New York City, New York – (StockNewsDesk) – 11/10/2014 — Finally, there is some good news for the food giant McDonald’s. Same-store sales during October beat the Street’s expectations. Analysts expected a fall in the same-store sales to fall 2.2%; however, the revenue segment of the company fared well in comparison to expectations. Fall in the US business was noticeable. Worldwide sales of McDonald saw a decline of just 0.5%, but US business took a hit of 1.1%. These figures are better when compared to the earlier month. McDonald’s business, for September, fell more than 4%. The company had a rough third-quarter sale as a drop of 3.3% was seen worldwide. Within the worldwide segment, sales in Europe fell by 0.7%, while Asia-Pacific and Africa region saw a decline of 4.2%.
Franchise Owners Blame the Company
US Franchise owners are blaming the company for lower revenues. After reporting below than expected revenues in the third quarter, franchise owners are solely dependent on the company’s new introduced monopoly promotion. Many feel that aggressive spending on advertising and promotion is sucking up the profits, while few feel that the company is lacking in innovation. The company is unable to offer innovative products to the customers.
Last two months, August and September, reported worst sales figures since last 10 years. Sales for August dropped 3.7%, and for September dropped 3.6%. Most of the franchise has doubts on the revival of a company’s growth trajectory. The Chief Operating Officer of McDonald’s has admitted of presenting too many products in the menu too fast. This has complicated the menu as a result of which sales had been negatively affected. He further added that introducing too many products hasn’t given time to franchise to adjust the pricing models.
What Went Wrong?
This year McDonald has moved out from the budget category fast-food chain. The company has increased the price of menu items by an average of 3%. For example: Menu categorized under “One Dollar” has been shifted to “Dollar Menu and More” According to McDonald’s, raw materials have become costly as a result of which cost of menu items increased. The market price of beef, a major raw material, used in fast food has shot up by nearly 30%. The Dollar Menu was not a big hit among franchise also. According to the franchises, Dollar Menu is a big constraint that is stopping the company from making profits.
Although for the month October, same store fell lesser than expectations, sales have dropped for four consecutive months. This is making a big impact of company’s profitability.