McDonald’s franchisees see mixed sales recovery after E. Coli incident, impacted by cold weather

NORTH AMERICA – McDonald’s franchisees saw mixed sales recovery after over 100 people were sickened by E. coli-contaminated onions, with early October showing strong sales but a 17% to 20% decline later, and some operators returning to growth by December.

Traffic remained low during the last quarter of 2024, as indicated by Placer.ai data. November saw the worst performance for McDonald’s, with traffic dropping by 4.2%.

However, traffic showed some improvement in December, down just 0.6%, outperforming the quick-service restaurant (QSR) industry, which experienced a nearly 3% decline.

McDonald’s had previously announced a US$100 million investment to assist operators affected by the E. Coli incident in October, with US$35 million allocated to marketing programs aimed at boosting traffic.

Despite this, franchisee sentiment has declined due to falling comparable sales and lingering concerns over food safety.

Some operators reported to BTIG that cost-cutting measures under McDonald’s “Accelerating the Arches” program may have contributed to food safety issues.

According to BTIG, McDonald’s had historically assigned a manager to oversee each major supplier, ensuring product quality and safety.

However, under the new strategy, many of these managerial roles have been eliminated in favor of third-party oversight, described as “self-managed excellence.”

While it remains unclear whether this change could have prevented the food safety issue, franchisees pointed out that it had been decades since the company faced a major incident of this nature.

McDonald’s did not respond to a request for comment regarding the franchisee claims by press time.

In the months following the outbreak, value offers seem to have helped drive sales. BTIG found that the Buy One, Add One promotion under the McValue menu, introduced in January, accounted for a significant portion of sales.

Additionally, the US$5 Meal Deal contributed to sales, with the total discount mix reaching 30%. However, the long-term effects of McValue remain uncertain, especially considering the severe weather conditions franchisees experienced in January.

One of McDonald’s biggest challenges will be reducing customers’ reliance on discounts, especially with premium-priced items on the horizon.

Franchisees are also facing margin pressures, with food costs as a percentage of sales at their highest in six to seven years.

Some franchisees raised prices on BOGO offers to protect their margins. With discounts likely continuing through summer, margins could remain under pressure.

BTIG expects comparable sales increases of 0.5% in both Q4 2024 and Q1 2025. McDonald’s will report its Q4 and year-end earnings next week.

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