McDonald's sales plunge in the US. Why customers aren't lovin' it.

McDonald's and other traditional fast food chains continue to leak customers to fast-casual brands like Chipotle. The creation of dollar menus by McDonald's, Wendy's and others may be one reason for the slide, especially among Millennials.

Mike Blake/Reuters
A McDonald's restaurant is pictured in Encinitas, Calif. Sept. 9, 2014. McDonald's Corp on Tuesday reported declining sales at established restaurants across all regions in August, the fifth monthly drop since CEO Don Thompson took the helm in July 2012, and warned a China supplier scandal would cut into profits.

McDonald’s sharp 2.8% decline in same-store sales for August announced this morning is indicative of a continuing shift in eating behavior, according to research from New York City-based Brand Keys. It finds that QSR brands continue to leak customers—of all ages—largely to fast-casual brands.

The creations of dollar menus by many top QSRs may be one reason for the slide, especially among Millennials. Among this age group, 53% agreed with the characterization of traditional QSRs’ fare as “dollar food.” Says Brand Keys Founder and President Robert Passikoff, “You don’t build brands or loyalty on the basis of price. That only works for commodities.”

Brand Keys’ research examined attitudes and behaviors of 1,000 consumers in each of three generational cohorts—baby boomers, Gen X, and Millennials—concerning fast food and fast-casual restaurants. QSR visits by baby boomers were down 18% compared with a year ago. Brand Keys says boomers want “quality food” and find it more often at fast-casual concepts.

Gen Xers show an 11% decline in QSR visits with an equal increase in fast-casual visits. “The Gen X group is more pragmatic about their decisions about eating out, so they seem to be more vulnerable to value positioning,” according to Passikoff. “But they’re skeptical about brands, too, and are looking not for price-value but value for dollar. They feel the fast-casuals offer that, too, equal to and more often better, than the fast food brands.”

QSRs’ greatest customer leakage comes from the ranks of Millennials, which show a 20% decrease in QSR visits. Additionally, 42% reported increased visits to fast-casual restaurants. Passikoff says this group is both the toughest to reach via traditional media and the most difficult with whom to build brand loyalty.

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