McDonalds says US sales are improving amid tensions with franchisees: Were taking the right steps

McDonald’s said its US sales were improving on the back of promotions and marketing, following a decline in the third quarter as financially stretched consumers cut back on dining out.Its shares were up more than 5% on Wednesday.Executives highlighted gains from increased marketing towards entry-level meal deals and extra value meals alongside the return of promotional offers, including a $2 breakfast sandwich and free fries with a $1 minimum purchase.This helped bring back customers who were opting for cheaper alternatives from rivals, convenience stores and home-cooked meals as they face rising costs of living.“We’re taking the right steps to improve our near-term performance in the US, and I’m encouraged by our baseline traffic trends in September and October,” CEO Chris Kempczinski said.Customer visits to McDonald’s restaurants fell 4.6% from a year earlier in the third quarter, according to Placer.ai, and rose recently due to the return of the chain’s Monopoly promotion and Halloween-themed Boo Buckets, though still below year-ago levels.McDonald’s announced its new turnaround strategy called “NEXT” in June.The plan includes simplifying operations, modernizing restaurant designs and investing in employee training, and aims to improve restaurant-level efficiency.However, the company has faced mounting tensions with franchisees who have complained about eroding control and rising costs.

McDonald’s executives in August said execution of its under-$3 menu was hurt by a third of franchisees that did not participate.“How deep and how lasting those meal deals are will depend on whether McDonald’s or its franchisees are willing to carry the cost,” said Nagham Hassan, market analyst at eToro.“If McDonald’s leaves the cost to franchisees, expect the deals to be patchy and the recovery slow.”Kempczinski said corporate and US franchisees are in conversation about pricing, and the two sides are “in a good spot with the exception of this ...