I have been writing constantly about the issues McDonald's is facing with slower consumer spending, rising commodity prices and the $ menu. It should come as no surprise that Europe is no different. In 2008, European commodity costs are also expected to increase significantly. For the full year, chicken is estimated to be up 6-8%, cheese up 20-25% and beef up 3-4%. With European economies slowing, the company and its franchisees are going to experience the same kind of issues with the Pound (in the UK) or Euro-saver menu as the U.S. system is currently facing with its $ menu. The margin pressure on the system will come from a negative mix shift to lower margin items, while inflation pressures come from every line on the P&L - energy, labor and food.
