanted lunch at different places, so I gave him a $20 bill, thinking that should be enough for anything he wants to eat at a McDonald's. Sadly, $20 did not cover his 10-piece Chicken McNuggets meal. That combination, which came with fries and a drink, was a few pennies over $20, so he opted for the 6-piece combo. Now, everyone knows that airport restaurants face higher costs, but this markup seemed excessive. The same combo, ordered through Uber Eats (which often costs more than an in-store order), cost $10.49 in Port St. Lucie, Fla. The airport price was nearly double the cost, which does not reflect well on McDonald's and make you wonder whether the chain should offer some sort or standard pricing nationwide. That's something analyst John Ivankoe asked about during McDonald's (MCD) first-quarter earnings call. "It's fairly apparent looking around the country, the amount of core menu pricing difference that you have. And, obviously, I understand all the different economic and competitive reasons for that. But the reality is that there's not a lot of price certainty specifically around the core menu. So, do you think that, that is an opportunity? Is it a risk?" he asked. Image source:McDonald's restaurants are operated by franchisees, and the chain does not set minimum or maximum pricing. That's something CEO Chris Kempczinski talked about during the earnings call. "Well, at the end of the day, pricing is an inherently local decision, and it's informed by the trading area that exists around each of our individual restaurants. And our commitment and the focus is, we need to make sure that relative to the trading area that we're competing in that we're offering strong value, and that's what shows up on both the menu board and that also shows up with the promotions and digital offers that we're running," he added. Kempczinski aggressively pushed back at the the idea of uniform pricing. "So, I think about it less as around having predictability across the country around a common menu, and it's more about we need to be competitive within the trading areas that we're competing. I think if you look at what's been going on with menu prices right now, because the inflation has come down and we're not nearly seeing as inflationary environment as we saw certainly last year and into - in 2023, they're not seeing the big moves on core menu that you saw previously," he added. Kempczinski did acknowledge that inflation in the food space, at least for McDonald's, has slowed down. He believes franchisees understand that offering value-based pricing is important. "I think our franchisees also recognize how important it is for us to stay disciplined on this, and we look at pass-through rates, as I described earlier, to make sure that we understand the consumers' willingness to accept any pricing. So, that would be my comment on that," he shared. McDonald's global sales fell by 1%. Kempczinski wasn't surprised by that, but had admitted that some numbers were worse than he had planned for. "We expected global QSR industry traffic would be down in the first quarter, actual industry traffic fell more than we anticipated in several of our large markets, including the U.S. In the U.S., overall QSR industry traffic from the low-income consumer cohort was down nearly double-digits versus the prior year quarter," he said. The CEO also noted that McDonald's saw a weakness in another customer group. "Unlike a few months ago, QSR traffic from middle-income consumers fell nearly as much, a clear indication that the economic pressure on traffic has broadened. However, traffic growth from the high-income cohort remains solid, illustrating the divided U.S. economy, where low- and middle-income consumers in particular are being weighed down by the cumulative impact of inflation, and heightened anxiety about the economic outlook," he added. The answer to that, he believes, is value. "We know that leadership in value and affordability is paramount in an environment like this, and we have been expanding and refining our value proposition to meet the needs of our consumers, especially our low- and middle-income cohorts, as well as families internationally. Building upon the actions we began to take in 2024, we now have everyday affordable price menus, or EDAP, and entry-level meal bundles in each of our big five international operated markets," he shared. Buy one full‑price McValue item, then add a second item for just $1. Breakfast optionseligible: Sausage McMuffinSausage BiscuitSausage BurritoHash Browns Lunch/Dinner optionseligible: 6‑pc Chicken McNuggetsDouble CheeseburgerMcChickenSmall Fries McDonald's 5 Meal Deal: Available through summer 2025, this meal includes: McDouble or McChicken sandwich4‑piece Chicken McNuggetsSmall friesSmall soft drink (Some locations may charge $6). The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Miami Herald
a day ago
- Miami Herald
Cracker Barrel faces new 'woke' backlash over DEI policies
Backlash to corporate diversity, equity, and inclusion policies has led to several major companies downplaying their DEI programs in got the ball rolling in January 2025 as it ended some of its DEI practices and renamed its diversity team as "Global Inclusion team."The company also faced a lawsuit filed by the American Alliance for Equal Rights, objecting to McDonald's and International Scholarship & Tuition Services' HACER National Scholarship Program and asking that its scholarship recipients be chosen on their "own merits and essential qualities," since it believes the scholarship unlawfully discriminates against students from other races and ethnicities. Related: Popular pizza and beer chain files for Chapter 11 bankruptcy Several companies have followed McDonald's lead and renamed or eliminated DEI programs and removed references to DEI in their annual reports, including Amazon, PBS, Pepsi, Citigroup, BlackRock, Paramount, UnitedHealth Group, Constellation Brands, and Gannett, Forbes reported. And now, popular dining chain Cracker Barrel is facing an attack on its diversity, equity, and inclusion policies from legal advocacy group America First Legal, a conservative