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McDonald's Faces 'Millennial' Challenge
by: Julie Jargon
Aug 25, 2014

TOPICS: Change; Competitive Positioning
SUMMARY: McDonald's is losing its luster with younger consumers. Customers in their 20s and 30s are defecting to competitors, in particular so-called fast-casual restaurants like Chipotle Mexican Grill and gourmet-burger chain Five Guys. Younger diners are seeking out fresher, healthier food and chains that offer customizable menu options for little more than the price of a combo meal. TERM PAPER APPLICATION: In analyzing the predicament, it is vital to cite facts and numbers, not just subjective impressions. To start with, Consumer Reports magazine said that in a survey of more than 32,000 subscribers, readers rated McDonald's burgers as the worst-tasting of 20 rival burger chains. A decade ago, there were 9,000 fast-casual restaurants in the US, versus nearly 14,000 McDonald's. Now, fast-casual restaurants number more than 21,000, while McDonald's US restaurant count has risen only slightly. QUESTIONS: 

1. Why is it that you are probably not eating at McDonald's? How would you define the 'Millennial' Challenge?

2. For your generation, what is the main problem with McDonald's? Are you tired of hamburgers generally? Or are you just tired of hamburgers at McDonald's?

3. Beyond just your own impression, what FACTS are cited in the article about the competitive position of McDonald's? Which of these facts does McDonald's most need to focus on?

4. In terms of the organizational life cycle, is McDonald's now starting to decline? Or is this setback just a dip in a much more open-ended process? Reviewed By: Mark Lehrer, Suffolk University

McDonald's faces 'millennial' challenge
Customers in their 20s and 30s are defecting to fast-casual restaurants like Chipotle, Five Guys

By Julie Jargon August 25, 2014 9:10 AM
Behind McDonald's Corp.'s worst slump in a decade is a trend that may auger even tougher times The world's largest restaurant company by revenue earlier this month reported its sharpest monthly decline in global same-store sales since early 2003, adjusted for calendar irregularities. In the U.S., with more than 40% of McDonald's 35,000-plus global locations, sales at restaurants open at least 13 months have been flat or falling for most of the past year. The hamburger giant on Friday announced it was replacing the head of its U.S. division for the second time in less than two years. The company tapped a former executive, Mike Andres, to take the helm of the domestic business—another sign that the company is trying to revive its fortunes at home. McDonald's stock has traded in a relatively narrow range in the nearly 26 months since Chief Executive Don Thompson took the helm, while the share prices of many of its rivals have soared. McDonald's shares are down about 2% since the start of the year, closing at $94.45 Friday. Demographics help shed light on McDonald's woes. Data compiled for The Wall Street Journal by restaurant consultancy Technomic Inc. point to an age problem for the chain. Customers in their 20s and 30s—long a mainstay of McDonald's business—are defecting to competitors, in particular so-called fast-casual restaurants like Chipotle Mexican Grill Inc. and gourmet-burger chain Five Guys Holdings LLC. Increasingly, younger diners are seeking out fresher, healthier food and chains that offer customizable menu options for little more than the price of a combo meal. The percentage of people age 19 to 21 in the U.S. who visited McDonald's monthly has fallen by 12.9 percentage points since the beginning of 2011, according to Technomic, while the percentage of customers age 22 to 37 visiting monthly during that period has been flat. .

McDonald's U.S. sales have been flat or falling for much of the past year. (John Taggart for The Wall Street J … During the same period, the percentage of 19-to-21-year-olds increased their monthly visits to fast-casual restaurants by 2.3 percentage...
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