With its dwindling stock price, strained public image and terrorist-targeted business, a Chicago-area corporate giant is facing a crisis unlike any it has faced before. United Airlines? Nope, McDonald’s.
The nation’s fast-food leader, based in suburban Oak Brook, has taken hits from all sides over the last few months, including the resignation earlier this month of Chairman and Chief Executive Jack Greenberg. His five-year tenure is the shortest in McDonald’s 47-year history.
The latest setback came Tuesday when McDonald’s announced it expects to post its first-ever quarterly loss, a warning that made Wall Street jittery. McDonald’s stock price dropped $1.39 to $15.99 and the Dow Jones Industrial Average lost 92.01 points to close at 8,535.39.
Battling an image as a purveyor of fatty, unhealthy food, McDonald’s has tried to foster a health-conscious image by introducing low-calorie menu items and even going so far as to switch to a healthier cooking oil for its popular french fries.
That hasn’t stopped lawsuits from customers who are unhappy that years of eating Big Macs have made them overweight.
An attempt to introduce a low-cost menu has yet to produce a positive result. In early October, McDonald’s launched the Dollar Menu, but during the first 28 days of the value program, same-store sales were flat or down slightly despite heavy advertising, according to the minutes of a meeting of franchisees and McDonald’s executives.
More troubling is that McDonald’s franchises overseas have become a favorite of those expressing anti-American sentiments. Since 1990, franchises have been bombed or burned by groups in France, Belgium, India, Mexico, London, Chile, Serbia, Colombia, South Africa, Turkey, Russia, Indonesia and Greece. McDonald’s recently closed 175 restaurants overseas, including two in Jordan, and pulled out of three countries entirely. One was in Bolivia and two were in Middle East nations that McDonald’s declined to name.
“McDonald’s represents an entire packaged cultural system,” said James Watson, a Harvard professor of anthropology who studies McDonald’s. “The fact that it’s food makes it even more dangerous and more powerful–there’s nothing more powerful than food in any society as a symbol of identity.”
Adding to its overseas woes, the company’s U.S. growth has slowed considerably. McDonald’s has eliminated hundreds of employees at its Oak Brook headquarters and will open only about 100 stores next year in the U.S., a far cry from the mid-90s when it opened more than 1,000 restaurants a year.
Best-selling author Eric Schlosser anticipated McDonald’s troubles. His 2001 book, “Fast-Food Nation: The Dark Side of the All-American Meal,” started as an assignment from Rolling Stone magazine to write about the fast-food industry.
During an interview with the Chicago Tribune in March 2001, Schlosser projected McDonald’s as vulnerable, especially because it markets not-so-healthy food to groups, such as low-income families, who are most at risk for health problems.
“McDonald’s won’t become a Montgomery Wards [the late department store], but it could become a Sears, losing its undisputed position as the top brand in its category,” Schlosser said.