nonprofit co-founded by White House aide Stephen Miller. America First Legal requested that the U.S. Equal Employment Opportunity Commission and Tennessee Attorney General Jonathan Skrmenti investigate Cracker Barrel for alleged potential violations of federal and state civil rights laws stemming from its diversity, equity, and inclusion policies, according to a July 21 AFL statement. Related: Popular pizza dining chain franchisee files Chapter 11 bankruptcy The restaurant chain has faced a customer backlash in the past, as in August 2022, when it added a plant-based-sausage option to its menu. It did not take traditional sausages off its menu; it only added a meat-free choice, and that angered some of its customer base, which called for boycotts. Cracker Barrel launched its Diversity and Inclusion Strategy in June 2021, which included an effort to "better identify, recruit and advance strong, racially and ethnically diverse talent," WMAL Radio reported. The restaurant chain also asserted its support for the NAACP and Urban League, as well as doing more to recognize the LGBTQ+ community, in its Diversity and Inclusion Strategy. The company in 2024 shifted its Diversity and Inclusion Strategy to Culture and Inclusion, focusing on "Culture," "Workforce," and "Business." Culture: to educate, advocate, and communicate to create an inclusive, engaging, culture, and work Force: to attract, select, develop, and retain high-performing talent with diverse backgrounds, experiences, and Build and nurture diverse partnerships in the communities where we live and work, and ensure we have diverse representation in our advertising. Cracker Barrel's Culture and Inclusion Strategy is a 180-degree turn from the company's policies in early 1991, when the company adopted a policy to stop hiring LGBTQ people and terminate those who were already employed by the restaurant chain, according to Forbes. The company's Board of Directors voted to end discrimination against gay employees in 2002. More food and restaurants: Major iconic food brand files for Chapter 11 bankruptcyPopular Dairy Queen rival franchisee files Chapter 11 bankruptcyIconic pizza chain's franchisees close multiple restaurants American First Legal objected to Cracker Barrel's Business Resource Group benefits that "appear to be restricted to specific identity groups," according to its statement. It also objected to the company's Nominating and Corporate Governance Committee considering "diversity of age, gender, race, and ethnic background" when evaluating potential nominees for the company's Board of Directors. "Treating employees differently because of their race or sex is not only wrong, it is illegal and violates numerous federal and state civil rights laws. AFL will continue to fight back against unlawful discrimination in all its forms," American First Legal said in its statement. The organization submitted a complaint with the U.S. Equal Employment Opportunity Commission, to investigate Cracker Barrel's employment practices, which they allege "appear to discriminate against employees or prospective employees, solely because of their skin color or sex." American First Legal also filed a complaint with the Tennessee attorney general, as well as the Cracker Barrel Board of Trustees. Cracker Barrel was not immediately available for comment. McDonald's: Renamed diversity team as "Global Inclusion team." Amazon: Removed references to inclusion and diversity hiring from its annual Closed its diversity, equity, and inclusion Removed representation goals from Renamed its Diversity, Equity and Inclusion and Talent Management team as Talent Management and Removed references to DEI in its annual No longer uses diversity tied to race and gender in Group: Removed diversity, equity, and inclusion webpages and adopted terms like "culture of belonging."Constellation Brands: Renamed DEI team as Inclusive Removes diversity references from its website. Don't miss the move: Subscribe to TheStreet's free daily newsletter The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Business Insider
2 days ago
- Business Insider
McDonald's (MCD) Targets Gen Z with Colorful Cold Brews and Dirty Sodas
Fast-food chain McDonald's (MCD) is getting ready to go beyond burgers and fries by testing a new line of colorful iced drinks this fall, according to The Wall Street Journal. The menu will feature items like Creamy Vanilla Cold Brews, Popping Tropic Refreshers, and 'dirty sodas' mixed with flavored syrups and dried fruit. Starting in September, about 500 restaurants in Wisconsin and Colorado will offer the drinks. This shift is part of a bigger trend in the fast food industry, where premium beverages are driving growth for rivals, especially as Gen Z customers look for fun and unique drink options. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Interestingly, drinks have become one of the fastest-growing parts of the restaurant business, especially as inflation causes people to spend less on full meals. Indeed, research firm Technomic reported that beverage- and snack-focused chains saw nearly 10% sales growth in 2024, compared to 1.4% growth for burger-focused chains. Drinks also tend to bring in higher profits. As a result, McDonald's believes that the drink market could be worth $100 billion across the U.S., Canada, Australia, and Europe. Unsurprisingly, the company's latest plan builds on what it learned from CosMc's, which was an alien-themed spinoff that it launched in 2023 to test specialty drinks. While some items, such as the Churro Cold Brew Frappé, were popular, others failed to connect with customers, and McDonald's ended the concept in May 2025. Nevertheless, McDonald's new drink strategy includes simpler customization options and different flavors for international markets. With competitors also releasing new drinks, McDonald's says it wants to move quickly to claim its spot. Is MCD Stock a Good Buy? Overall, analysts have a Moderate Buy consensus rating on MCD stock based on 14 Buys, 13 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average MCD price target of $335.87 per share implies 13.7% upside potential.
