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Aussies drive-by McDonalds

Australian consumers may be giving the world’s largest fast-food chain, McDonald’s, the flick, with the company reporting falling sales here.

McDonald’s global chief executive and president Don Thompson warned that lower levels of spending in Australia and cut-throat competition among Australia’s fast-food chains had dramatically cut revenues for the global giant.

“Australia is another one of those markets that at this point in time we see from their perspective you’re seeing some softer – clearly a softer economy,” Mr Thompson said. Consumer confidence has fallen to recessionary levels, with even low cost burgers unable to tempt people to spend. The introduction of its “Loose Change” menu in 2012 supported sales last year, but consumers have even withdrawn from that offer, and were spending less and less at McDonald’s.

Competition from traditional players such as KFC, Pizza Hut, Nando’s, Red Rooster, Subway and Hungry Jacks (Burger King elsewhere) has been bolstered by burger brands Oporto, Urban Burger, MOS Burger and Grill’d to name just four. Australia has also embraced a multitude of international and healthy fast-food styles, including Red Rock Noodles, Sumo Salad and Go Sushi, adding more choice for consumers and diverting sales away from McDonald’s.

The company could also face increased competition from US burger chain Carl’s Jr. which announced in April this year, that it plans to open as many as 300 stores in Australia following its success in New Zealand.

Results from Australian listed players Domino’s Pizza Enterprises (ASX:DMP), Retail Food Group (ASX:RFG) and Collins Foods (ASX:CKF) suggest that fast-food is still a growing industry in this country. No wonder other chains are looking to setup shop here.

Foolish takeaway

With a clear trend towards healthier fast-food in Australia, McDonald’s may need to tweak its product offering, to keep competitors at bay.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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