McDonald's Marks 33 Years in Israel Amid Franchise Search and Global Slump
McDonald's marks 33 years in Israel while its global parent seeks a new local franchisee. Meanwhile, the fast-food giant faces declining U.S. sales and stock drops amid an $8.5 billion global turnaround plan.
McDonald's marks 33 years since its legendary launch in Israel this week, when franchise owner Omri Padan opened the first branch at the Ayalon Mall. Instead of major celebrations, however, the global corporation is currently occupied with finding a new franchisee.
Corporate Restructuring and Local Management
It is worth recalling that about two and a half years ago, global McDonald's acquired the chain's operations from Padan and the Alonyal company, yet day-to-manegement still relies on the same veteran leadership team. The current CEO is Shaul Segev, and about half of the management team has been with the company for close to 30 years. The connection with the American headquarters is conducted mostly remotely, leaving local operations largely in familiar hands.
However, this arrangement is expected to change. Industry sources report that McDonald's continues to look for a potential buyer who will take over the Israeli franchise and return the chain to the model under which it operated during Padan's tenure. Among the interested parties whose names recently surfaced is Wiz founder Assaf Rappaport, who according to media reports engaged in talks on the matter in August - though sources close to him denied the reports to Globes. As of now, no deal has been announced, and its value has not yet been estimated.
Operational Costs and Global Challenges
One of the challenges facing the chain, which operates about 230 branches in Israel, is the high cost of operations. In February, it raised prices by up to 11% on certain products, bringing the price of a McRoyale meal to 54 ₪.
On the global front, the company has also been going through a difficult period in recent months. The fast-food giant has lost more than 22% of its value since April, and last week the stock traded at a nearly four-year low. For the company, which operates about 46,000 branches worldwide, this represents a wiping out of tens of billions of dollars from its market value within a few short months.
"The main reason lies in the changing eating habits of Americans, and primarily the weakening demand for the chain's meals among low-income populations," analysts noted.
In the second quarter, comparable store sales in the U.S. grew by only 0.8%, compared to 2.5% a year earlier, and the number of visits to branches declined. By comparison, Burger King actually recorded an 8.5% growth in comparable U.S. store sales, thanks in part to aggressive pricing promotions.
Now, McDonald's is trying to win back customers through discounted meals, menu changes, and investments in technology. Last month, the company introduced NEXT, a recovery and growth plan for the next decade totaling $8.5 billion designed to support franchisees, alongside restaurant upgrades and the expansion of chicken product offerings. Investors appeared unimpressed, and the stock plummeted by about 5% on the day of the announcement.
