QUESTION: What are McDonalds competitors doing toattract this segment of consumers? Name each competitor and hisstrategy.

NOTICE

Why Millennials Just Aren't That IntoMcDonald's

Cassie Shortsleeve?August? ?07?, ?2016

Head over to the website of McDonald’s, and you’ll begreeted with this statement:

“Since 1955, we’ve been proud to serve the world some of itsfavorite food.”

But are fast-food burgers and fries really our favorite foodthese days? After the company introduced the “Create Your Taste”program this week — where you can customize your burger by choosingfrom ingredients such as guacamole, grilled mushrooms, and (in somelocations) Gouda cheese — people took to social media this weekwith photos of lettuce buns, a reminder that even with a new way toorder food, people are still trying to make the meals themselveshealthier.

The numbers paint a not-so-pretty picture for the fast-foodgiant. McDonald’s same-store U.S. sales also dropped 4 percent inFebruary and 2.2 percent in May. And just last week, the companyreported that its global comparable sales fell yet again — makingfor unhappy (once-thriving) franchise owners.

What’s to blame? Perhaps it could be changing consumer tastes —namely, those of Millennials, my generation, born roughly betweenthe early 1980s and the early 2000s. “As Millennials, we are moreskeptical of the fast-food category than any other generationbefore us — which is shown through our purchasing pattern, but alsoin how we are talking about the industry,” Jason Dorsey, aMillennial researcher at the Center for GenerationalKinetics (and a Millennial himself), tells Yahoo Health.

In fact, Yahoo Health polled other Millennials to find theiropinions about McDonald’s — and while the results were admittedlyunscientific, they pointed largely to the idea that the fast-foodgiant has a bad rep to shake. (Respondents noted that theyperceived the food to be something reserved for long car rides;unhealthy and cheap; and with unclear ingredients.)

Industry experts aren’t shocked by these sentiments. Born in theage of technology, we’ve managed to impact almost every industrywe’ve touched — and the food industry is no exception, saysDorsey.

“Millennials have hit lower-dollar items first,” he says. Inpart, that has to do with our age: “Millennials currently have alot more interaction with McDonald’s than with automobilecompanies, for example.”

Other areas our generation is affecting: membershiporganizations like country clubs (who needs to pay money to hangout with your friends when you can reach them on Twitter?);car-buying (partly because we’re buying cars later, and partlybecause we’re now buying through social media and digitaldecision-making); the housing market (we’re getting married later,so we’re buying homes later and renting longer — sending rentssky-high); the workplace (with technology, we don’t want to work ina cubicle!); and, too, the restaurant biz.

And these changes have many industry experts hooked: What’s tobecome of fast-food chains like McDonald’s as our generationcontinues to grow up?

The Fast-Food Problem

One study Dorsey and his colleagues conducted found thatingredients are incredibly important to our generation. Sixtypercent said they aim to avoid synthetic hormones, high-fructosecorn syrup, trans fats, and artificial preservatives — allingredients that are often found in fast food.

We’ll tell you ourselves that transparency matters, too. “I wantto see what’s going into the food, if I’m in a fast atmosphere,”Christina Panagakos, a 25-year-old from Kansas City, Missouri,tells Yahoo Health. “At a place like The Mixx in Kansas City, it isa faster atmosphere, but you go down a line and people assembleyour salad behind a glass — Chipotle does this for salads.”

Meanwhile, something like Wendy’s Strawberry Fields ChickenSalad could very well include fresh fruit in the dish. But becausePanagakos isn’t actually able to see the restaurant workers makeit, “all I imagine is freeze-dried strawberries,” she says.

Mike William, a 26-year-old from Somerville, Massachusetts,shares the same sentiment: “You can’t see what they are doing atMcDonald’s, Burger King, or Wendy’s. I’m skeptical about everythingthat’s in my food,” he tells Yahoo Health.

Transparency is just a part of the way Millennials makedecisions about what they eat, says food-marketing expert PhilLembert, editor of supermarketguru.com, a nutritional site thatanalyzes food trends to help consumers. But transparency hasn’talways been a non-negotiable factor. For Baby Boomers (born between1946 and 1964), it was more about taste and convenience. And forGen-Xers, born between the early 1960s and the early 1980s, it wasabout saving money and sharing — not about taste or creativity.

“Millennials look at a whole different series of criteria forwhat foods they’re going to purchase: the quality of food, thetransparency of a company, where the food comes from, and thesustainability of that food,” Lembert tells Yahoo Health.

