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Where Has All the Innovation Gone, McDonald's? (MCD) (BKC)

November 30, 2012 9:04 AM EST Send to a Friend
McDonald's (NYSE: MCD)is known for three things: food, folks, and fun. However, one of those legs isn't living up to proper expectations.

According to Bloomberg, McDonald's has lost the fun, er, new ideas and menu innovations that keep customers coming back. After reporting its first monthly comps decline in nearly nine years, many question whether its heading in the right direction.

The venerable fast-food giant focused on more "premium" offerings over the last few years, looking to take down Starbucks (Nasdaq: SBUX) with its McCafe beverages as an example. Peer Burger King Holdings (NYSE: BKC), meanwhile, has been snatching up business with its continued focus on family-friendly items.

McDonald's is looking to turn-around that perception, with a new head of U.S. operations to be announced soon while the chain re-focuses on its push of value menu items and advertising.

Some analysts think a push on Dollar Menu items won't necessarily cause customers to buy more; many will still try to spend less, squeezing McDonald's profit margins in the process. For example, one analyst points out that if you can buy a Double Cheesebuger (cheezburger?) for $1, why would you pay $3 for a Quarter Pounder?

Burger King also hasn't been blind to the success. After running a highly-successful ad campaign using "the Kind" (not Elvis), the chain has moved to copy some of McDonald's offerings like smoothies, salads, and snack wraps.

Instead of pushing higher-margin drinks, another analyst suggests, McDonald's might focus more on snack and breakfast items to draw customers in.

One key item that many have been waiting for -- the McRib -- will come back in December. Hopefully McDonald's is on the nice list this year, because its going up against 9.8 percent of comps growth from December last year.

And investor don't want to be stuck with a lump of coal this time around. Shares are down 0.4 percent in early trading.




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