McDonald’s all-American menu is rocked by the Shack

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It’s the story of two burgers. One is in decline and the other is growing. One is a symbol of the United States and how they exported fast food to the world. The other is a playful New York City competitor, marketed as a healthier, tastier alternative. One is the Big Mac, the other is the ShackBurger.

The Big Mac sells for $ 4.80, has 530 calories, and is a familiar heap of mass-produced beef, cheese, pickles, and buns. A double ShackBurger is “100% All Natural Angus Beef.” No hormones and never antibiotics, ”on a potato roll, contains 770 calories and costs $ 7.99 at the Shake Shack in Madison Square Park.

Which would you prefer?

Judging by the various fortunes of Mcdonalds, which tries to simplify its over-filled menu to stem the drop in sales and profits, and Shake Shack, the gourmet burger chain founded by chef Danny Meyer, which filed an IPO this week, the answer is: ShackBurger.

Here is another question. Which business is closest to McDonald’s, the self-service kiosk opened in 1948 in San Bernardino, Calif. by Dick and Mac McDonald, with nine items including a 15-cent burger? Is it McDonald’s or Shake Shack, which is IPO filing nicknamed “a ‘roadside’ burger stand serving a classic American menu of premium burgers, hot dogs, fries, shakes, frozen ice cream, beer and wine”?

Maybe the wine is a gift – proof that Shake Shack is a hipster pastiche, preferred by urban millennials who want their organic beef served with a nostalgic edge, and not real fast food. Surely McDonald’s, where a Big Mac is relatively expensive and Dollar menu items such as Bacon McDouble play the role of the old 15-cent burger, is the successor?

But the McDonald brothers served hormone-free beef and milkshakes with sugar, not corn syrup. California was pretty natural in 1948. American farm animals were not fed on antibiotics until 1951 and beef cattle were not given growth hormones until 1954. The massive use of high fructose corn syrup didn’t start until the mid-1960s.

What about the price? Fifteen cents is equivalent to $ 1.47 at today’s prices, closer to the Dollar menu than the Big Mac or the ShackBurger. But the United States is richer than in 1948 – its gross domestic product per capita in 2013 was 3.6 times higher. This suggests that the average American consumer can afford $ 5.29 today as easily as 15 cents in 1948. A single ShackBurger costs $ 5.19.

Rising disposable income, particularly among the well-paid and educated, has challenged McDonald’s and other “quick-service restaurants” of “quick-chill” chains such as Mexican Grill Chipotle, Panera Bread and Noodles & Company. They offer lighter and healthier varieties of food (although a Chipotle burrito often contains more calories than a Big Mac).

Young people are leaving McDonald’s and Taco Bell for such outlets and for hamburger brands such as Shake Shack and Five Guys. They prefer the food, they can afford the prices, and they see McDonald’s as unhealthy, old fashioned, low end and not a nice place to be. In its IPO dossier, Shake Shack describes itself as “fine casual”, deliberately placing itself at the top of the market.

American fast food is disrupted from above, unlike other cases of “breakthrough innovation” identified by Clayton Christensen, the Harvard professor. Instead of technology or new business methods that allow entrants to undermine incumbent businesses with cheaper products, McDonald’s has a grip on the mass market but is losing the upper hand.

McDonald’s has long struggled with increasing complexity, also known as growing inequality. The McDonald’s stand in 1948, and franchises then spread across the United States in Ray Kroc, sold in a large and uniform market. But the the highest income share of 1% in the United States went from 11% in 1948 to 19% in 2012. Selling a menu to a company is much more difficult.

His response was to regularly add more items to the menu to cover all the bases. The nine articles of 1948 have extended to 121, including 14 desserts and shakes, and 29 kinds of chicken and fish wraps and sandwiches. His mission statement didn’t even mention the burgers. No wonder his clients are confused.

It’s a very large company, with 35,000 points of sale in over 100 countries and annual revenues of $ 28 billion. Shake Shack is tiny, with 63 Shacks and $ 82 million in sales in 2013. But the newcomer sells a lot of ShackBurgers – the average American Shack generates $ 5 million a year, double the turnover of American McDonald’s. medium, and is more profitable.

Which would you prefer?

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