It's a wrap for wraps at McDonalds Corporation (MCD).
The restaurant chain has decided to pull the plug on McWraps. Available at multiple price points, McWraps were introduced last summer to attract millennials, who crave fast casual food. Unfortunately, they added complexity to the operations and menu of the restaurant chain, which has been striving for simplicity.
For starters, they took a long time to assemble. According to reports, steaming tortillas for premium wraps took 20 seconds. Subsequent actions, such as chopping ingredients, stuffing them, and rolling the final wrap, added more time and complexity to the process. In addition to this, they added wait times to drive-thru orders, which account for 70% of the company's revenues. In contrast, McDonald's burgers take 10 seconds to assemble. The decision to discontinue wraps seems to have been on the agenda for a while, since individual franchises had already begun eliminating the item from their restaurants as far back as October last year. (See also: McDonald's Franchisees Worried About the Future.)
During an earnings call in the second quarter last year, CEO Steven Easterbrook had emphasized the importance of simplicity and efficiency in the chain's operations.
“It's not simply the menu simplification, it's what else can we take off the workload of our teams in the restaurants to enable them to focus on what really matters, which is taking care of customers,” he said.
The success of the all-day breakfast menu also played a role in the company's decision to eliminate wraps from its menu. Analyst Jack Russo with Edward Jones was quoted in a Bloomberg report as saying that McWraps never really “took off” with customers as compared to the success of the all-day breakfast menu item, and this might have accelerated the item's demise. (See also: McDonald's Earnings Powered by All-Day Breakfast.)
The Bottom Line
In recent times, the restaurant chain has begun experimenting with its menu structure and items to drive profits. Last year, it introduced a new buttermilk crispy Chicken sandwich and went back to its Egg McMuffin roots by substituting butter for margarine in the dish. Kevin Ozan, the company's CFO, reported that the change “supported” a 0.9% increase in comparable store sales.
That said, the restaurant still has work to do. According to Russo, the chain would need to introduce a novel menu item in order to make its brand fun again.