Can McDonald's Survive the Upscaling of Fast Food?

Moneybox
A blog about business and economics.
Sept. 27 2013 11:07 AM

Can McDonald's Survive the Upscaling of Fast Food?

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In conjunction with the Clinton Global Foundation, McDonald's on Thursday announced its intentions to introduce healthier menu items in many of its key markets as part of the foundation's efforts against childhood obesity. But in business nothing is just about being nice, and I don't think it's quite right to even see this as being about becoming healthier.

It's more that McDonald's sales in the developed world have leveled off as most of the fast-food growth has gone to somewhat more upscale "fast casual" spots like Panera and Chipotle. Chipotle's marketing efforts focused on the provenance of its food are in part an effort to pitch it as part of a healthy lifestyle, but depending on what you order it can be even easier to make yourself fat from burritos than from burgers and fries. In other words, whatever benefits are flowing to society from fast casual restaurants, it's not curbing obesity.

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My general take on this is that it's going to be very difficult for chains to reposition upscale. Taco Bell tried it, but it hasn't really worked. Instead they've found success by being even more absurd and introducing Doritos Locos Tacos. It's just hard for established companies to pivot this way. Taco Bell succeeds best by being itself, not by trying to be Chipotle. But if anyone can pull it off, it's probably McDonald's. There's almost no other company in the world that's done as much to tweak its business to fit dozens of different local markets around the world. McDonald's has tons of experience finding places where burgers and fries alone won't make a great business and dreaming up the appropriate menu items for the market. And so if the United States is in a sense becoming a "foreign" market where burgers and fries aren't good enough, there's no reason the company can't adapt.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.