$61.97
-0.53 (-0.85%)
McDonald's Corp (MCD)
CAPS Rating:
The Company franchises and operates McDonald's restaurants in the food service industry. These restaurants serve a varied, yet limited, value-priced menu in a number of countries around the world.
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McDonald's began their move toward higher growth a few years ago when they upgraded their coffee to compete with the Starbucks/Caribou trend. That move was successful, but the coffee houses had been adding food items that continued to draw more customers away at all times of the day. By adding more premium coffee options, McDonald's is pulling back that business, though some of the regained volume may be due to the general economy. The move also created more breakfast demand as announced by MCD in August 08. This strategy adds volume to existing stores with only a small increase in capital needs during a period of tightened credit. Part brilliant strategy and part luck for the timing, Micky-D may have found a way into the Starbucks niche that Starbucks may not easily counter. Even once we can tap our home equity again for two-buck muck once or twice per day, we may have developed a permanent fondness for tiled walls and bright lighting.
While I am bullish on McDonalds, I disagree on why. Consumers are gravitating away from Starbucks because it is changing in negative ways. McDonalds stands to benefit from a recession by pricing strategy and not mimicking Starbucks. Taking the family out here in El Paso to a good resturant is not as expensive as in New York but relative to income it is. MCD offers an affordable alternative and will be able to even in falling economic times.