It all makes sense: when times get
tough, like during the recession of 2008, people want to spend less because their
money is suddenly more valuable. When
many restaurant businesses—big and small alike—began to fail during this time,
fast food restaurants like Wendy’s, Burger King, and (most notably) McDonald’s
began to thrive (Steverman 2010). In
fact, this epic franchise grew more in 2008 than it had in 2006 and 2007. After all, who can turn away a Sausage
McMuffin for only one dollar? And throw
in a coffee and hash brown for only $1.50 more?
Hardly anyone.
Because people are so concerned with
making money and wasting no time, especially during the recession of 2008,
McDonald’s greatly excelled because McDonald’s sold time—the scarcest resource
at that time—very cheaply, said John Osborne, head of Osborn Capital Management
(Dahle 2009).
As Stephanie Dahle’s article in Forbes magazine stated, “McDonald’’s
loves your recession” (2009). This
statement makes a lot of sense, for in the early to mid-1990’s, McDonald’s
sales declined (Dahles 2009). This was
clearly a time of economic boom, and just one decade after came the bust; a
time when “Americans began to trade down [food quality] with a vengeance” (Gross 2009). However, as many firms started to slash their
prices, McDonald’s did just the opposite (Gross 2009). Along with offering their usual coupons,
McDonald’s really took off because while many companies began slashing their prices
and quality alike, McDonald’s started to promote “higher margin [goods]” to
those who were adjusting from a life of pricier meals to those of… McDonald’s (Gross
2009).
Overall, the economic recession that
plagued so many other restaurant companies and franchises did nothing but help
that of McDonald’s. People did not have
the time or money to sacrifice their spending on fancier places like Olive
Garden or the like. As the economy
reaches its stages of recovery however, McDonald’s could be in for a rude awakening.
Gross,
Daniel (2009 Aug, 5). Who Won the
Recession? Retrieved from http://www.slate.com/articles/business/moneybox/2009/08/who_won_the_recession.html
Dahle,
Stephanie (2009 Feb, 17). McDonald’s
Loves Your Recession. Retrieved from http://www.forbes.com/2009/02/17/mcdonalds-recession-stock-intelligent-investing_0217_mcdonalds.html#
Steverman,
Ben (2010 Mar, 8). McDonald’s: Winning a Hard-Times, Fast Food Fight. Retrieved
from http://www.businessweek.com/bwdaily/dnflash/content/mar2010/db2010038_123647.htm
I find it very interesting how restaurants such as McDonalds actually thrive during recessions due to their low-priced products. I am excited to see how McDonalds fairs now that we are in the stage of recovery. McDonalds may be a major leader of this restaurant industry, but will that soon change as the economic climate continuous to shift?
ReplyDeleteThough McDonalds could be in for that rude awakening, I wonder if they will be able to find other ways to get customers and their money. As you said, Time is one of the scarcest resource and McDonalds sells it the cheapest and fastest of most of the companies in this industry, and with the restaurant industry having to adapt to a new fast paced economy, it is possible that McDonalds will still be able to thrive.
ReplyDeleteTo answer your question, Jenna, I do think that as we enter the recovery strage, McDonald's will have some economic challenges to face. However, Erik, I also believe that McDonald's will be able to rise to the challenge. But even though America is starting to show some signs of growth, I know that Europe is struggling financially, and much of McDonald's profit comes from its European market. However, I know that their CEO of 41 years, Jim Skinner, recently retired this summer. New CEO, Don Thompson, wants to continue with their classic "Plan to Win," which so far has included revitalizations of thousands of McDonald's restaurants (Dingle, 2012). It should be interesting to see what McDonald's has in store. Perhaps a new CEO will further revitalize this very importnat restaurant.
ReplyDeleteDingle, Derek T (2012, March 22). Don Thomson named CEO of McDonald's. Retrieved from http://www.blackenterprise.com/career/don-thompson-named-ceo-of-mcdonalds/