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Will Consumers Trust Brand New Menu Efforts of McDonald's?

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Source: courtesy of McDonald's Corp.
The new president of the U.S. division of McDonald’s Corp. (NYSE: MCD) faced analysts for the first time on Wednesday since taking over in the middle of October. Mike Andres joined CEO Don Thompson to at an investor briefing to say that the company is going to shrink its menu and boost food quality.

The company plans to remove eight items from its menu in January and eliminate five of its extra-value meals. The idea is to simplify a menu that currently includes more than 100 items and to bolster quality by improving ingredients, cooking techniques and warming techniques.

Andres said, “We must and will win with our food.” In addition, however, the company will allow franchise operators more latitude in food offerings and promoting plans to become more involved in communities in an effort to encourage families to dine at McDonald’s.

The plan seems a bit vague about how the company plans attract millennials, the 18- to 34-year-olds who have slipped through McDonald’s fingers and moved up to fast-casual dining spots like Chipotle Mexican Grill Inc. (NYSE: CMG). The thinking seems to be that fresher, higher quality ingredients — hallmarks of the fast-casual restaurants — will attract the millennial crowd.

Maybe, but changing customers’ perception is likely to take significant promotional effort and some time. The company could also endanger its appeal to its base if these changes raise prices.

What to watch? Revenues, first and last. Sales need to rise. The increase doesn’t have to be large to begin with, but the trend has to be up. If sales remain weak through late next year, McDonald’s will be holding another investor briefing, certainly with at least a new story.

With the meeting still in progress, investors are not terribly impressed with what they are hearing. Shares were down about 1.1% at $90.36 Wednesday afternoon, in a 52-week range of $89.34 to $103.78.

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