McDon­ald’s to shrink in U.S. for 1st time in decades

The ham­burger chain plans to close more restau­rants than it opens this year.

Los Angeles Times - - BUSINESS BRIEFING -

The burger chain that put “su­per­size” into the Amer­i­can ver­nac­u­lar is slim­ming down: For the first time in more than 40 years, and per­haps ever, McDon­ald’s Corp. says the num­ber of U.S. restau­rants it has is shrink­ing.

McDon­ald’s plans to close more restau­rants in the U.S. than it opens this year, the world’s big­gest ham­burger chain said. That hasn’t hap­pened since at least 1970, ac­cord­ing to a re­view of McDon­ald’s reg­u­la­tory fil­ings.

Becca Hary, a McDon­ald’s spokes­woman, de­clined to pro­vide a spe­cific fig­ure but said the re­duc­tion would be “min­i­mal” com­pared with its to­tal of about 14,300 U.S. lo­ca­tions.

Still, the con­trac­tion is sym­bolic of trou­bles un­der the Golden Arches and how it’s try­ing to re­group.

The com­pany en­joyed rapid ex­pan­sion for much of its history by of­fer­ing con­sis­tent food at af­ford­able prices. It even thrived dur­ing the re­ces­sion, when its Dol­lar Menu drew in peo­ple try­ing to save money and new prod­ucts like McCafe cof­fee drove up sales.

But since then, chains like Chipo­tle that mar­ket them­selves as serv­ing bet­ter food and in­gre­di­ents have chipped away at McDon­ald’s dom­i­nance. A new breed of “bet­ter burger” chains such as Five Guys Burgers and Fries is tak­ing away cus­tomers too.

McDon­ald’s past suc­cess led to “a nat­u­ral over­con­fi­dence,” said John Gor­don, a res­tau­rant in­dus­try an­a­lyst with Pa­cific Man­age­ment Con­sult­ing Group.

“McDon­ald’s is such an in­ter­nally fo­cused or­ga­ni­za­tion, it’s a sit­u­a­tion where you don’t have a fresh per­spec­tive com­ing in,” Gor­don said.

McDon­ald’s ex­ec­u­tives have also con­ceded that an overly com­pli­cated menu led to in­ac­cu­rate or­ders and longer wait times, and that they failed to keep pace with chang­ing tastes.

In April, McDon­ald’s said it would close about 700 un­der­per­form­ing lo­ca­tions around the world this year, in­clud­ing in the U.S. Chief Ex­ec­u­tive Steve Easter­brook, who stepped into the role March 1, also later laid out plans to re­struc­ture the Oak Brook, Ill., com­pany to re­move lay­ers of bu­reau­cracy and move more nim­bly.

In any given year, some un­der­per­form­ing McDon­ald’s restau­rants will close. But pre­vi­ously, the num­ber of clos­ings has been out­weighed by new restau­rants that open.

The U.S. store clos­ings will be a mix of fran­chised and com­pany-owned lo­ca­tions, Hary said. She noted that the clos­ings are part of a strate­gic re­view in­tended to set the stage for the fu­ture growth.

McDon­ald’s has not re­ported an an­nual re­duc­tion in U.S. lo­ca­tions since at least 1970, ac­cord­ing to archived fil­ings with the Se­cu­ri­ties and Ex­change Com­mis­sion.

The com­pany de­clined to com­ment on the last time that it re­duced its U.S. store base. But given the rapid ex­pan­sion that char­ac­ter­ized its early years, it’s likely that McDon­ald’s hasn’t pulled back since Ray Kroc founded the com­pany in 1955.

Even though it’s clos­ing lo­ca­tions, McDon­ald’s easily re­mains the coun­try’s big­gest ham­burger chain. It still has more than twice as many restau­rants as No. 2 Burger King, ac­cord­ing to the in­dus­try tracker Tech­nomic.

And McDon­ald’s is still grow­ing glob­ally. It plans to add about 300 restau­rants to its world­wide to­tal of more than 36,000.

Spencer Platt Getty Im­ages

DE­SPITE CLO­SURES, McDon­ald’s easily re­mains the coun­try’s big­gest ham­burger chain with about 14,300 U.S. restau­rants. Above, a store in New York City.

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