And, for the most part, we hear those conversations coming outof fast-casual joints like Chipotle. Recently, the company stoppedselling pork at hundreds of locations because of a violation in howthe animals were being raised. Chipotle is also incredibly vocalabout only using “good” ingredients. Walk inside a store and you’llsee that décor and messaging alike focus on “food with integrity”and how the company values how food is raised and cultivated.(Interestingly, McDonald’s was a major investor in Chipotle fornearly 10 years.)

“I think people appreciate places like Chipotle,” saysPanagakos. “You can make your meal as healthy or unhealthy as youwant. You see it being put together, and they are open with howtheir animals are treated and fed.”

In the past, fast-food joints’ focus was on the mass market. Forthe future, these places must hone in on who they are trying toserve and how they can meet those individual needs, says Lempert.After all, Millennial consumers tend to have more rigid diets aswell as higher standards for the food experience in general.

And to serve Millennials, Lempert agrees that the food itselfhas to evolve — beyond just ingredients. “It can’t be the same foodon that menu board every time you go in,” he says. The food needsto create excitement. And while this is more difficult on a largerscale — not to mention expensive — Millennials want unique flavors:“They want ethnic foods — and an ‘Italian sandwich’ is notethnically inspired.”

In the past few years, McDonald’s has taken strides to do this.The company recently announced that it plans to fade out chickengrown with antibiotics in coming years. It also eliminated eightitems from its menu and a whole slew of other ingredients, testingout new menu items and options like the “Create Your Taste” model —allowing people to choose what goes on their burger.

When asked to comment on initiatives to attract Millennialconsumers, McDonald’s commented to Yahoo Health:

“Millennials visit McDonald’s today, and we’re taking steps tobe an even greater part of the conversation with them. Create YourTaste enables customers to order at a digital kiosk, and select abun and toppings (such as spicy mayo, chili lime tortilla chips,and lettuce wraps instead of a bun) for a customized burgerdelivered directly to their table. We’ve introduced menu items thatMillennials love, which include the Egg White Delight, McCafébeverages, and shareable menu items, such as the 20-piece ChickenMcNuggets. Millennials, families, and our customers share a desirefor quality ingredients and freshly prepared menu items. We’relistening to all of our customers — including Millennials andevolving our menu to meet their expectations and changing eatinghabits.”

So why does McDonald’s continue to lose — even compared withother fast-food competitors? Burger King, for example has actuallyseen sales increase. Experts suggest that could be due in part tothe now-Canadian-based company bringing back the popular, classicmenu item Chicken Fries and focusing on the menu. Wendy’s couldalso be appealing to fast-food customers with higher-end items likea bacon portabella melt on brioche, some say. Taco Bell, owned byYum Brands, is chugging along, too — hoping that delivery willdrive sales.

Another reason why McDonald’s in particular seems to be thefocus of the fast-food backlash: It’s “the biggest target possiblein the space in terms of revenue, history, visibility, andemployees,” says Dorsey. “It’s naturally the prime target for amultitude of vocal groups, from health and wellness advocates tothe labor movement.”

Meanwhile, the company has struggled to innovate in response tochanging preferences in a time of unprecedented competition in thequick-service and fast-casual space, Dorsey adds. The result?“Significant negative public focus.”

The Millennial Marketing Scheme

Here’s where it gets tricky. To some extent, companiesunderstand consumer wants — especially when it comes totransparency and cleaner labels, says Lempert. The problem is, thatsame transparency can quickly become a marketing scheme.

Take, for instance, Pepsi’s Caleb’s Kola, a “craft” soda. Pepsitouts three ingredients: sparkling water, cane sugar, and kola nut— making the product seem healthier than other sodas and thecompany transparent about what it puts in the soda. But do a littledigging and you’ll see the drink also contains a “special blend ofspices,” 29 grams of sugar, and caramel color (which has beenlinked to cancer). “Here’s a company that understands what to do,but they haven’t gone the whole way. We’ve hit ‘Phase One,’”Lempert says. While the effort is there, the product doesn’t matchthe marketing — and the marketing proves to be a bit of afacade.

But to some extent, this marketing can work: “Bright andhealthy-looking places, foods, and drinks seem better and fresher,”says William. “I tend to think healthier-looking food or drink ishealthier than fast food, regardless of if it’s the truth,” addsPanagakos.

But that’s just it — sometimes it’s not the truth. “Theperception that one fast-food brand is healthier than another isn’tnecessarily always true,” says Dorsey. “Many Millennials base thatdecision on speed, price, taste, or quality of the food — and thevocal part of the generation starts saying certain things arehealthier than others.”

