Recession takes bite out of McDonald's

McDonald's breakfast items

TEXT OF STORY

Kai Ryssdal: Outside the beltway today, the corporate news of the day came with fries and a Coke. McDonald's unveiled quarterly profits this morning. Investors were left less than completely satisfied. Sales growth slowed here in the United States. It fell outright in Asia.

But if you're thinking to yourself right about now -- hang on just a second. Cause a couple of months ago I heard this story on Marketplace about how McDonald's was going to do just fine in this recession. You did hear that story. But the change in fortunes at the Golden Arches speaks to how even the best-positioned brands can get themselves into trouble. From Washington, Marketplace's Steve Henn reports.


STEVE HENN: Rafael Rodriguez is the kind of customer McDonald's executives used to call "a heavy user." He comes a lot.

RAFAEL RODRIGUEZ: Ahh, at least twice or three times a week. Yeah, it's quick easy drive through.

And it's pretty affordable.

RODRIGUEZ: It's Egg McMuffin, large O.J., and hashbrown.

For $5.18

Meals like that were supposed to make Micky-Dees immune to this economic downturn. McDonald's was one of the only stocks to actually gain value in 2008. Or at least that was the story from restaurant analysts like Tom Forte at the Telsey Group.

TOM FORTE: So what you had initially was a consumer who was trading down from TGI Fridays and Applebee's and Ruby Tuesdays and others into McDonald's and Burger King.

We were all supposed to trade our Starbucks for McCafes. But recently Rodriguez, who frequents a McDonald's on Grand Avenue in Los Angeles, noticed a change in the morning crowd.

RODRIGUEZ: Yes, you can tell there's less people.

Turns out the great recession is hurting McDonald's too. Unemployment topped 9.7 percent last month, and if you lump in folks whose hours have been cut, nearly one in six Americans is unemployed or under-employed. Analyst Tom Forte...

FORTE: Now by necessity, given the high rate of unemployment, you are seeing consumers opting out of all forms of dining away from home.

Forte says we are all trading down again. This time giving up Big Macs for cans of Chef Boyardee.

In Washington, I'm Steve Henn for Marketplace.

About the author

Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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