December 16, 2008

Intellectuals like Skinner

The WSJ asked a few top management professors to name three
picks for the best CEOs of 2008. A professor at the University
of Chicago's Booth School of Business chooses Jim Skinner.

"They've stuck to their knitting and made their
existing stuff better and it's paid off."

My question is: How is diverting the entire focus of McDonald's
USA and most of the national marketing effort for the next two
years to specialty coffee "Sticking to their Knitting"?

The WSJ article is HERE

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December 6, 2008

Crain's on McDonald's & Unions

Speaking of pouring money down a rat hole check
out how the PAC is spending Owner/Operator money!

And check out how Don Thompson is spending his!

Crain's Article is HERE

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Speaking of Unions


IBDaily is running the best political cartoon of the season:

(McDouble Click on the Picture)

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November 19, 2008

A Cult of Personalities

There is no doubt that to keep the McDonald's business
a PR firm or ad agency has to kiss up to the corporate
people but THIS press release takes it to a new level.

SoCal corporate guy Steve Norby is featured in a press
release with secondary mention of world children's day
and absolutely ZERO mention of McDonald's Owner/Operators
and their contributions to their communities.

The PR agency has not been made to realize that the
Operators are paying their fees, not Steve Norby.

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November 7, 2008

McCafe Xenophobia


The first major test for specialty coffee was in the
state of Michigan beginning in 2006. Michigan was chosen
because of the planned expansion of Tim Hortons from
Canada into the USA. Those plans did not work out as
Hortons' management envisioned.

Read about Tim Hortons' lack of progress HERE

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October 27, 2008

WSJ on McCafe

The Wall Street Journal is reporting:

"McDonald's Coffee Strategy Is Tough Sell" and
mentions franchisee concerns.

Subscribers to their website can find the link HERE

If you are not a subscriber please check back
and we will find a free site that reruns the
article. Meanwhile check out this financial
weblog about changes to McCafe.

McDonald's coffee drinks not getting customers buzzed?

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October 9, 2008

Huge Victory for McDonald's Owner/Operators!

Oak Brook has completely reversed themselves in
their support of the National Gay and Lesbian
Chamber of Commerce. The American Family
Association has therefore dropped their national
boycott of McDonald's.

This is huge - not only because of the issues
involved but as a wonderful example of the
power of Owner/Operators to steer the system
back on course when the bureaucrats take it astray.

Congratulations to the courageous Owner/Operators
who lead the effort to stop Oak Brook from
playing politics with brand McDonald's.

The AFA press release is HERE
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October 2, 2008

Who Says There's No Financing for McCafe?


McDonald's Operators can now put the
specialty coffee equipment on their credit
cards ... how special!

However, the equipment suppliers are allowed
to mark up any credit card purchases by 4%?

So McDonald's management is sympathetic when
the closely controlled vendors incur credit card
fees but it's no problem for McDonald's Operators?

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September 28, 2008

AdAge Reports on McCafe Credit Crunch

A number of Owner/Operators qouted HERE

Some interesting discussion about when McCafe goes on OPNAD.

"My gut tells me that if McDonald's is counting on this for the second quarter, it's going to happen," another franchisee said. "They certainly have enough money and enough power to push their weight around."

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September 22, 2008

Franchise Financing

McDonald's Operators in the USA should be watching for their
"partners" copy of a September 18 memo from McDonald's
Treasury Department concerning franchise financing..

Please do not let this memo get lost in your Monday morning
Inbox clutter.We suggest you share the information in the
memo with your appropriate advisers and consider how the
situation impacts CBB/McCafe in your stores.

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September 10, 2008

Tradition Can Be a Good Thing



Speaking of the history of McDonald's PR
and Advertising - one of the historical
disciplines that worked well was the
practice of not advertising new products
until nearly all the stores had the product.

But - with McCafe - Co-Ops are getting ready
to go on TV with 60% or less of the stores
serving the product!

We can only assume the same will apply to
OPNAD next year.

Aside from the customer dissatisfaction this
will cause - do the stores that do not have
McCafe yet - or will never have the drinks,
get to forgo their Co-Op contributions for
this period? Or, more doable, will there be
a Co-Op rebate for this waste of advertising?

I do however get a kick out the fact that if an
Owner/Operator isn't 100% on the Dollar Menu
they are harassed for damaging the consistency
of the brand. Yet, with McCafe, it will be OK to
disappoint 40% of the customers who have seen
the ads and are looking for the product.

