McDonald’s faces significant challenges as recent financial results reveal mixed performance and new obstacles threatening its U.S. market position. The fast-food giant’s third-quarter earnings report for 2024 showed a global comparable sales decrease of 1.5% year-over-year, accompanied by a 3% decline in net income.
While U.S. sales managed a modest 0.3% increase, this gain was partially offset by reduced customer traffic at its locations. During the earnings call, CEO Chris Kempczinski acknowledged that the quick-service restaurant (QSR) industry continues to face widespread difficulties, with the company’s performance falling short of internal projections for 2024.
Consumer behavior has shifted notably, with many Americans reducing their fast-food consumption due to repeated price increases in recent years. A LendingTree survey indicates that 62% of Americans have cut back on fast-food purchases specifically because of higher prices.
Despite these challenges, there are some positive signs. Chief Financial Officer Ian Borden reported success with the company’s $5 Meal Deal promotion, which runs through December. The promotional offering, which includes either a McChicken, four-piece chicken nuggets, or a McDouble with fries and a drink, has helped McDonald’s gain market share among price-sensitive consumers and increase visit frequency among deal participants.
However, a recent E. coli outbreak has emerged as a serious threat to the company’s U.S. sales recovery. The outbreak, linked to Quarter Pounder products, resulted in one death and approximately 75 illness cases, leading to the temporary removal of the item from menus nationwide. The impact was immediately apparent in visitor statistics, with Placer.ai data showing significant declines in restaurant visits: 6.4% year-over-year on October 23, worsening to 9.1% on October 24, and further dropping to 9.4% on October 25.
Borden confirmed that the food safety incident has negatively affected the positive momentum the company had been building, resulting in daily decreases in both sales and customer counts since the outbreak announcement. The company plans to reintroduce Quarter Pounders to its menus in the coming week, following the production of new beef supplies.
During the earnings call, Kempczinski addressed the severity of the situation, noting that McDonald’s hadn’t faced a serious public health issue in the United States for more than four decades. He expressed deep concern over the E. coli cases and offered an apology on behalf of the entire system for the impact on customers.
According to R.J. Hottovy, head of analytical research at Placer.ai, while food safety incidents typically have extended impacts on visitation patterns, McDonald’s swift identification of the outbreak source and implementation of preventive measures may help minimize the long-term negative effects on customer traffic.
The company now faces the complex task of rebuilding consumer confidence while navigating ongoing industry challenges, including price sensitivity and changing consumer behaviors. The success of value initiatives like the $5 Meal Deal shows promise in attracting budget-conscious customers, but the recent health scare presents a significant hurdle in maintaining this momentum and stabilizing sales performance in the U.S. market.