This article goes into a little history of the problems with the McResource Line. McDonald's employee site bashes fast food - NBC News.com "Although the McResource Line is nominally a site for employees, it is accessible via a registration process that does not actually verify employee credentials, meaning anyone can register for it by providing a username and email address and selecting a McDonald's region." .
"We have 70 years of labor law that has developed to make it fair for workers and for employers, and now you have this new creation that’s exploding, that allows them to skirt many of these things,” he says.
This employee resource website causes a major embarrassment to McDonald's on a weekly basis. If fact, it's a huge resource for unions pushing for an increased minimum wage. McDonald's Operators really should watch this CNBC video.
While waiting for my food at McDonald's I usually fiddle with my smart phone. With all the noise about digital ordering and payment, during these visits, I try to imagine what would have been different about my customer experience if I'd ordered and paid with my phone. Would I have gotten in and out more quickly? The answer is usually - not really. That's because I still have to wait three or four minutes for the food. A faster ordering and payment system would make no difference whatsoever. The credit card processing at McDonald's is so amazingly fast I don't see how one could improve over "instantaneous". Since a smart phone purchase is a debit or credit transaction I'll assume it would go through the same network, increasing the % of sales going out on "plastic", but not be any faster. If it were faster it would have to be measured in milliseconds. Having said that, McDonald's and every other restaurant must eventually offer this opportunity. If nothing else but for the fun factor of doing things on-line or on a device. Ordering our pizza on Papa John's web site may not necessarily be any more efficient than picking up the phone - it's just more fun. But, since so many of the decision makers at McDonald's Corporation have never run a restaurant I foresee the following exchange: * Corporate guys announce new products, more LTOs, customization, and kitchen complexities. * McDonald's Operators express concerns about the High Density Menu. * Corporate guys respond, "Smart phone ordering and payments will fix those problems". * Corporate guys then mumble something about "Millennials" and give out information on ordering the next equipment package. McDonald's appears to be doing a good job of moving the system into the digital arena but it would be a mistake for Operators to rush into all things digital thinking it will solve their restaurant capacity problems in the back of the house. There used to be an app for that - it was part of the original Plan to Win - called "Simplification". .
"the day before Obama called for an increase in the minimum wage, the restaurant chain Applebee’s announced that it will install iPad-like tablets at every table. Chili’s already made this move earlier this year." Jonah Goldberg - National Review Online .
In the mid-1990s, after the dual flops of Arch Deluxe and Campaign 55, reporters were running around asking "What's wrong with McDonald's". After the Convenience Strategy failed in the late 1990s the same people were asking the same question. And now that sales increases are harder to come by the media is at it again. And everybody's got an opinion: Crain's Chicago Business asked five experts but only the last two had useful comments: Five Ways to Revive McDonald's And QSR Magazine asks "What's Going On at McDonald's?" Of course, articles like this never get to any real solutions because they don't interview McDonald's Operators. This is an interesting quote from analyst John Gordon,"But McDonald’s may be approaching a point of … reaching our approximate sales plateaus. If you’re looking at $2.6 million in terms of U.S. AUVs, McDonald’s is up nicely, but how much higher can it go practically in a nation with a million restaurants?” .
McDonald's Operators have expressed concerns over negative publicity about the system over the past year. Some of that negativity is naturally going to come to a company that has a near decade of success and then hits a plateau. However, much of the news that makes Operators cringe is generated from idiotic moves by McDonald's management. Such as the following:
We can't expect that these lefties would understand any business issues, let alone the fairly complex franchise relationship. But it's still stunning that they think the CEO of a franchise chain can dictate pay rates. However, McDonald's management continues to tell investors that corporate determines menu prices for franchisees so maybe it's easy to believe they also control labor costs.
Peter Saleh, a New York-based analyst at Telsey Advisory Group says “It would be the same as McDonald’s trying to do some sort of pasta meal.” Please, Mr. Saleh, don't give McDonald's management any ideas! Bloomberg Reports .
“Steak n Shake effectively controls both the buy and sell prices for every food item sold by franchisees,” Scott’s said in its lawsuit. As a result, it said, “Lower menu prices would mean financial disaster for many franchisees.”
I've figured out Oak Brook's dastardly plan - cause the competition to imitate McDonald's by complicating their menus until operations break down. McDonald's will then simplify the menu, improve speed of service, and leave the competition struggling to be all things to all people.
This column is an example of advertising people over-intellectualizing things trying to make themselves sound smart. But the writer ends with the point, "It's hard to make a point when your ads are all over the map". Isn't that because the McDonald's menu is all over the map?
