Ever since Don Thompson became Chief Executive of McDonald’s (NYSE:MCD) last year, he has had a rough go of it.

Wall Street was stunned in November 2012 when the chain reported its first decline in same-store sales, a key metric of  locations opened at least a year,  in more than nine years. The Oakbrook, Ill. company has struggled since then and disappointed Wall Street in its most recent quarter.  The company needs a hit after items such as the Grilled Onion Cheddar Burger and Premium McWraps seemed to do little to attract customers.

Rivals such as Wendy’s (NYSE:WEN) have marketed their offering as being both delicious and good values, an image that McDonald's has yet to achieve. Market research by Technomic, a food industry market research company shows that Wendy's is preferred by consumers over McDonald’s by a wide margin. Subway has also positioned itself effectively as a healthier alternative to conventional fast food chains as has Chipotle Mexican Grill (NYSE:CMG).

One of Thompson’s biggest challenges is bringing back younger diners who have bypassed McDonald’s for more upscale chains such as Panera Bread (Nasdaq:PNRA) and Chipolte, both of which continue to grow at impressive rates.  Consumers aged 23 to 36 don’t consider the Oakbrook, Ill.-based company to among their top 10 favorites, according to a March Advertising Age report. Winning these consumers back won’t be easy since the company is the midst of two tricky public relations situations. One is over the nation’s growing obesity epidemic, particularly among children. The Center for Science and the Public Interest and other activists have declared McDonald’s “Public Enemy Number One” on that front because of its Happy Meals. McDonald’s has responded by cutting the portion size of the French Fries in the meals and providing kids with apple slices. The company also recently announced plans to quit marketing some of its less healthy food options to children.  It’s also making healthier food available for adults.

Give McDonald's credit for experimenting. The company has recently launched Mighty Wings, its answer to the hugely popular chicken wings offered by Buffalo Wild Wings (Nasdaq:BWLD) and others to try to lure young diners. Its also testing a mobile payments system so only time will tell whether it is enough to draw in the younger crowd.

McDonald’s has gone down this road before.  Few people bought the salads it introduced a few years ago so it decided a few months ago to quit selling them.  Though it’s easy to paint McDonald’s as a villain, the issue of obesity is complex.  People become fat and stay overweight for a host of reasons that range from the psychological to the genetic.  As for the kids who gobble up too much McDonald’s food, it’s important to remember that most need an adult to drive them to the home of the Quarter Pounder.

The other major dilemma facing Thomson is the fight over wages. Fast food workers across the country went on strike this summer.  Though Thomson has denied that McDonald’s pays poorly, recent articles from Forbes and others suggests otherwise. Even so, he has little to say about the paycheck of the average burger-flippers since most McDonald’s are owned by independent franchisees, which may not be in the mood to give raises. Many are reportedly furious with the chain over increasing fees and diminishing profits.

Shares of McDonald's, though, haven't left a good taste in the mouths of investors. They have gained only 7% this year relative to the 17.3% return of  the S&P 500. The stock has also underperformed its key competitors - Wendy’s is up more than 60% and Burger King Worldwide (NYSE:BKW) has surged more than 20%.  

Bottom Line

Absent any near-term catalysts, investors should take a pass on this stock since its risks outweigh its rewards.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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