Business Blog: Hoover’s Business Insight Zone

Today’s Company of the Day is McDonald’s.

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Tens of thousands of McDonald’s restaurants dot the world’s landscape, but in the past few years the company’s pervasive presence hasn’t meant automatic success like it did in decades past. Case in point: McDonald’s has posted just two quarterly losses in its half-century of operation, but both of them have come during this decade. The second instance came in the most recent fiscal quarter; yet the loss stemmed from costs related to the sale of 1,600 Latin American restaurants, a move that is part of the company’s overall strategy to retool itself for prolonged growth in its hottest markets. Foremost among those markets, believe it or not, is Europe, where McDonald’s has reaped fat profits thanks to renovated restaurants that sport upscale décor, regional menu items (beer for German diners, porridge for Britons’ breakfasts), and fancy coffee drinks on par with Starbucks.

In the US, too, McDonald’s has continued to fine-tune its approach to everything from menu items to marketing. Chicken wraps and salads appeal to health-conscious eaters; these offerings, combined with a better breakfast menu and extended operating hours, have boosted profitability for McDonald’s US stores. To focus on its core brand, the company has also reduced its diversification, first by selling its stake in Chipotle Mexican Restaurants (which enjoyed a successful IPO in 2006), and then by selling its Boston Market unit to Sun Capital Partners. On top of that, it has reached beyond its traditional core audience of children to market more intensely to moms. Nicer design and a menu more in touch with the times make it likelier that moms will want to keep returning to McDonald’s with their kids in tow. So far, these moves have paid off with strong growth in same-store sales, which suggests the Golden Arches remain relevant for diners from Frankfurt to Fresno.

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