"As it turns out, increasing the minimum wage actually hurts the working poor, is a windfall for affluent families, and raises the barriers facing the unemployed. There is growing evidence that increasing the minimum wage hampers employment for low-skilled workers who need the most help and experience." The Mythology of the Minimum Wage | Douglas Holtz-Eakin .
“Simplicity is the key to success in the foodservice industry,” said Gary Stibel, of The New England Consulting Group, “Doing a few things extraordinarily well” — that is, efficiently and at a reasonable price while still making a profit — is at the heart of running a good restaurant, he said.
The company, based in Oak Brook, Ill., also recently said it's partnering with Kraft Foods Group Inc. to sell McCafe bagged coffee at supermarkets in test markets. The company is hoping the move will help build awareness of the MCafe brand. "It's about selling more coffee in restaurants," (Kevin) Newell said of the Kraft partnership. And Redbox was supposed to build customer traffic.
Jim Cantalupo became Chairman and CEO at the beginning of 2003 and had this to say in the opening paragraphs of the 2003 Annual Report: "As you will recall, our business was in serious need of improvement when I became chairman and CEO at the beginning of 2003, I said back then that we had taken our eyes off our fries, and we paid a price. Our performance had disappointed our customers, our shareholders and ourselves. We know we had a lot of work to do to right McDonald's ship and rebuild our foundation to support future growth." Ten and one-half years later can't the same thing be said about McDonald's today? Isn't expanding the menu exponentially and making the restaurant operation insanely complex also taking your eyes off your fries? The 2003 annual report also makes this statement: "In the long run, only exceptional service will truly differentiate McDonald’s from the competition. So we are making a concerted effort to improve the friendliness, speed and accuracy of our service. We improved our drive-thru service times in the U.S. last year, but we’re committed to doing even better. We’re simplifying our restaurant operations. We’re using more visual menu boards to make ordering easier for customers. We’re also eliminating some sizes and slow-selling items and better organizing the kitchen, front counter and drive-thru areas to improve efficiency." Wow, what a difference a decade makes! .
All's fair in business warfare but Chipotle has become increasingly aggressive in distancing their brand from McDonald's. Even while two former McDonald's executives still serve on the Chipotle board of directors (Flynn & Charlsworth).
When I heard about Operator "Leadership" discussing the support of a new coffee initiative I thought it was a joke or that I was being misinformed. Then, Don Thompson mentioned coffee in his remarks on last week's analyst conference call. Then, this week it was announced that a McCafe line would be tested in supermarkets. It's doubtful we're only talking about drip coffee here and likely much of this is about espresso based drinks. McDonald's Operators are busy and the years go by quickly so we'll review the damage done by the disastrous launch of espresso drinks in 2009. The year was going along pretty well until McDonald's Operators began spending millions advertising espresso drinks - America yawned. This took advertising support away from the core menu and other new product introductions. Sales suffered and did not rebound until the introduction of iced drinks in the spring of 2010. Please refer to the chart at the bottom of this post. If this is another effort against espresso drinks it's coming at an awkward time as the overall sales improvements from 2003 to 2012 masked the failure of espresso drinks. There is no such momentum currently in the USA. This is a dangerous time to waste more advertising and system resources on a failed product line. As for McCafe in supermarkets - after McDonald's Operators have spent many millions supporting the McCafe brand - the benefit of supermarket sales will go to McDonald's Corp. Kraft, and the supermarkets? Where do Operators go to get paid for trying to build the McCafe brand? Yes, McDonald's management will blather about "brand extension" benefiting the Operators but that never seems to work out the way it's promised. If this is about spending more money on espresso then it is a continuation of Oak Brook's obsession with Starbucks and their efforts to be more than "Hamburger Guys". If OPNAD votes to spend more on espresso then it's time to consider shutting down this voluntary ad fund.
This study seems to be flawed. Yes, customers like simplicity. The QSR industry was built on that premise. But it appears the people who wrote this study failed to do any field work. They've obviously never tried to read a McDonald's drive-thru menu board.
McDonald's Operators won't like this WSJ article
but I'm posting it in hopes of generating some communications between a particular Wall Street analyst and a few
outspoken people in the Operator community.
Michael Kelter at Goldman Sachs continues to
criticize McDonald's for not having enough
"innovation". This during a period when McDonald's USA is launching a
new product or an LTO every 60 days!
I'm suggesting that a few McDonald's Operators
reach out to Michael and explain to him what innovation is doing to the capacity of the McDonald's restaurant
Analysts are always eager to communicate with
McDonald's Operators. Confidentiality?
there is no conceivable reason why an analyst would reveal
the identity of one of their sources. They'll want to keep the communications flowing over time. I just wouldn't
use the Oak Brook E-mail system.
