Fast Food in the 21st Century: Will the Custom-Made Burrito Crush the Golden Arches?

A tension exists in the fast food industry between former standbys, such as McDonald’s, and newer fast casual chains, such as Chipotle. As fast casual chains gain popularity, the likes of McDonald’s need to re-examine their business models to stay competitive.

The fast casual food market has grown 550 percent since 1999, more than 10 times fast food restaurants (Ferdman 2015). The recent resignation of McDonald’s CEO Don Thompson made major headlines, but it’s likely few people were surprised. McDonald’s same-store sales continuously declined during Thompson’s two years as CEO.

Meanwhile, chains such as Chipotle have expanded. With its simple menu and straightforward pricing, Chipotle allows customers to see how the food is made and exactly what they’re getting. This helps customers look beyond the price and see the value of better food. Consequently, they are willing to pay up to twice as much.

Gagliardi (2015) speculated that consumers may be ready to give McDonald’s another chance after a successful 2015 Super Bowl ad. However, Gagliardi also acknowledges that incoming CEO Steve Easterbrook has a big job to do. Easterbrook faces a problem of market differentiation. Colt (2015) cites a quote from Thompson that indicates McDonald’s is trying to be everything to everyone: “If anything, I think McDonald’s will be more and more and more, and not just this type restaurant or that type, but a restaurant that’s trying to satisfy diverse needs.”

It will take more than a well-received ad for McDonald’s to compete with fast casual restaurants. McDonald’s needs to look at its core business model and decide where its core market is. McDonald’s is not Chipotle, and if it continues to be anything other than the best McDonald’s it can be, its customers will continue to eat fast casual.