McDonald's new bet on chicken hits a snag as franchisees say the birds are too big

By Bill Peters

McDonald's franchisees have complained about 'tough meat' and other issues with new hand-breaded chicken, an analyst says

McDonald's is hoping to win back customers with new chicken and beverage offerings.

As McDonald's goes all in on chicken to bring back wary customers, some franchisees say the biggest difficulties could come down to the type of bird at the centerpiece of the chain's new initiatives.

That's at least one takeaway from BTIG analyst Peter Saleh after conversations with franchisees, who say the burger chain's (MCD) potential plan to sell more hand-breaded chicken is "doomed for failure," partly because of the cost and partly because the chickens themselves are too big.

"Franchisees indicated that the bird is too large, producing tough meat, and that the company should evaluate moving to a smaller bird of a different breed," he said.

McDonald's franchisees - independent operators of the chain's restaurants - also complained that installing the new fryers, drains and exhaust hoods that will likely be needed to prepare the hand-breaded chicken could demand six-figure investments, along with multiday closures to install that gear and additional labor hours in the kitchen. Those changes, the franchisees said, would also come with additional food-safety concerns. McDonald's is currently testing hand-breaded chicken in several U.S. markets, Saleh said.

Some of those franchisees said that hand-breading was the only way to keep up with Chick-fil-A and Raising Cane's. But Saleh said that McDonald's past chicken offerings, with different cuts and seasonings, hadn't resonated with consumers.

"Some noted that no other quick-service burger concept offers hand-breaded chicken for good reasons, and cited the poor precedent offered by Burger King," he said.

Burger King's hand-breaded Ch'King sandwich, he said, was offered for only about 15 months in 2021 and 2022. It was axed due to weak sales, operational snags and challenges selling the sandwich during late-night hours, he noted.

McDonald's did not immediately respond to a request for comment on the note. Shares were up 0.4% on Monday. However, the stock is down around 18.3% so far this year.

The company has been trying to win back customers navigating inflation and discount offerings from the chain's rivals, with lower-income consumers in particular struggling. Over the summer, management said too many promotions run simultaneously had made messaging less clear for staff and for customers.

The chain last month said it would make its biggest menu upgrade ever. Along with hand-breaded chicken, the menu overhaul includes new flavors of Chicken McNuggets, as well as new wings, wraps and other sandwiches. Those plans also include fresher coffee, larger burgers and restaurant remodels. Analysts have said more diners have opted for chicken, partly because of elevated beef prices this year, and partly because sandwiches and tenders are easier to eat in the car.

The franchisees that BTIG spoke with indicated that sales slowed a bit in October compared with September but were still positive.

Franchisees, at least in analyst surveys, tend to be an irritable bunch. But the BTIG note said they praised McDonald's new beverage platform, which includes McCafe drinks and craft sodas. It caters to younger, higher-income shoppers but had also done well in rural and less wealthy areas, Saleh said. That platform accounts for around 2% of sales, he said, and the customers who buy these drinks tend to spend around $16 on average on a meal overall, about 40% to 50% more than average.

But the franchisees said that the total likely remodeling cost for a restaurant - which Saleh said exceeded $1 million - was high. They also said the remodeling effort didn't "have enough test cases to inspire confidence, and that McDonald's hasn't provided enough detail on co-investment with franchisees," according to the note.

Looking at the rest of the year, Saleh said the McRib was expected to land back on menus next month. In December, he said, McDonald's was set to run another movie-related collectible promo. Things like Snoopy cups at Starbucks (SBUX) and SpongeBob toys at McDonald's have been put up for sale at a premium on sites like eBay (EBAY) amid a thriving collectibles market.

However, any toy promo from McDonald's in December would have a high bar to clear after last year's "Grinch"-themed socks, available with a "Grinch"-themed meal, sold quickly.

"Comparisons are very difficult (6.8% comps last year), but many noted the Grinch socks sold out in a few days, so a good collectible tie-in with more supply could allow the system to eke out a decent result against this," Saleh said.

-Bill Peters

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-26-26 1517ET