Recession Planning: McDonald’s Dollar Menus!
Posted on October 11, 2010
Should you still be recession planning? Or, should you be planning a recession-proof business model?
According to the guys who tell us what’s actually going on with the economy these days, the recession is over, and has been over since last year. While that may be true, it’s still hard to believe it when restaurants and other businesses are struggling to get customers in the seats, or worse, closing the doors altogether.
Still, some businesses and business models are experiencing just the opposite—that is, they have actually seen improved sales this year. McDonald’s is one such fast-food chain that is showing gains through it’s clever recession planning. Its sales rose in August, 4.6 percent in the U.S. This beats the figure from the previous year, which was only 2.2 percent. Sales also rose slightly in Europe. And globally, sales were up 4.9 percent in August.
Is this because everyone everywhere knows and recognizes McDonald’s? Is it because the well-known, well-loved food chain follows the fast-food business model, which has certain economic perks over sit-down restaurants? Joshua Ritchie’s article on Mint.com last month delves into the topic with a dissertation on key McDonald’s business strategies that have kept it afloat in the poor economy, including:
- Recession-friendly pricing. Two words: Dollar Menu. Although I have seen dollar menus at other fast food chains, this one seems to have outlasted the recession like a champ, with items that people recognize everywhere in the country.
- New products for growing markets. The introduction of the McCafé series of beverages really blew the competition out of the water this year.
- Improving operations company-wide. From its inception, McD’s has given a lot of focus to forming an efficient operational strategy, and this focus has served it well.
When you think “fast food,” probably a large portion of Americans automatically think of McDonalds. That may be because they have been around since about 1955, and since then they’ve literally taken the world by storm. I think one thing that’s interesting about McDonald’s approach is its pricing, which Ritchie’s terms “recession-friendly.” I’d like to return to McD’s Dollar Menu, which includes such treats as the McDouble, a small order of fries, a side salad, or—my personal favorite—the Fruit’n Yogurt Parfait. For a fast food restaurant, it really doesn’t get any better than that! Customers know how it’s going to taste, the food is available on any corner in most major cities in the world, and food is available for only a dollar! Of course it’s going to outlast a recession! You don’t even need a job to get a deal like that. People may be pinching pennies, but they aren’t going to feel too bad about spending a dollar on a cup of coffee, especially when the coffee shop next door is selling the same thing for twice that. And you can’t really blame that neighboring coffee shop, because it would probably go out of business if it tried!
On one hand, McDonald’s has no doubt found a bullet-proof business plan that works, and they are also not afraid to lower prices to a level that would probably be unreasonable to any other fast food chain. They’ve introduced new menu items recently, too, like the McCafé Smoothies, which were a hit when they hit the market this past summer.
Other fast food chains have mimicked this menu promotion, and have likely seen similar success. On the other hand, though, you have to feel bad for the independent guys whose doors close when they can’t scrape together enough revenue to stay open after their first year. Not everyone can put together a fool-proof dollar menu. Not every operation has the staying power of a McDonald’s store, either—not even the other fast food chains. Is McDonald’s “too big to fail?” I suppose time will tell, but the recent numbers are on their side.