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September 8, 2008

Retailing and Politics Don't Mix


When a major brand stubbles into an embarrassing
political mess it is possible to resolve the
situation and save face. Wal-Mart found a gracious
way out of their difficulties in 2006.

Wal-Mart press release is HERE

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August 11, 2008

Jim Skinner from China

"The dollar menu has really driven 13 to 14 percent of our discounts. Seventy percent continues to be driven by core in the broad-based appeal of the menu, and the opportunities for the consumer to take advantage of the value across the menu continues to keep our margins in pretty good shape."

The Video Interview is HERE

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August 7, 2008

Chipotle Got The Smart People in the Spinoff


This Article discusses the trend to give away free
food during "tough economic times".


But as far as couponing:

"Arnold (a Chipotle spokesman) said discounts
condition customers to think that the food is
worth less than they would pay under normal
circumstances. It also encourages people to
come back only when discounts are offered."

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July 15, 2008

But the Ribs Were Great!



I spent a few days last week in the Heart of America
Co-Op (Kansas City) trying again to evaluate the service
impacts of McCafe. Fortunately the market is now selling
so few Specialty Coffees that I can report there are no
negative impacts on service.

For the week ending 6/26/08 the market's weekly units
were 217 - lowest since the launch on 10/18/07.

Obviously the Heart of America Co-Op needs to spend
more money advertising McCafe.

Remember that Kansas City is the most mature market in
the country with the full beverage cell remodel. The larger,
long term test, has been in Michigan which did not roll
with the beverage cell. However, the remodel is now being
forced on Michigan Owner/Operators even though the region
is only selling 234 specialty coffees a week.

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July 8, 2008

Some QSR CEOs Know What They are Doing

The CEO of Carl's Jr parent criticizes dollar menus


"When you lock yourself into a price point,
you're screwing up your future because commodity
costs are going to increase," Puzder said in an
interview with Reuters Wednesday.

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July 6, 2008

Coffee Jitters


So Starbucks is closing 600 stores?

And the business media is
running around trying to
answer the question, "What's
wrong at Starbucks?"

There's nothing wrong at Starbucks - they just built
too many stores - proving there is a limit to the
specialty coffee market.

This is a replay of what happened at McDonald's in the
1990s. Trying to impress Wall Street McDonald's
management launched the Convenience Strategy and
built a few thousand unnecessary stores. Same store sales
fell and the world asked "What's wrong at McDonald's?"

Oak Brook had a ready answer. They simply blamed
everything on McDonald's franchisees, never admitting
they'd built too many stores.

At Starbucks there are few franchisees to blame so
management has to take real responsibility for their
actions.

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To OPNAD or not to OPNAD?

There are lots of comments here about OPNAD and it's a
common topic when Operators discuss profitability and
pricing. But, too often OPNAD is lumped in with the NLC,
SET, NSLC and other "Leadership" groups as though OPNAD
is just another part of the corporate structure.

That's the wrong way to think about OPNAD.

OPNAD is a "Voluntary" organization and you if you
don't look at it that way you might want to re-read the
advertising section of your franchise agreement(s).

From the McDonald's corporate website:

"In addition, through a voluntary U.S. cooperative of
McDonald's Owner/Operators known as the Operator's National
Advertising (OPNAD) Fund, the Company and its Owner/Operators
combine to purchase national television advertising. "

(See the page HERE)


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June 16, 2008

Crains - Giveaways anger McD's franchisees


Oklahoma Owner/Operator Steve Biddle says: "The challenges are unprecedented, and I've been in business for 40 years. We just have to be sure we are doing the best we can with the money we have to spend."

Unfortunately Crain's Chicago Business is a "subscriber site" so if you are not a Crain's subscriber you can sign up for a free four week trial.

Try Starting HERE


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May 22, 2008

More from Shareholder's Meeting

Forbes says:

"McDonald's can opt to absorb costs
rather than risk losing customers to
price hikes since its international
sales have been so strong lately".


This would indicate some cost shifting
back to MCD Corp so Opeators can offer
"value".

Forbes article is HERE

ChiTrib says Alvarez says:

"in today's environment, we can't pass on all our costs"

"The dollar menu is a key component and is not something
we will be moving off of"

ChiTrib article is HERE:

Please note that the above ChiTrib article mentions
our world famous Owner/Operator surveys!

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Newflash! - McDonald's will not pass all costs to consumers

It's shareholder meeting day so there will a
lot of silly headlines like this. Of course
we know McDonald's Corp does not set prices
for franchisees so this must mean just McOpCo.

