Fast Food Sales: "That's Not Ketchup...It’s Blood"

McDonald’s store sales just took another nose-dive. Global same store sales tanked more than three percent. One investment analyst entitled his analysis of McDonald’s prospective sales growth as “That’s not ketchup…it’s blood.”

The three stated reasons for McDonald’s sales declines were: competition; the company’s own missteps, including a TV story in China showing work associates mishandling chicken; and “shifting consumer tastes.” The harsh sales reality for McDonald's and other fast food retailers is that consumers increasingly associate eating their food with being fat and unhealthy. For the millennial generation focused on being “cool with a purpose,” the eating of fast food is definitely not cool or purposeful.

Fast food schizophrenia damages brand equity

The marketing of fast food is schizophrenic. Fast food used to be well understood by consumers as being cheap, tasty and convenient. Now the same fast food restaurant chain will run simultaneous schizophrenic ads where it promotes a healthy chicken wrap in one ad and its supersized hamburger loaded with bacon and cheese in another. This marketing schizophrenia only serves to undermine the customer’s understanding of the chain’s core values. In comparison, Chipotle’s stock continues to soar to record levels based on its singular marketing focus of selling sustainably-sourced, good food.

Fast food loses its price advantage

Fast food chains are also eroding their brand equity with ever-higher prices. Fast food prices, except for a rapidly-shrinking dollar menu, appear to be rising faster than wages. One study found that a healthy food diet was half the cost of a convenient food diet! If true, what is the future of the Big Mac if it is both unhealthy and not price competitive?

Fast food wages damage their brands

Wages are another economic issue damaging fast food brand equity. Who can live on the $8.69-an-hour core wages earned by front-line fast food workers? The answer is no one. The cost of public assistance to families of workers in the fast-food industry is nearly $7 billion per year. There is growing awareness among taxpayers that they are subsidizing, through taxes, the medical and welfare benefits paid to fast food workers -- where 52 percent of fast food family members are enrolled in tax-funded public programs, compared to the national workforce average of 25 percent.

Yet the fast food industry is fighting wage increases like it is a catastrophic economic event. Higher wages will undercut the dollar menu. Ironically, this may enhance fast food profits as most items on a dollar menu have thin -- if any -- profit margin. Paying a living wage of $15 per hour is only sustainable if a restaurant can win customers based on an alignment of values with value. How many fast food chains are succeeding in marketing themselves as selling healthy, tasty food at affordable prices? That question is the revenue growth challenge facing the fast food industry that is increasingly being shaped by informed customers using their smart phone apps to find healthy food served in a social environment. Maybe that is the core reason one fast food industry analysis is seeing blood and not ketchup.

Image credit: National Restaurant Association 

Bill Roth is an economist and the Founder of Earth 2017. He coaches business owners and leaders on proven best practices in pricing, marketing and operations that make money and create a positive difference. His book, The Secret Green Sauce, profiles business case studies of pioneering best practices that are proven to win customers and grow product revenues. Follow him on Twitter: @earth2017