Tag Archives: McDonald’s

Falling arches and other cataclysmic changes

31 Jan

change

With sweat and angst, people struggle for years to change things, then suddenly the mighty fall simply because of changing tastes.

Powerful people and institutions use their power to create systems that sustain and protect them. But these systems always contain elements of their own destruction. They do not defend against the unexpected and the unlikely. So when that unforeseen wave rises, it crashes with the force of a tsunami.

Who could have anticipated that people would turn against McDonald’s hamburgers?

mcdonaldsIn 1994, the restaurant giant had sold 99 billion burgers – an unfathomable number. Then it stopped counting. The film Fast Food Nation cites a survey showing that 88 percent of people could identify the McDonald’s arches but only 54 percent could identify the Christian cross. Financially, the company is larger than the economies of many countries.

Yet the chaos has come.

Days ago, after only two years as McDonald’s CEO, Don Thompson announced he would step down. Profits in the last quarter dropped a precarious 21 percent. Sales have pretty much fallen or remained flat at all stores for 13 consecutive months.

McDonald’s didn’t change. We did.

“I don’t know a single person of my generation that eats at McDonald’s,” a man in his early 20s said. “When the older generations pass on, they’ll have no customers.”

People haven’t necessarily forsaken burgers. They just prefer the so-called “better burgers” at places like Five Guys and the Shake Shack, which this week had a highly successful public stock offering.

McDonald’s, with its top marketing pros, is trying to reverse the trend. Ads have changed to show that its food is actually real. Other changes must be in the works. It could turn things around and reinvent itself, but so far that hasn’t happened. If McDonald’s goes under it will leave a giant hole in the global economy. In its wake will be opportunity for others.

We are used to disruptive technologies destroying things like newspapers and video stores, but the technology related to burgers has not changed. Only taste and attitudes have changed.

Can you imagine if this happens in politics?

Political parties usually are quick to adapt. They are willing to give people what they want – or at least provide the appearance of this – in order to survive. Still, quick changes can alter much about the system.

Koch Brothers

Koch Brothers

In a political overhaul, what would happen to the conservative Koch brothers, who announced recently that their political network will spend about $900 million on the 2016 elections – more than the Republican and Democratic parties will spend.

If the political climate takes a dramatic shift, what will happen to this network, its money and its associated power, influence, special interest legislations and the intricate machinery that runs everything and keeps order? What will happen to all the other power networks? What will replace them? Will it be genuine or phony? Helpful or hurtful? Open or closeminded? Peaceful or warlike?

It was reported this week in the New York Times and elsewhere that a majority of the American public, including half of the Republicans, support government action to curb global warming. That news is bound to recast agendas in the 2016 congressional and presidential elections.

What else is coming? Lots, probably.

Young people aren’t buying homes; aren’t buying cars; aren’t living in the suburbs; aren’t using traditional banks. Maybe they will decide to stop using traditional politicians.

On a dark election night, a losing politician was heard to have said, “The people have spoken – the bastards!”

We may be hearing more of this. It’s something to think about as we eat a better burger in the back of a peer-to-peer driving service on the way to a friend’s apartment in the city.

By Lanny Morgnanesi

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When the poor stop going to McDonald’s, we’re all in trouble

20 Jun

mcdonalds-meal

Businesses like Wal-Mart and McDonald’s haven’t been doing well.

 

People without a lot of money usually go to these places, but because they now have even less money, they’ve stopped going. When people who work at Wal-Mart and McDonald’s can no longer afford to shop and eat there, it’s a sure sign of a coming, broad-based financial decline.

 

It will affect us all, even the rich, who don’t amount to much if they can’t get the poor to give them money.

 

Reports show that the parade of U.S. customers into Wal-Mart fell 1.4 percent during the first quarter. That followed a decline of 1.8 percent in the prior year.

The discount retailer blamed the bad winter weather but also cited cuts in food stamps, higher payroll taxes and the increased cost of health care.

 

You know things are bad when Wal-Mart relies on the food stamp program to move product.

 

Walm-MartRecent U.S. sales at McDonald’s also have declined, by 1 percent. To lure back low-end customers, the burger behemoth increased its value menu, but that hurt profits even more.

 

What’s happening is the downward pressure on income is leading to downward pressure on sales.

 

Henry Ford used to pay his people well so they could buy cars. If Wal-Mart and McDonald’s have any sense, they and the other minimum-wage shops will copy this strategy. Not doing so will have consequences. It could turn the U.S. into another Japan – the bad one, not the good one.

 

Japan was once the globe’s supreme economic power. It made and sold great products while setting new standards for manufacturing. Flush with cash, Japanese investors bought up billions in prime New York real estate, and nearly everything else. During this period, in the mid-80s, I visited Hawaii, which seemed more like Japan. Japanese tourism and culture were so strong that hippie beach bums peddling sailing lessons had to learn Japanese.

 

Then came the bust, the swoon and massive disinflation. It began around 1990. People in the U.S. don’t understand disinflation. It’s when prices fall and fall and fall and still no one buys anything. The economy becomes comatose. Seems impossible, until you look at Japan, where disinflation has been a cruel fact of life for a couple decades.

 

 

According to Bloomberg Businessweek, one contributor to Japan’s disinflation is falling wages. The recent habit of businesses there, as in the United States, is to avoid hiring full-time workers and instead contract with temporary workers who earn less and have no job security. These temps now make up about 40 percent of the Japanese work force. They are paid about 38 percent less than full-time workers.

 

The financial and social divide between the two kinds of workers has grown and is causing multiple calamities. For example, no one wants to marry a temp. This depresses birthrates and is making Japan a nation of elderly people. Banks won’t give temps mortgages, which doesn’t encourage building. These and other negative trends cascade and the country stagnates.

 

In the current era, U.S. corporations have reaped huge profits from selling to the developing world. But those markets, at least to some degree, are cooling and maturing. The bread-and-butter American markets may have to be revived in order to maintain profits. That could require a higher minimum wage and more opportunity for the middle class. The government and the business community finally are waking up to this.

 

The Great Cure for so much – including crime and falling education standards — is to put money back in the hands of traditional spenders. For a time, greed will blind us to this reality. Then the cash register stops ringing and we see.

 

Wal-Mart and McDonald’s — and all the other places where you can work full-time and not earn a living — now see. Each is probably afraid to take the first big step. Sooner or later someone has to, otherwise that first big step will be involuntary and it will send us over a cliff.

 

Think about the return of the 25-cent McDonald’s hamburger. Think about taking the family out for one on a very special night, maybe once every couple of months. That disinflation, and it will make 15 percent inflation seem like good times.

 

Now, we wait.

 

By Lanny Morgnanesi

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