Reuters story is HERE

The company said it remains committed to its low-price dollar menu:

"The menu (double cheeseburgers for $1) has
been popular with cash-strapped customers
and has helped drive traffic to stores,
which has helped to mitigate margin pressure
from commodity costs.
"

Oh, really ???

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May 20, 2008

Deutsche Bank Accepts Mediocrity

If you ever ask yourself, how can McDonald's push for a
national roll-out of McCafe when the sales of specialty
coffee have bee so unimpressive?

The answer is that Oak Brook thinks on a chain-wide scale
with little regard for the individual store. This is the same
logic Deutsche Bank uses to place a conservative "Hold"
rating on Starbucks.

Deutsche calculates, based on test markets, that McDonald's
could sell 30-40 units/day. That's enough to hurt sales at
Starbucks on a national basis.

So it's not about profitability for the individual store - it's
about the brand - and attracting investors away from other
brands to buy McDonald's shares.

Deutsche Bank article is HERE

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May 17, 2008

Five % Royalties?

McDonald's Owner/Operators in the USA will find some
interesting numbers in the McDonald's 10-Q published
May 6th. Ever wonder what your fees to McDonald's
would be if you owned the land and building and simply
paid Service Fees?

As you'll recall McDonald's sold its businesses in 18
Latin American and Caribbean countries. They sold about
1,600 restaurants.to a developmental licensee that now
owns the business, including the real estate. The buyers
pay monthly royalties commencing at a rate of 5% of
gross sales.

When comparing this to the fees you pay don't forget to
include your Service Fees which are essentially royalties
by a different name.

The first quarter MCD 10-Q is HERE

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May 12, 2008

SSS vs TCs




Our Owner/Operator surveys have
historically focused on Operator
comments and gathering some sales info.

To keep things simple we have not tracked transaction
counts. But, when studied TCs were usually a few
points behind the % increase. If the same store sales
increase was + 4% the TC increase was usually around
+ 2%. Expressed as percentages these are apples and
oranges but at least there was a trend for comparison.

This was obviously caused by menu price increases
and the resultant increase in average checks.

In what looks like a seismic shift TCs in many areas
have flip flopped and are increasing ahead of sales.

This can only mean more customers are moving to
the Dollar Menu.

So we are gathering Operator feedback on this topic
and will work to develop a simple way to include TCs
in future surveys.Please make a comment here or send
your thoughts to: adams@fegroup.com

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May 10, 2008

Article Grinds Up McCafe

Crain's Chicago Business is running a
comprehensive article about McCafe titled
"McD's coffee perks slowly"

Owner/Operator Irwin Kruger has the best
quote in the article when he says, "We need
to be convinced that the new product
line is going to give us the lift everyone
hopes it will".


The Crain's website is a subscriber site
so you may need to sign up for a free four
week trial.

Access the article HERE

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April 14, 2008

Poultry In Motion




I'm happy that McDonald's has a Southern Chicken sandwich
similar to the Chick-fil-A product. I've always enjoyed eating
at Chick-fil-A but my kids are both allergic to peanuts and the
product is fried in peanut oil. No matter what the "experts" say
a parent who has kids with peanut allergies NEVER takes that
risk. Both the kids enjoy the McDonald's sandwich.

As a customer, the McDonald's sandwich is smaller and the
Chick-fil-A sandwich is too big to even fit into the box for the
McDonald's product. It'll be interesting to see how people in
non-Chick-fil-A markets react to this unusual sandwich.

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April 1, 2008

ABC News on McCafe

On Wednesday, March 31st ABC's Nightline ran a feature on
McCafe. Now this is pretty much a puff piece as it should be
when McDonald's Operators spend $200 million plus on the
network.

Having viewed the preparation of specialty coffee drinks only
from the customer side of the counter it was interesting to
watch the reporter try to prepare a drink, going through all
of the steps and the correct number of "stirs". If you haven't
worked with this product watch this video and imagine what
happens when you get a drive-thru order for four Iced Mochas.

As a customer and a McDonald's veteran it reminds me of when
we used the original Multimixers to make shakes. If the right
shake was not already in the cabinet the "windowman" had to
leave the front to make their own shake. Assuming the area
was stocked with shake mix and syrups this could take a minute
or more. If you left the shake on the spindle and went to get
another part of the order the shake could well over mix and
destroy itself. Or, you finger spindled the shake destroying
the Bakelite disks and the flywheel that drove the spindle.
In any case, the windowman disappeared from the customer's
view for a seemingly long period of time - not to mention the
customers in line behind the customer being served. The speed
of Direct Draw shake machines was a gift from heaven, especially
since it kept the counter person upfront with the customer.

