McDonald’s to close 700 outlets
McDonald’s has announced a plan to close 700 restaurants worldwide this year. This is the first time the company would be closing so many of its outlets in four decades. Declining sales and increased market competition has forced the food business to streamline itself and make it more profitable.
The firm said that in the US, many franchises as well as company-owned restaurants would be shuttered. McDonald’s spokesperson Becca Hary told the Associated Press that closings are part of a strategic review. The company said that the closures were aimed at future growth. The firm has a total 14,300 locations in the US.
The firm has not divulged which locations would be shuttered. It however did say that it would trim hundreds of restaurants worldwide. The closures include 350 restaurants in China, Japan and the US. Already, the firm has closed 350.
According to the firm, as of May, sales had increased 2.3 per cent in Europe but declined by 0.2 per cent in the US. Operations in the Asia/Pacific/Middle East/Africa markets took a hit of 3.2 per cent.
Speaking of their plans to cut the number of branches, the company’s president and CEO, Steve Easterbrook, said, the firm has “embarked on a turnaround plan to reignite our business performance through great-tasting, high-quality food, compelling value and outstanding service.”
Even though the firm has been known to close branches if they were underperforming, restaurant openings far outweighed the closures. The firm, while planning to open 300 branches, is definitely feeling the heat of the economic slowdown. Further, it is also cutting flab in its management by trying to remove layers of bureaucracy, an exercise that could make it more profitable.
The firm, which has been providing food at affordable prices, was able to even withstand the recession when its Dollar Menu attracted people. It has been able to hold on to competition from Burger King, Wendy’s, Taco Bell and KFC all these years. However, competition is increasing with new players such as Shake Shack and Five Guys making their appearance as worthy competitors. Customers also feel that food is fresher at Chipotle Mexican Grill and Panera Bread.
Worldwide, McDonald’s has 36,000 restaurants serving 69 million customers in 100 countries. About 80 per cent are franchise-owned. Last year’s global sales were worth USD27bn. It shuttered 350 poorly performing stores in Japan, the United States, and China the first three months of 2015. Earlier the firm had reported an 11% decrease in revenue and a 30% drop in profit for the first three months of year, a trend that has been seen since the last two years.
The firm is bullish on its turnaround strategy. CEO Steve Easterbrook said,
“I often describe McDonald’s as possibly the most democratic — with a small‘d’ — brand in the world. And what customers love the world over and none more so than here in the US is how they can buy into aspirational quality products, but at a McDonald’s price.”
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