Francesca Basile, a 28-year-old in Manhattan, New York, saysthat even though the food at fast-casual joints may not actually behealthier, she tends to think it is. “I may be wrong, but I thinkthat when you’re paying slightly higher prices for food that ismade out of real ingredients and prepared to order, then it’shealthier and more acceptable,” she tells Yahoo Health.

Some fast-casual joints — even though they tend to serve largerportions, and thus, more calories — have what’s called a “healthhalo,” Kristin Kirkpatrick, RD, the manager of nutrition servicesat Cleveland Clinic Wellness Institute, tells Yahoo Health. “Ahealth halo is a classification of wellness, health, or nutritionthat individuals may place on a brand that is marketed as healthy.And while that brand may have some healthy food options, the halogives the illusion that all options under the brand must behealthy.”

Consider Shake Shack — the popular burger chain with “cool”environments, high-quality ingredients (no hormones, noantibiotics), and an interactive social media presence. You maythink that because of all these factors, the joint’s food isautomatically healthy (or at least, healthier than other fast-foodrestaurants). Well, look at these stats: A hamburger fromMcDonald’s has 240 calories and 8 grams of total fat. A Shake Shacksingle hamburger? 360 calories and 17 grams total fat. Of course,there are other factors beyond calories and fat content to consider— like how the food is produced and the exact amount of meat andbun — but that’s just one example. Even more: Research out ofCornell University has found that people actually consume morecalories when they were at an eatery with a health halo.

Regardless, it’s hard for fast-food brands to break away from anunhealthy reputation — even with healthier menu choices. “In thefood business, perception is reality,” says Dorsey.

Panagakos notes that in her mind, there’s just somethinginherently unhealthy about fast food. “It could be because of allthe media surrounding how unhealthy it is — YouTube videos,documentaries like Fast Food Nation, Michelle Obama even,”Panagakos says. “I think it’s just something that everyone knows isunhealthy because most of these places are decades old and havebeen doing things the same way for a long time. There’s littlechance that any of these restaurants will ever been seen as ahealthy option even with all their efforts to providehealthier-seeming choices.”

And it’s sentiments like these — despite the efforts fromfast-food giants — that create room for competitors to step in andtake that market share, says Dorsey.

After all, Dorsey says, “we still have to eat.”

The Rise of Fast-Casual

While the trust may not be there for classic fast-food joints,if you look at the data, we’re still eating out, says Dorsey. Butwhere? “Fast-casual places, sandwich places, salad bars, andpre-prepared meals are all on the rise — it’s a shift toward whatis perceived to be healthier, but also better,” he says.“Millennials who can afford to are spending their money to get abetter experience.”

Our generation wants more than just food, though — we wantlocally or regionally owned, and we want unique. “Millennials grewup with the idea that buying local is a reflection of your valuesand that makes you a better part of the community,” says Dorsey. Wewant a great dining experience — something that is unique to ourgeneration. But the ability to choose meals and customize dishes isautomatically a challenge for fast food, he says. And while fastfood is arguably the most affordable food option, Dorsey saysMillennials are OK spending a little bit more for “better” food. Wealso want good service (which might seem strange, considering oursis a generation that’s received criticism for not being able tolook up from the phone). “But great service might mean orderingthrough your phone,” Dorsey says. We want social media. We wantconnectedness. We want variety.

These experts agree that all of this points to an even biggerrise in fast-casual joints to come. “If we look at typicalfast-food restaurants, the problem is not just the foods — theproblem is the environment,” adds Lempert. “McDonald’s, Burger King… the stores themselves haven’t really changed much. They mighthave new seats or new artwork, but Millennials who love food trucksand all kinds of food experiences don’t want to walk into a store,look at a menu, and be given food that looks the same every singletime,” he says. “The model is broken.”

Ultimately, we are the new consumer, and the model has tochange. Millennials are said to be one of the most connected,informed generations ever. To some extent that’s harmful — are wetoo plugged in? (Sometimes, sure.) Is all of the information wereceive correct? (Not always, no.) After all, perception,especially when it comes to food, isn’t always the truth.

Regardless, consumer demand is at an all-time high, saysKirkpatrick. And connectedness also means the ability to seek outthe truth. While marketing schemes and health halos may worktemporarily, companies can’t “fake it” long-term, says Lempert.“This generation will search information out — they grew up withsearch engines. If they turn to the Internet for answers and thoseanswers are different than what they are being told, then they aregoing to be angry.” And angry costumers don’t buy.

As Kirkpatrick puts it: “When I was a child, I couldn’t justjump on the Internet to look at a menu for a fast-food restaurantor watch a documentary movie about how farming practices havechanged. Information can be powerful, and in this case, it justmight be industry-changing.”