Aren't Baristas supposed to take care of drink preparation?

Based on my store visits the Baristas are a myth or very few
stores sell enough drinks to afford to staff that position.

The video follows. It's a quick eight minutes.


ABC News On McCafe

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March 25, 2008

Hard to Believe but ...



the Quiznos franchisees are
asking how much the parent
company makes on services
and supplies from the
approved vendors. What a
concept - actually trying
to find out where their
profits are going!


This article has a link at the bottom for a
.pdf copy of the letter the Quiznos franchisees sent to the CEO.


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March 20, 2008

It's Good to be a Franchise Attorney

Veteran franchisees will know the name and
reputation of Miami attorney Robert Zarco.
Franchise Times magazine has not only
profiled him but his lavish waterfront
home.

Lifestyles of the Rich in Franchise

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March 1, 2008

OPNAD $$$ for Specialty Coffee? Already?

While visiting a popular political site I came
across a banner ad for McDonald's coffee. Clicked
on it and went to a full website advertising McCafe
and all five Specialty Coffees.

I found no mention on this site of the fact that
these drinks are available in less than 10% of USA
McDonald's stores.

On Thursday Jan Fields sends out a letter complain -
ing about consistency in the burrito giveaway and
yet Owner/Operator money is being spent on advertising
a product line that 90% of your customers can't buy?

Someone needs to pay attention to where Oak Brook
is spending OPNAD's money. Not to mention Oak Brook's
decision to confuse and disappoint a few million
McDonald's customers.

Your McCafe website is here:

McCafe Website


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February 11, 2008

Rolling the Dice on CBI


When the NLC convened in Kansas City they
were shown five stores in which to study
CBI. I hope the members got out on their
own and visited other stores to see what's
really happening.

This kind of stagecraft brings back memories
of the 1986 Owner/Operator convention in
Las Vegas. The theme was "Operation Pride" -
a major remodel program. At the time the
Las Vegas market was 100% McOpCo so to sell
Operation Pride McDonald's Corp remodeled
many of the stores with various options and
conducted bus tours for convention attendees.

Problem was - McOpCo went broke doing the
remodels. Within a few years the market was
entirely refranchised - McOpCo was gone.

So it doesn't work to dummy-up a group of
stores with an ill advised initiative, no
matter how bad Oak Brook wants it.

A McOpCo market can go broke and McDonald's
survives. Not so with Owner/Operators.

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January 26, 2008

Operators Who Know Nothing About Equity

I have been informed that there are members of the
McDonald's SET team who take the position that
Operator equity has improved and is better than it
was five years ago.

To believe this one must depend entirely on information
and philosophy provided by Oak Brook bean counters.
"Cash flow" as computed by McDonald's Corp. has little
to do with the value of your stores. It doesn't address
marketability, reinvestment, Co-Op situations, livability,
and tortious interference my McDonald's, etc.

For one thing - the measurement should not be "equity
as compared to five years ago" but equity as what it
should be at this time. It should be - what would your
equity be if changes in corporate policies over those
five years had not demolished the value of stores?

Anyone who thinks that equity has improved should
not be sitting on committees with such responsibility.

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Free Food for All or a Food Cost Freefall?

Analysts are being lead to believe
that the answer to a weakening
economy will be more "value"
initiatives at McDonald's.

"Management has indicated that
it expects to launch regional
marketing that highlights value
in geographies that are seeing
the greatest economic weakness."
an anylyst writes.

When did McDonald's become the
Foodbank to the world?

Click here for article with analyst's comments


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January 21, 2008

Be a Winner - Be Last!

We recently sent an E-mail to our McDonald's
franchisee list suggesting they:

* Don't spend $3.00 to get a check for $1.00 just
because there is a corporate contribution.

* Go with the Michigan approach - no beverage cell
- just a machine to set someplace.

* Be a winner - be last. We continue to encourage
you to be the Last Operator - in the Last Co-Op -
to go with CBI.

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January 9, 2008

Business Week also gets it right

Business Week headline:

"Adding specialty coffee stations
to its restaurants could reap specialty
profits. But adding such complexity to
a simple system has its risks"

These magazine reporters understand
McDonald's better than the bureaucrats
in Oak Brook!

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