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Why do diners eat where they do and what does it mean for McDonald's?
A new report from RBC Capital Markets seeks to answer just those questions as the country's largest fast food chain struggles to turn around its domestic unit. (Tweet This)
McDonald's has strayed away from value to the chain's detriment, RBC said.
"In our view, McDonald's U.S. division eased away from the Dollar Menu without a viable replacement. Given the perceptions—and expectation—that McDonald's should lead with value, we believe this has been a big reason for McDonald's woes," wrote RBC analysts in the report.
The decision about where to buy food is sparked by a variety of factors, according to a study done for RBC by market research firm Mission Measurement that surveyed 1,758 respondents. There are traditional factors such as affordability, taste and variety, and social ones, led by quality ingredients, sustainable ingredients and healthiness.
Combined, ingredient quality and taste account for 31 percent of purchase intent—bad news for the Golden Arches. McDonald's earned the second lowest score for both of these categories among 13 leading burger and sandwich restaurant chains. Only Burger King scored lower.
Interestingly, there appears to be an inverse relationship between quality/taste metrics and total restaurant footprints, RBC noted. Smaller regional chains like In-N-Out Burger, Culver's and Steak 'n Shake fared noticeably better.
The so-called veto vote also sheds light on McDonald's woes. Only 12 percent of customers rejected McDonald's, earning it the best score in this category. But a big part of its top showing was the company's vast footprint. When the score was normalized for "convenient location," the chain's veto rank dropped toward the middle of the pack.
Why did people veto McDonald's? The most common reason they cited was it was "not healthy," followed by being "poor quality." Both of these responses were more than double the rate of the fast food average, illustrating the uphill battle McDonald's faces in revamping its image perception among diners.
McDonald's wasn't immediately available to comment.