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McDonald’s franchisees had an ominous prediction — and now it's coming true
(Biz Carson/Business Insider)
McDonald's all-day breakfast has been a massive success, helping to drive up sales growth after two years of declines.
But the excitement from the new menu offering appears to be wearing off, and sales growth is now slowing.
McDonald's US same-store sales grew 1.8% in the second quarter, following 5.4% growth in the first quarter of the year.
Some franchisees had predicted months ago that the boost from all-day breakfast would be only temporary.
"The next few months might look pretty good for McDonald's USA, but ... by the middle of 2016, we may be in the tank again," one franchisee wrote last fall in response to a survey by Nomura analyst Mark Kalinowski.
Another franchisee wrote: "I think all-day breakfast is gimmicky and only really a Band-Aid to help us get through the next couple of quarters."
In a more recent survey conducted earlier this month, franchisees said breakfast sales have been slowing.
"All-day breakfast kind of faded out in our stores and we don't expect much from all-day breakfast 2.0," one franchisee wrote. All-day breakfast 2.0 refers to McDonald's plan to expand the all-day menu to include more breakfast items.
"We are not seeing the benefit of all-day breakfast like it was sold to us," another franchisee wrote.
Twenty-seven domestic franchisees with approximately 199 stores participated in the survey, representing a small fraction of McDonald's 14,000 stores in the US.
All-day breakfast could also be contributing the slowing sales growth because customers are getting cheaper breakfast-menu items during lunch and dinner, as Business Insider reported Tuesday.
McDonald's says all-day breakfast continues to be a strong source of growth for the company.
The company credited its all-day breakfast and its McPick 2 promotion, which allows customers to pick two menu items for $5, for its 1.8% same-store sales growth in the US.
Overall, McDonald's global same-store sales grew 3.1% in the second quarter, but revenue fell 3.6%, to $6.27 billion.
The company's net income fell from $1.20 billion, or $1.26 per share, to $1.09 billion, or $1.25 per share, a year earlier.
"At McDonald's, we are focused on meeting our customers' needs for high quality, affordable food and beverage choices," McDonald's CEO Steve Easterbrook said in a release. "Our second quarter performance, which marks our fourth consecutive quarter of positive comparable sales across all business segments, provides a clear indication that customers are responding to the steps we're taking to deliver the menu and value options they want at the convenience of McDonald's."
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