McDonald's to Close 175 Restaurants

Reuters ^ | 11/8/02 | Reuters

[DWPittelli]

OAK BROOK, Ill. (Reuters) - Fast-food giant McDonald's Corp. MCD.N , said on Friday that it would close about 175 restaurants worldwide and will miss its 2002 earnings estimate as it continues to struggle with underperforming sales in the U.S. amid stiff competition in the fast-food business.

The company said it will cut 400 to 600 jobs. The actions will reduce fourth-quarter earnings by $350 million to $425 million, the company said.

[DWPittelli]

Perhaps this is related to the Middle East boycott of American businesses. See this other excerpt from PRNewswire-FirstCall (emphasis mine). Does anyone know further details?

Restructuring Ownership in Four Countries and Closing Three Countries

McDonald's plans to restructure four international markets by transferring ownership to developmental licensees. Under the developmental license business structure, which McDonald's successfully employs in more than 25 markets around the world, the licensees will own the business, including the real estate interest. While the Company will no longer have any capital invested in the four restructured markets, it will receive a royalty based on a percentage of sales. McDonald's also plans to close operations in three small markets outside the U.S. These decisions were driven by the assessment that returns in these countries will continue to be below acceptable thresholds for the Company. Collectively, McDonald's operates 200 restaurants in these seven countries in the Middle East and Latin America.

[cynicom]

The beginning of that long steady decline.

[FreePaul]

Maybe their advertisements in France are paying off. Aren't they telling people to cut down on their trips to McD's. I know that I was impressed. I probably won't make my annual trip to a McD's this year and maybe not next year.

[RichardW]

I really hate to see this. Where am I going to stop to use the restroom?

[CWRWinger]

I had breakfast at McAfrica today. With nobody in line in front of me, it took 15 minutes to prepare the lukewarm-to-cold gravy/biscuit. The jungle music was so loud, I had to take it to my car to finish it. Gross.

[VOA]

I really hate to see this. Where am I going to stop to use the restroom?

That is no laughing matter.
When my parents would drive from Okalhoma to visit my brother at St. Paul, MN,
I know my mom had memorized the location of every MacDonalds on I-35.
And it wasn't just for the food!

[Mark Felton]

"Perhaps this is related to the Middle East boycott of American businesses. "

No. Their US sales have been in free-fall for the last few years. They've developed a bad reputation that is sticking.

Americans are changing their eating habits, somewhat, and Grocery stores are offering wide arrays of prepared foods at their deli's.

McDonalds greatest growth occured as American culture switched from families with 1 working parent to families with 2 working parents and single parents.

Ready prepared healthier food for families seems to be what the market is demanding.

(I say this like I'm some expert, LOL, I'm not. These are only my observations)

[reegs]

Just as the quality of their food declines, so will their earnings. I know they overhauled their kitchens a couple years ago in an attempt to deliver "fresher" food, but it has only added to the wait in getting your food. Besides, microwaving a pre-cooked hamburger patty doesn't make it fresher, only more rubbery. They need to cut their menu in half and concentrate on delivering a few, high quality items like they did in the 70's. Also, bring back the beef fat formula for cooking the french fries!!!

[jbstrick]

Headline: McDonalds to cut the Fat.

[DWPittelli]

I agree that McD's quality is lacking, and I certainly don't eat there except when it's the only option on a highway stop, but the article I quoted up top referred to closing down 3 countries and restructuring 4 others, and apparently all 7 are in the Middle East or Latin America. Hence my initial question.

[carlo3b]

This is hardly a major development, McDonald's worldwide has 31,000 locations. This news is meant to stir emotions and is interesting, but equivalent to my former restaurant chain rearranging the dessert menu at only one location.

[HELLRAISER II]

That's funny, they just opened a brand new one here where I live & I live in BFE. But I think that alot of the posters here are right, Americans are cutting out the Fast Food Grease burgers with Fries.

[SamAdams76]

Middle East has nothing to do with this. The McDonald's business in the Middle East represents but a grain of sand in McDonald's crumbling sand castle.

McDonalds built a huge global fast-food empire and they are going to be around for a while. They still make most of their profits on real estate - the own the properties and lease them back to the franchiser. McDonald's is sitting on billions of dollars of prime real estate. But unless they change their business plan for the restaurants, they are going to begin suffering a decline in fast-food market share. There are just too many outlets out there doing fast-food better.

[Aquinasfan]

Ready prepared healthier food for families seems to be what the market is demanding.

Good point.

[TankerKC]

Where am I going to stop to use the restroom?

Actually, the restrooms are one of the many reasons I don't go to McDonalds anymore. They are always dirty and there are no paper towels. You end up standing in a line to use the ONE blower (assuming that the ONE they have works).

[discostu]

It's over saturation. Back when I was a burger flipper (which ended 10 long years ago) the McD's execs were saying they thought the FF market was over saturated in most American cities (and considering the place I worked was one of 10 FF joints in a 1 mile stretch I heartily agreed). But inspite of that McDs continued to plop news stores all over the place. If the market was over saturated when McDs had 10,000 stores what is it when they have nearly 20,000?

[Inspectorette]

I think a lot of this is due to increased competition. Out here on the Left Coast, Jack in the Box is very popular (better food, too), along with Carl's Jr., BK, In-n-Out. Not to mention Taco Bell, El Pollo Loco, etc., not only popular with Latinos but with Anglos too.

[Dick Bachert]

That's it: Sales of their McGoat and McLamb Value Meal have slumped badly.

[Nephi]

I used to love Big Macs and McDonalds used to be famous for delicious french fries.

Now, if I have a Big Mac, I end up belching dehydrated onions the rest of the day. As for the fries, as soon as you get to your seat, they're cold and rock hard. Do you remember when they would droop as you dipped them in ketchup?

Now, I crave Whoppers with cheese, but BK's fries are no better.

[DWPittelli]

Middle East has nothing to do with this. The McDonald's business in the Middle East represents but a grain of sand in McDonald's crumbling sand castle.

Perhaps McDonald's is also doing poorly in the U.S. But the initial article says that all 7 countries where McDonald's is pulling back from, or entirely out of, are in the Middle East or Latin America!