Fast-Food Chains Like McDonald's Corporation (MCD) Lack Customer Loyalty, Unlike Starbuck's And Panera Bread - Report

 @moranzhang on June 13 2013 11:36 AM
McDonald's Happy Meal are pictured in Los Angeles
McDonald's Happy Meals are pictured in Los Angeles. Reuters

When it comes to service, McDonald's Corporation (NYSE: MCD)’s customers just aren’t lovin’ it. After posting its first monthly same-store sales decline in nine years last October, the world’s largest restaurant chain started to push its workforce to provide service with a smile.

A new report on fast-food chains concludes that they are missing out on business because there isn't a differentiator between options, as consumers bounce between restaurants. The experience of eating there is impersonal, and often the service is poor.

Due to its scale, McDonald's has an advantage over Arby’s, Burger King Worldwide Inc. (NYSE: BKW), Jack in the Box Inc. (Nasdaq: JACK), Yum! Brands, Inc. (NYSE:YUM)’s Taco Bell, The Wendy's Co. (Nasdaq: WEN) and Dairy Queen – but it still lacks the brand loyalty infused by fast-casual chains such as Starbucks Corporation (Nasdaq: SBUX) and Panera Bread Co. (Nasdaq: PNR).

The study by consultancy Dunnhumby points out that restaurants face more operational challenges in becoming customer-centric organizations than other categories of retail, as franchise models often make it difficult to consistently deliver the same customer experience across outlets and, ultimately, build long-term loyalty with customers.

Weak economies around the world have resulted in fewer consumers eating out. To attract more customers, McDonald's has been adding more items to its Dollar Menu and promoting those items in its ads.

While pricing is important across all companies, pricing is also more heavily tied to perceived value.

“Emotional connection is critical,” said Euan White, senior vice president of consumer markets at consultancy Dunnhumby. “Customers want to feel like they are part of a company’s dialog.”

In a recent internal webcast, McDonald's executives told franchisees that 20 percent of complaints were related to workers’ attitudes, “and it’s increasing,” according to a slide from the presentation reviewed by The Wall Street Journal.

The webcast identified the top complaint as "rude or unprofessional employees." Some customers find service "chaotic." Steve Levigne, the fast-food behemoth’s vice president of business research, said candidly that McDonald’s “service is broken.”

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