McDonald's Quarterly Earnings Report and Comm Strategies

McDonald’s had a good second quarter, with global sales up 6%. Students could analyze the report formats and communication strategies executives used during the earnings call.

One lesson for students is the multiple communication channels and report formats McDonald’s published to communicate its quarterly earnings. The press release, quarterly report in four formats (PDF, Zip files, HTML, and Excel), and recorded Webcast earnings call (and transcript) are all open to the public and convey a consistent message, which is upfront in the press release:

Our 6% global Systemwide sales growth this quarter is a testament to the power of compelling value, standout marketing, and menu innovation—proving again that when we stay focused on executing what matters most to our customers, we grow. Our technology investments and ability to scale digital solutions at speed will continue to elevate the McDonald's experience for customers, crew, and our global System.

Any question and answer during the earnings call provides examples of communication strategies. For example, executives use what we might teach as hedging or tentative language (“I think”); however, students can see these responses employed strategically. They persuade the audience by demonstrating humility and credibility—qualifying responses to show a cautious approach and, in effect, saying, “I don’t know everything.” This language also protects an executive whose prediction turns out wrong, and it conveys a conversational tone to build trust.

Although the news is good, the first question challenged the company’s reliance on “value,” particularly in the United States, where families are under increasing financial pressure. Here are the first question and answer as an example from the transcript (my notes in green italics):

David Palmer, Analyst, Evercore: Thank you, and thanks for all of your, comments. Sounds like you’re still exploring ways to bolster value perception in The US. Ahead of anything there, you know, could you just speak to where you think McDonald’s value and affordability scores are today in The US? You know, perhaps before and after Snack Wrap and your recent McValue menu changes. You know, where is the consumer perception today versus McDonald’s in the past and versus near end competitors and maybe even fast casual competitors?

And and if there’s a difference between The US perception in terms of value versus other key IOM markets, would love to hear about that as well. Thanks so much.

Chris Kemczynski, Chairman and Chief Executive Officer, McDonald’s Corporation: Hi, David. It’s Chris [builds trust with first names and a friendly tone]. Thanks for the question. I think [demonstrates conversational style and humility with hedging language] when we talk about value, it’s important that we we really break it down and and get very specific about the different consumer segments. And I’ll start with, our most loyal consumers, and these are the ones who are on our loyalty program [previews content].

Roughly a quarter of our business in The US is on our loyalty program [frames the response and emphasizes return business]. And what we see is if you [conversational style] are a loyalty member at McDonald’s, we have we have exceptional value and affordability scores amongst those consumers. And probably that’s most evidenced by what I shared in in the prepared remarks, which is the uptick that you see in terms of frequency when we have a loyal consumer in our loyalty program going from 10 roughly 10 visits to 26 visits. So I think [again] with our loyalty members, our most ardent McDonald’s customers, we’re in a really good position as it relates to value [reinforces “value” throughout] and affordability perception. If you move then to the McValue program, McValue is working.

And if you think about what we have with McValue, we have the $5 meal deal, which is the anchor for that. That continues to perform very well for us. And then we also have the buy one, add one for a dollar program. What’s interesting is [highlights what’s important] those two programs are very complementary. If you look at consumers who are using both, it’s only about 8% or so who are actually using both.

So they’re going after two very different occasions, two very different users, but compelling to both. So I feel good about the loyalty program. I feel good [uses anaphora to emphasize his confidence] about where we are with McValue. But the issue or the opportunity is if you add those two up, that’s, call it, roughly 50% of the business. And we know there’s the other 50% that today isn’t coming into our restaurant, isn’t using McValue, isn’t using the loyalty program [anaphora again], and that’s where we have the opportunity, which is around core menu pricing that we talked about in our prepared remarks [transitions to an “opportunity”—is more direct in the next section].

Today, too often, if you’re that consumer, you’re driving up to the restaurant and you’re seeing combo meals could be priced over $10 and that absolutely is shaping value perceptions and is shaping value perceptions in a negative way. So we’ve got to get that fixed [addresses concern directly]. As I mentioned in my remarks, we’re having, I think [again], very active and productive conversations with the franchisees. But the single biggest driver of what shapes a consumer’s overall perception of McDonald’s value is the menu board. And it’s when they drive up to the restaurant and they see the menu board, that’s what’s shaping the that’s the number one driver. [Could be clearer, but the gist is that the low-priced meals are good sellers, but pricier menu items negatively affect consumer perception.]

So we’ve got more work to do on that in The US. I’d say on the IOM [international operational markets—insider abbreviations for the audience] side of the business, we’re in a better position on that. Part of it is, as I mentioned in in the remarks [Fourth time he refers to the remarks—could demonstrate consistency/integrity] as well, we have a really strong EDAP program in all of our markets. So these are essentially $1 $2.03 dollars $4 euro pound whatever the currency is. But that is proving to be a very strong addition to the value programs in the IOM market.

And then also, as I mentioned, our operators there have been very prudent and I think [again] are doing the right things to make sure that our core menu pricing continues to be at leadership levels in the market. I would just note [tentative language], also on our international side, it’s not as competitive a market as it is in The U. S. There’s a lot of different players in The U. S.

We don’t face the same breadth of those players or competitors in our international markets. And so I think it’s a little bit easier for us to stand out and represent good value in international.