McDonald’s Corporation (MCD) Is Getting Fried

All three of these companies, McDonald’s Corporation (NYSE:MCD), The Wendy’s Company (NASDAQ:WEN) and Burger King Worldwide Inc (NYSE:BKW), are stressing price more than ever. The fact that they are all pushing the same value proposition means that their message might very well get lost, resulting in an inability to distinguish themselves from the competition.

Ted Marzilli, CEO of YouGov BrandIndex, commented that, “There is so much marketing and messaging out there to consumers, it becomes harder to break through and really come up with a compelling offering that drives people to stores….”

Rising Customer Dissatisfaction

Needless to say the aforementioned rise in customer complaints regarding the friendliness of McDonald’s staff and customer service are also threats, although McDonald’s new strategy for the counter might stem these issues.

Rise in the Minimum wage

There has been much talk lately in Washington over raising the minimum wage. The merits of doing so can be debated elsewhere–what is clear is that it would have a significant impact on companies like McDonald’s, Wendy’s, and Burger King.

President Obama has talked about raising the minimum wage to $9 an hour, while a congressman from Florida recently introduced a bill to raise it all the way to $10.50 an hour. Doing so would significantly increase expenses for McDonald’s, Wendy’s and Burger King.

Even though many of these companies employees make more than the minimum wage, most still make less than $10.50 an hour. In fact, the average food service worker makes $8.72 per hour.

If legislation changing the minimum wage goes through, these companies’ profit margins will get fried.

Conclusion

While McDonald’s stock might have performed well lately, there is a lot of risk going forward. Will the economy recover? Will McDonald’s value message get through to customers? Will people change their perception of McDonald’s? Will legislation increase expenses? It’s probably best to hold off until it all simmers down.

The article McDonald’s Is Getting Fried originally appeared on Fool.com and is written by Sean Sullivan.

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