Chipotle Shows How Good McDonald's is

Today’s profit warning from Chipotle has obviously surprised the market. At time of writing, shares have dropped 20%. Either this decline is a typical over-reaction by Wall Street or alternatively the exceedingly high share price to date was the overreaction. The warning is just one more reflection of how weak the economy is, but it is also a back handed compliment to the 800lb gorilla in the fast food sector – McDonald’s.

While Chipotle and Darden ( a really well run company) announce profit warnings, the Golden Arches continues to go from strength to strength announcing good August results with US sales alone up by 4.5%.

Only a few years ago, McDonald’s was a basket case with few predicting a bright future. Deceased CEOs Jim Cantalupo and Charlie Bell energized the business and put it back on the right track – a track that it has never since looked like falling off. I am so impressed the Oakbrook based chain that when keynote speaking about branding, innovation and business growth, I suggest audience members should have their next informal business meeting at a newly refurbished McDonald’s. Why? Well, if you haven’t been to a McDonald’s outlet in recent years, you’re in for a surprise. The ambience and store decoration is inviting – even comfortable where McCafe is in situ, the coffee is drinkable (but don’t tell me it is comparable to Starbucks) and items like the Chicken Snack-Wrap are quite simply good.

Sometime, somewhere, McDonald’s almost lost it. Today the brand is relevant, the products are relevant and in a climate where money is tight, the pricing is relevant.

Chipotle’s price point - at almost $10, is substantially higher than McDonald’s. But if the very recent darling of Wall Street is suffering, it is not inconceivable that the burger giant will hit a rough patch as well, but it sure deserves kudos for what it has achieved to date