McDonald's to Franchisees: Merry Christmas. Now Open Your Stores
McDonald's must pull out all the stops to eke out gains after its global October sales decline, its first in nine years.
When McDonald's Corp. stunned analysts last week by posting U.S. sales growth in November after a drop the prior month, one contributor went untouted: The company gained sales by urging franchisees to open on Thanksgiving, a holiday during which many of them traditionally close.
But it's not stopping with Thanksgiving. According to an internal memo obtained by Ad Age, McDonald's is pushing franchisees to open on Christmas in a bid to lift December sales.
"Starting with Thanksgiving, ensure your restaurants are open throughout the holidays," reads the Nov. 8 memo from McDonald's USA Chief Operating Officer Jim Johannesen. "Our largest holiday opportunity as a system is Christmas Day. Last year, (company-operated) restaurants that opened on Christmas averaged $5,500 in sales."
While that might not seem like much, consider this: In a second memo, dated Dec. 12, Johannesen pegged average sales for company-owned restaurants, which compose about 10 percent of its system, at "more than $6,000" this Thanksgiving. People close to the Oak Brook-based company said that about 6,000 more locations opened their doors this Thanksgiving than last year, so presuming their sales were on par with company-owned stores, that's about $36 million in additional sales.
Should the same number of franchisees open on Christmas and the day's take equal that of Thanksgiving, the bump jumps to a total of $72 million for the fourth quarter. And if Santa grants corporate's wish and every store in McDonald's 14,000-strong U.S. system opens on Christmas and rings up $6,000 each (a near impossibility), it could line the chain's stocking on Dec. 25 with a total of $84 million.
But if only a few thousand stores open, it's still a win, since even a little ho-ho-ho can turn around ho-hum sales. According to people close to the company, franchisees opening on Thanksgiving accounted for almost one percentage point of the company's 2.5 percent growth in U.S. same-store sales in November.
"Our November results were driven, in part, by our Thanksgiving Day performance," said Johannesen in the Dec. 12 memo. "Thanks to proper planning and your great execution, we capitalized on the opportunity to be open while our customers were on the road—and those customers rewarded us."
McDonald's spokeswoman Heather Oldani said the company does not comment on leaked documents or information, but added, "However, our restaurants will be open to serve our customers when and how they need over the holidays."
Opening on holidays didn't happen much in the company's Christmases past. Richard Adams, a consultant and former McDonald's franchisee, said, "Thanksgiving was never open, then 15 to 16 years ago, some started staying open." As recently as five or six years ago, "you would never even talk about being open on Christmas, even if some were open on Thanksgiving. For the franchisees, this is a big cultural shift."
But McDonald's must pull out all the stops to eke out gains after its global October sales decline, its first in nine years. Howard Penney, restaurant industry analyst with Hedgeye Risk Management LLC in New Haven, Connecticut, said McDonald's benefited in recent years from programs to keep stores open later and longer. But in recent years, those opportunities became exhausted, which was one of several reasons for the sales deceleration.
"They kind of maxed that out—all the restaurants that made sense to have open longer, they've already got those sales dollars—and that whole initiative kind of dried up in 2012," he said. "These kinds of things have a limited-growth opportunity year over year."
So are employees paid more to work holidays? Oldani said she can't speak for franchisees, but "when our company-owned restaurants are open on the holidays, the staff voluntarily sign up to work. There is no regular overtime pay."
McDonald's other big play to boost fourth-quarter sales, as first reported by Ad Age, was to move one of its most-popular limited-time sandwiches to December.
So now kids can also leave Santa a McRib.