McDonald’s has only one way to go  ©

Between 1996 and 2000, the Chairman’s Letter in the McDonald’s Corporation Annual Report only once referenced the “customer experience”. This from an organization whose vision proudly proclaimed: “to be the world’s best quick-service restaurant experience”.  The 2001 report published March 2002 showed a dramatic change in attitude “First and foremost, we plan to improve the customer’s experience…..We have rededicated ourselves to giving customers … an outstanding experience” wrote departed Chairman and CEO Jack Greenberg.

Much of the burger giant’s woes can be traced to the above attitude or lack of it in relation to the customer experience.

The best thing that McDonald’s has going for it right now is just how poorly it performed in recent years. If we put it into car industry parlance, the Oakbrook based giant is similar to the Ford Focus – where the concept is a value for money, everyday car with few pretensions. The McDonald’s version of the Focus though was one with flat tires, dirty windscreen and a very poorly maintained engine. The difference today is that the new driver of this model, Chairman and CEO Jim Cantalupo - has demanded a major service tune-up and is providing very clear navigation skills. In the first conference call – January 16^th - following his appointment, Cantalupo in a stinging indictment of what he felt was going on said “Clean bathrooms in every restaurant and hot fresh food served quickly in every restaurant would be a change”

McDonald’s previous strategy was predicated on new store openings, a strategy that in a few years time likely will pay dividends for the corporation – once they have got their act together, but for which they have paid a substantial price in the interim.

Possibly the greatest indictment of the restaurant growth strategy can be garnered from considering the average sales of a McDonald’s unit versus Wendy’s between 1990 and 2002. In 1990, the average Wendy’s unit was generating just 55% of the revenue of the average McDonald’s unit. Today, a Wendy’s unit does almost 80% of the turnover of its largest competitor.

Some other key business metrics have also shown astonishing declines in the past decade. Store margin has fallen from 19% to a current 12%. This compares to current margins of 15% for Wendy’s and - while not in the same segment – 19% for the Red Robin Gourmet Hamburgers chain.

The annual QSR magazine drive thru awards shows the McDonald’s average drive thru speed is 35 seconds less than that of the fastest in the industry – Wendy’s. For you waiting tenth in line, that can feel like a lifetime. Conversely, for the Wendy’s restaurant unit, this speedier service can conservatively generate an extra $50,000 per year.

Wendy’s has published some data, which while it may be somewhat self serving suggests that the Columbus, Ohio based corporation outperforms McDonald’s on 42 out of 45 metrics, primarily in relation to food and operations. A more aggressive customer focused McDonald’s will certainly improve on this dismal performance.

Cantalupo’s retirement in April 2002 may have been a blessing in disguise. In his book, In The Arena, A memoir of Victory, Defeat and Renewal, Richard Nixon said his most creative time was when he was out of office and it may well be that Cantalupo has benefited in similar fashion, following his “retirement” in April 2002.

Today, there is a different sense of urgency in the organization but an urgency that is based on a clear understanding that it is the customer experience with all its associated components which will drive return business to their restaurants.

Charlie Bell – recently installed President and COO – speaks about customer relevance with almost religious fervor. It is ironic that the relevant product message which the major hamburger chains are promoting at the moment is salads. I doubt that Ray Kroc or Dave Thomas could have envisaged it, but they surely would have been in respective agreement with a product strategy that is relevant and just as important for the bottom line does not impact significantly on restaurant operations.

McDonald’s have been hiding one of their greatest assets in recent years. Ronald McDonald is the world’s second most recognized icon after Santa Claus, yet has not been utilized efficiently in recent years. A higher profile for this character is likely going forward.

Bell and Cantalupo also understand the number one rule about running restaurants – Be brilliant at the basics – something they are now trying to re-inculcate into the organization. A disciplined grading process for restaurants will force franchisees and corporate owned stores to upgrade overall quality. With over 30,000 restaurants world wide this will take time to achieve.

Jim Cantalupo has to be given much credit for generating new energy and direction to his company. Given his start point, he may well have completed the easiest part of a long and difficult journey.

Conor Cunneen is President GROW Foodservice Profit. He is an acclaimed and award winning motivation speaker, strategy speaker, leadership speaker and marketing speaker. He is the 2003 Chicago Toastmasters Humorous Speaker of the Year.

 More Articles>>