Mcdonald’s caps off a terrible year with falling sales, discrimination lawsuit
The great thing about 2014 for McDonald’s is that the entire year from hell is finally over – roughly it hopes, since it looks to carefully turn over a fresh leaf in 2015.
On Friday, the fast-food giant released its latest earnings report, which showed that global same-store sales for 2014 were down a complete 1 percent from this past year. In the fourth quarter, same-store globally fell 0.9 percent and sales in the U.S. dropped 1.7 percent – both smaller-than-expected falls than predicted by analysts.
Still, it’s hard to check out the numbers and start to see the positives after a year filled up with scandals and slumping sales domestically and internationally.
"2014 was a challenging year for McDonald’s all over the world," McDonald’s CEO Don Thompson said in a statement. "As we begin 2015, we are taking decisive action to regain momentum in sales, guest counts and market share."
McDonald’s arrange for gaining momentum includes attempting to build back trust and sales in China and Japan following last summer’s supplier scandals, simplifying and localizing the menu, and making significant cost cuts.
McDonald’s Franchisees Brace for Sales Slowdown
"As we begin 2015, we’re exercising further financial discipline – you start with a capital expenditure arrange for the year of around $2.0 billion – our lowest capital budget in a lot more than 5 years – as we’re strategically targeting fewer openings inside our most challenged markets," Pete Bensen, McDonald’s CFO said in a statement. Put simply, 2015 provides fewer new McDonald’s locations in China, Russia and the U.S.
The business is simultaneously trying to overturn its image as an aging fast-food brand that provides customers little in the form of choice and quality. Thompson noted that in 2015, McDonald’s will be focused on "adapting to the changing marketplace." That appears to indicate buying fast-casual friendly items, like new tech by means of the “Create Your Taste” platform, that will allow customers to build their own burgers and chicken sandwiches, and incorporating higher-quality ingredients. But is McDonald’s putting an excessive amount of on its plate by attracting new, potentially brand-building features?
"From ineffective digital technique to ‘Experience of the Future’, ‘Our Food Your Questions,’ ‘Create Your Taste,’ and regionalization to streamlining its menu, and its own latest ad campaign, McDonald’s strategy seems unfocused, even schizophrenic sometimes," says Sriram Madhusoodanan, campaign director at activist group Value [the] Meal, in a memo on the wages report.
Ironically, McDonald’s biggest success is resulting in its biggest challenges. Its enormous size greater than 36,000 locations helps it be difficult to focus on the minutia worldwide, even while the chain emphasizes cooperation with owner/operators and works to refranchise at least 1,500 restaurants from 2014 to 2016.
"Overall, I continue steadily to see McDonald’s in defensive mode; beleaguered by the significant challenges to its business design that placed such a burden on its top and important thing this past year," says Ken Odeluga, a senior market analyst at CFD Trading firm CityIndex. "McDonald’s continues to see a sea change in junk food consumption in the us and it remains questionable whether it’s responding fast enough to catch up. Chains like Burger King and Chipotle are smaller and nimbler, and for that reason have reacted faster."
McDonald’s Lays Off Employees within $100 Million Cost-Cutting Effort
The business is also facing conditions that will likely follow the business into 2014 on the legal side of operations. Furthermore to finding your way through increased costs with the Affordable Care Act and states’ rising minimum wages in 2014, McDonald’s was forced to cope with a threat to its very business design in the ongoing "joint employer" debates sparked by the National Labor Relation’s Board decision that McDonald’s will be held accountable in employee allegations against the chain.
The limits of this is of joint employer will be put to the test. This week, 10 former workers at three McDonald’s locations in Virginia filed a federal civil rights lawsuit against McDonald’s Corp. and Michael Simon, who owns the franchised location, with allegations of racist discrimination.
The ex-employees say that these were fired from McDonald’s after racial and sexual harassment from supervisors, who complained "there are way too many black people in the store" and ultimately replaced about fifteen African-American employees with white workers. McDonald’s Corporate allegedly didn’t react to employee complaints.
This is simply not an unprecedented case – in August, the California Supreme Court ruled that Domino’s cannot be held accountable as a franchisor in a former employee’s sexual harassment lawsuit. However, your choice also stated, "[We do not] mean to imply franchisors, including those of immense size, can’t ever be held in charge of sexual harassment at a franchised location."
If prosecutors find that McDonald’s corporate exerts enough control over employee hiring, firing and trained in this case to have tacitly – or explicitly – approved of racist employment practices, McDonald’s franchise model will probably need to make some major changes that could affect the complete franchising industry.
"Decades of established law demonstrate that franchisors usually do not control the conditions and terms of the employees of their independently-owned and operated local franchise businesses," a global Franchise Association spokesperson said in a statement on the case. "IFA will contend in the correct forum any try to change the existing joint employer standard to preserve the sanctity of the franchise model to make sure its continued economic growth."
McDonald’s has up to now declined to touch upon the allegations, and reiterated its dedication to diversity in a statement.
2015 could be a fresh year, but McDonald’s isn’t likely to have the ability to escape old challenges, from the consequences of the joint employer decision to struggles maintaining the fast-casual industry. The business promises to create a change – now, it’s time to see if their customers will be "lovin’ it."