McDonald's Is Blowing it! Same-Store Sales May Never Improve!

NEW YORK (TheStreet) -- McDonald's (MCD) has some franchisees who do really stupid things, like post signage telling people to leave.

A Tempe, Ariz., location posted the sign below asking customers to eat and leave within a half hour. 

Meanwhile, McDonald's President and Chief Executive Officer Don Thompson states he is focused on creating an "easy, memorable experiences". He's failing in the U.S., as reflected in MCD's same-store sales growth of 0% for the month ended April 30, down 1.3% year-to-date.

 Photograph courtesy of Alexander Cho, of

This McDonald's isn't the only one driving away customers. There are other stores in the U.S. and abroad using similar practices. It is a good thing this is not stand practice throughout the chain.

Part of what makes a franchise successful is standardization. McDonald's is a no-brainer turn-key operation that's supposed to be managed the same way, every day, across all locations. The current McDonald's isn't the one that was envisioned by Ray Kroc, who opened a McDonald's franchise and turned it, franchising and food-service automation into a huge success.

The Arizona store with the 30-minute policy pictured here was completely empty one evening when I visited, at around 8 p.m. Non-peak hours can be one logical justification. But in retail, having a completely empty store at any time of the day is just unacceptable.

Photograph courtesy of Alexander Cho, of

Empty! It's not good for shareholders and it's not good for business owners. Why?

Well, humans do a lot of group think. If business owners blatantly ignore group think, it can be fatal. You need people, and you need a lot of them, to validate your social existence. It's why many small business owners will intentionally tell employees to park the car in front of the store to make it look busy.

It's called the bandwagon theory:

A psychological theory where individuals will do something primarily because other individuals are doing it, regardless of their own beliefs, which they will ignore or override.

People tend to gravitate to things that other people like. If you see a completely empty McDonald's store, regardless of justification, the store is thought to be "uncool."

This is why other chains offer free Wi-Fi, cozy interiors and massive seating space. The justification is that if a lot of people are hanging out in the store, other people will assume it's a great restaurant. The foot-traffic will increase as the bandwagon effect takes hold. 

I see several McDonald's business owners complain on the Web that people want to sit for hours at the location. I understand that business owners want to free up space. But rather than freeing up space by telling customers to leave, the owner should invest in more seating, if possible, and further build out the store to accommodate seniors and younger adults who want to hang out.

>>Read More: Food Fight! Burger King Battles McDonald's Over Breakfast With Burgers

McDonald's needs to notify all of its franchisees that this time limit practice is just bad. It works against cultural trends and psychologically dampens social validation of the brand.

Source: Google Reviews

Look at the reviews of this specific location. Almost every reviewer complains about the service. A 2.3 out of 5 rating? That's subpar when compared to other major chains like Starbucks (SBUX), In-N-Out and Chipotle Mexican Grill (CMG). I believe that rating is reflected in its earnings.

Starbucks reported same-store-sales growth of 6%. Starbucks' growth came from a 2% increase in foot-traffic, and a 3% increase on in-store-purchases-per-person. Chipotle Mexican Grill reported 13.4% comparable-store sales growth in the same period.

On May 8, McDonald's reported 0% same-store sales growth -- stores open more than 13 months  -- in the U.S. Yes, those numbers include both franchisee and corporate owned restaurants.

>>Read More: 3 Food & Beverage Stocks Pushing The Industry Higher

Of course, McDonald's owns fewer corporate stores than franchised stores. So corporate really needs to crack down on terrible business decisions made by smaller business owners.

McDonald's President and CEO Thompson stated, "We remain focused on delivering an outstanding restaurant experience by serving our customers their favorite McDonald's food and drinks and offering compelling value, choice and convenience to create easy, memorable experiences."

Well, Don Thompson, you are failing.

By Alexander Cho, of

At the time of publication the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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