McDonald's battles ‘fierce' competition in Australia as global sales drop

News.com.au

25-05-2025

The famous golden arches might be losing their glow, with McDonald's recording a surprising drop in global sales as the fast-food giant battles 'fierce' competition in Australia.
McDonald's reported a one per cent fall in global comparable sales in the first quarter of the year compared to the same period in 2024, which included a Leap Day.
In its US birthplace, McDonald's recorded a 3.6 per cent decline in sales – marking the biggest sales drop since the pandemic, when restrictions were in place.
McDonald's attributed a decrease in the number of comparable customer transactions at restaurants as a major factor behind its decline in US sales.
McDonald's Chairman and CEO Chris Kempczinski said customers were 'grappling with uncertainty'.
'McDonald's has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share,' Mr Kempczinski said.
In Australia, research suggests the fast-food giant's sales are rising, with market research firm IBISWorld estimating McDonald's sales to be $5.7 billion in 2024-2025, compared to $5.4 billion in 2023-2024.
But it's not all good news, with the fast-food giant having to fight off hungry competitors eating into its market.
'While absolute sales figures might be rising, it is anticipated that McDonald's is losing market share to other fast food providers in Australia,' IBISWorld Industry Team Leader Disha Jeswanth told news.com.au, adding 'McDonald's faces fierce competition from several sources'.
'Within the fast food segment, the main differentiator is price in terms of value for money.'
According to IBISWorld, McDonald's market share has consistently dropped from 21.5 per cent in 2021-2022 to 19.3 per cent in 2024-25.
Aside from competing against KFC, Dominos as well as burger joints of the likes of Hungry Jack's and Grill'd, McDonald's is also facing off with Mexican food brand Guzman y Gomez (GYG) which has proven itself to be a 'major emerging competitor'.
'Guzman y Gomez is capturing market share through its perceived healthier food offerings,' said Ms Jeswanth.
'While a large burger meal at Maccas is averaging above $15 these days, GYG is offering a burrito bowl for a similar price. The brand is also marketing its use of free-range chicken and high-quality ingredients.
'GYG's next move involves expanding into drive-thru operations, which will further weigh on McDonald's demand.'
'Grill'd, on the other hand, although it doesn't compete with Maccas on the basis of price, is offering gourmet burgers that are often a healthier choice.'
To counter this, Ms Jeswanth notes McDonald's has continued sourcing over 90 per cent of its ingredients locally and using 100 per cent RSPCA-approved chicken.
'McDonald's also provides nutritional information with its food orders to maintain transparency. However, public perception around McDonald's food quality remains a challenge.'
Jump in price
An increase in prices, as other restaurants have done amid rising cost-of-living and inflation, have also hurt McDonald's reputation.
'McDonald's value proposition has long centred on providing affordable meals, appealing especially to budget-conscious consumers,' said Ms Jeswanth.
'However, consistent price increases in recent years, driven by rising input costs and wages have eroded this perception of value.'
The price of a large fries has increased by more than 50 per cent since 2019, from $3.20 to $4.85 as of this month, while a classic Angus burger is up more than 25 per cent from $7.95 to $10.
The increase has come at a time when cost-of-living pressures has changed Australians' spending habits.
'Lower-income households and younger consumers are extremely cautious of their discretionary spending', said Ms Jeswanth.
According to Finder's Consumer Sentiment, only 61 per cent of Australians reported spending money on food delivery or takeaway services per week in May 2025, compared to 68 per cent in May 2022.
'The cost of living is putting significant pressure on household budgets, and one area many Australians are cutting back on is non-essential spending such as takeaway,' Graham Cooke, head of consumer research at Finder told news.com.au.
'Fast food prices of some menu items at McDonalds have been rising faster than inflation.
'At the same time, local fast-food brands have diversified their offerings.'
'When groceries, energy bills, and housing costs rise, the convenience of restaurant-prepared meals becomes a luxury that is harder to justify for many individuals and families,' he added.
'What might have been a weekly or even bi-weekly habit could shift to a monthly treat or only for special occasions.'
Low customer satisfaction
According to Sydney-based Fonto, which conducts weekly surveys of customer experiences at 19 Quick Service Restaurants (QSR) across Australia, McDonald's consistently underperforms on customer satisfaction compared to other brands across the last 16 months.
In the first quarter of the year ending in April, McDonald's scored 69 per cent overall satisfaction – a drop from 71 per cent compared to the same period last year.
Out of the top 15 brands, the fast-food giant was ranked last in the first quarter of this year.
'We're seeing consistently that McDonald's ranks towards the very bottom,' Fonto CEO Ben Dixon told news.com.au, adding it sits in the bottom third of 19 brands.
Meanwhile, competitors GYG, Crust and Grill'd made up the top three brands for overall satisfaction.
'They're really focusing on fresh and healthy, they're brands that an athlete would consider buying from, and their prices aren't too far away. The gap in price used to be quite significant between, say, a Grill'd burger and a McDonald's meal, and it's not as big anymore.'
Grill'd beef burgers range from $13.50 to $16.50, according to current prices listed on its website.
In the first quarter of the year, McDonald's ranked 13 for price out of the top 15 brands.
'McDonald's customers have consistently got the least satisfaction with their prices than any of the other brands,' said Mr Dixon.
'So people feel like they're still paying a lot, and the quality is not there for what they're paying.'
Between March 2024-May 2024, Grill'd's overall satisfaction jumped from 85 per cent between to 88 per cent between February and April 2025. Over the same period, McDonald's dropped from 74 per cent to 69 per cent respectively.
Despite the low customer satisfaction, 75 per cent of McDonald's customers told Fonto they didn't consider going elsewhere.
Mr Dixon said one major reason behind this decision is proximity, with McDonald's owning over 1,000 restaurants across the country.
'If you're in a regional or rural area then it's hard to consider going somewhere else if there's nothing for a long way away,' he said.
But as competitors open more stores the game could change.
Last year, GYG announced its goal to expand its network to over 1,000 stores.
'The question that everyone probably needs to think about is, if every town had a strip, and in that strip was a McDonald's, a Hungry Jack's, a KFC and a Subway, would McDonald's hold the massive market there that it does?' Mr Dixon questioned.
'Or would people move between them because they don't want to eat a burger every night, or because the quality and the satisfaction is not necessarily as high in some of those restaurants?'
The future of fast food in Australia
New competitors such as US-based chicken chain Wingstop – which opened its first store in Australia this month – is also looking to take a bite out of an increasingly crowded market.
'McDonald's has stood the test of time in the Australian market, there is always the risk of losing market share to new competitors,' said Ms Jeswanth.
'International fast food giant Wendy's is set to expand to over 200 locations in Australia over the next decade, proving to be a direct competitor to Maccas.'
To compete, Ms Jeswanth said brands will need to focus on providing premium quality and healthier meals at affordable prices.
'Consumer behaviour is tilting towards sustainable and healthier options, and fast food giants will need to match these preferences (including plant-based options) to remain viable in his highly competitive market,' she said.
'Despite McDonald's loyalty and scale within Australia, the brand will need to focus on bettering its offerings to remain competitive.'
Mr Dixon agrees 'the competition will just get tougher'.
'If I was McDonald's or a McDonald's franchisee, I'd have my work ahead of me,' he said.
'They've got to think seriously about how they reinvent themselves again, or what they do differently to continue to dominate.'