There was probably no greater criticism of Mcdonalds (NYSE: MCD) missing the boat on the chicken sandwich craze than its own franchisees, but after the fast food giant’s second quarter earnings report, they must feel like they are dominating the roost.
McDonald’s reported sales and profits above Wall Street expectations, in large part thanks to the success of the three chicken sandwiches it launched in February. The company saw comparable double-digit sales growth in the United States, not only against depressed numbers from the pandemic, but also over a two-year stack.
The fast food chain may have been late in joining the chicken sandwich war, but it is quickly making up for lost time.
Play catch up
When McDonald’s finally entered the fray, there was good reason to believe its impact would be negligible. Popeyes Louisiana Kitchen had a good 18-month lead over its rival, and other fast food and casual fast food chains were following suit to join in what was becoming a cultural phenomenon. Even the Chicken King Chick-fil-A has brightened up his chicken sandwich to make sure it stays relevant.
Still, McDonald’s trudged along, seemingly ignoring the hubbub that surrounded it, but under fire from its franchisees who began to act to develop their own sandwich. They could see they were losing customers and needed something on their menu to generate buzz.
This is why the launch of the company-backed initiative to release three chicken sandwiches had all the hallmarks of being too little, too late. Still, it turned out to be exactly what McDonald’s customers were looking for.
► We need nuggets: Popeyes will add chicken nuggets to the menu based on their chicken sandwich recipe.
► The masks are back: McDonald’s again demands face masks for customers and employees in areas with high COVID transmission
Birds of a feather
Mobile device location data from analytics firm Placer.ai indicated that consumers flocked to McDonald’s from the get-go. He noted that foot traffic to McDonald’s restaurants increased 19% on the day sandwiches entered the menu compared to the previous year, and increased the following days and remained high thereafter.
We must not forget that these increases were measured against foot traffic before the pandemic forced the eventual closure of restaurant dining rooms. And the increases were even well above 2019 levels.
Placer.ai VP of Marketing Ethan Chernofsky said, “The launch was so important that it fundamentally changed the trajectory of McDonald’s.
While this helped improve Q1 results at the time, it’s clear the Q2 also benefits. McDonald’s lineups are up 26% from last year, but 15% more than two years ago.
Focus on partnerships
McDonald’s actually hit the marketing magic in the last quarter. In addition to his chicken sandwiches that resonate with consumers, he also had great success with a chicken nuggets promotion featuring BTS, the South Korean K-pop (or Korean pop music) boy group.
It also experienced a strong recovery globally, with a 2.6% increase in lineup in international markets. The gains have been much more modest than in the United States, as many foreign markets continue to face severe restrictions related to COVID-19.
Yet McDonald’s does not rely on its successes. He’s building on his partnerships with BTS, Travis Scott and J Balvin by announcing his new celebrity couple, this time with rapper Saweetie. He will feature the “Saweetie Meal” featuring a Big Mac, chicken nuggets, fries, drinks and sauces including the “Saweetie and Sour Sauce”.
McDonald’s might not ruffle the feathers of executives Popeyes and Chick-fil-A just yet, as both chains see their own foot traffic improvements, according to Placer.ai. But at least now he has a hunting dog. With the recent release of the chicken sandwich from Popeyes sister chain, Burger King, the Ch’King, the International restaurant brands (NYSE: QSR) sibling rivalry could benefit McDonald’s.
Now it’s cooking
Until the introduction of the new chicken sandwiches, McDonald’s stock gains were rarer than hen’s teeth. Since March, however, its stocks have gained around 20% and restaurant stock has been at its best for some time.
Focusing on its main menu, giving customers and franchisees the food they want, and building smart partnerships puts McDonald’s back on top.
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Rich Duprey has no position in the stocks mentioned. The Motley Fool recommends Restaurant Brands International Inc. The Motley Fool has a disclosure policy.
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