What's hurting McDonald's? Subway.
Subway's Jared ads back in the early aughts were nothing short of brilliant. It positioned them as being the fresh and healthy option, right when McDick's was being attacked for the obesity epidemic and questionable food quality. Now Subway is the largest restaurant chain in the world.
Plus, McDick's now has a lot more competition in the form of "upscale" fast food chains like Chipotle, Five Guys, and Panera. Where as 30 years ago, their only big competitors were BK and Wendy's.
I think McDonald's biggest problem is they lack an identity. They don't know exactly what kind of restaurant they want to be, or who their target market is. So they're just throwing everything against the wall to see what sticks. You just can't do that anymore in today's consumer climate.
A good example of how to do things right is A&W Canada. About 20 years ago, the chain re-branded itself back to its 1950s drive-in roots. The stores are modeled after classic diners. Heavily appeals to Baby Boomers' nostalgia. They also reintroduced the Burger Family. The menu has 10 items in total: seven hamburgers and three chicken burgers, plus the usual fries and drinks. Their breakfast menu is simplified as well. Five items. A smaller menu cuts turnaround time for the kitchen, ensuring fast service without long lineups. Recently, they've been focusing on using fresh, high quality ingredients and toppings for their burgers. They went from a has-been to Canada's second largest burger chain.