"Chick-fil-A is a contrast to the current QSR strategy that involves broader menus and more complex operations. Chick-fil-A's unit volumes exceed $3 million. That's the highest average of any limited-service chain out there. It's higher than Chipotle, it's higher than Panera Bread and, yes, it's higher than McDonald's. Indeed, Chick-fil-A does those unit volumes with half the menu of your typical Golden Arches and it's not open Sundays or holidays." Why Chick-fil-A Just Works - Restaurant Industry Insight, News and Analysis .
I'm not the only one who thinks McDonald's menu is ridiculously complex. First of all, I love the new Mighty Wings and have eaten them three or four times a week since the introduction. They taste good enough to eat without the dipping sauces so I ignored that issue until I read in a press article that Mighty Wings come with "a choice 9 dipping sauces". At first I thought that was a typo or bad reporting but it turns out to be true. So when a crew person asks me what kind of sauce I want I ask (like millions of others) "What do you have?". The list is so long most crew people have to take a breath part way through. Yesterday I went inside a McDonald's to order and an affable collage age man took my order. I again asked my sauce question and even using the POS screen as a guide he got confused, shook his head, and said "We have too many dipping sauces". This twenty something gentleman knows more about what's going on in a real McDonald's restaurant than anyone at Oak Brook headquarters. .
It's very encouraging to hear that recent McDonald's Operator Pulse Surveys included Operator concerns about the growing complexity of the McDonald's restaurant operation and that Operators feel the regional staffs are "disconnected" from the restaurants. It seems like yesterday that one of the components of the original Plan to Win was "Simplification". That was back when the McDonald's menu was about one-half the size it is today. I don't know if a conscious decision to expand the menu exponentially was made at some point in time or the menu just evolved from a lack of discipline. McDonald's decision makers appear to believe that efficient operations are old hat and McDonald's restaurants must now be All Things to All People. But don't the long-time operations people in McDonald's upper management know what they are doing to the capacity of the restaurants and the effectiveness of the people running the restaurants? They might, but there are now so many Oak Brook decision makers who have no real restaurant experience that the people with real operations knowledge must get drowned by the new product pipeline and ignored. Or they may be told (by non-ops people) they are becoming obsolete and don't understand the realities of today's marketplace. That would be pretty intimidating. In many ways McDonald's veterans have been to this movie before. In the late 1990s McDonald's USA was on the ropes and Jack Greenberg staked the system's future on the Made For You cooking system. While millions of customers refused to wait in the long lines created by MFY no one would tell Jack Greenberg they'd created a huge problem. McDonald's USA went through another four years of sales problems and Operator failures. At that time Greenberg was one of the few decision makers in McDonald's USA who didn't have decades of real restaurant experience. Because he lacked that operational background Greenberg apparently refused to listen to those who had such experience (or they were afraid to speak up). Today, according to the corporate bios, there are only a couple of people on McDonald's upper management team who've ever run a real McDonald's restaurant. In addition there are the corporate marketing people running OPNAD who live in their own fantasy world and will never understand operations. The danger is that these non-operations people are under intense pressure from Wall Street analysts who expect constant "Innovation". These analysts know McDonald's by the numbers but have no idea what they're seeing if they ever visit a McDonald's restaurant. I've been working with the analysts for more than 15 years and I know that they'll keep pushing for "Innovation" until McDonald's menu is the size of a Denny's menu. And, while not as influential, the press is constantly hassling Oak Brook for "New Product News". The corporate PR people know that the easiest way to get a positive headline is to announce a new product line. So who's going to tell the decision makers with no real restaurant experience about the damage they are doing to the growth prospects of McDonald's USA? It won't be anyone working in Oak Brook. Their career path will grind to a halt if they admit to their bosses that McDonald's can't be All Thing to All People. It will have to be McDonald's Operators who stop the insanity through Co-Op and OPNAD decisions, surveys, public comments, and other activism. It's a long road back to a sensible menu and a workable kitchen system - only McDonald's Operators know the way. .
In June I was quoted in Businessweek saying, “McDonald’s management, once they get to a certain level—I think it’s when they get a limousine — they no longer want to be hamburger guys. They want to be restaurateurs.” This event proves my thesis: McDonald's tries fancy food with celebrity chefs in NYC .
This is cute - those at McDonald's in charge of "sustainability" tell the UK Guardian that consumers are becoming more interested in "sustainability". Of course they'll say that - it's called job security!
McDonald's executives presented at the Goldman Sachs Retailing Conference this week and continued to tell investors that Operator pricing decisions are made in Oak Brook. Analysts are a little frust - rated at this since menu price increases boost corporate earnings. Management says they will stay the course. This is why we continue to hear about regional staff bullying Operators and deeming them "not expandable / not rewriteable” even taking new stores away from them for being outspoken against continuing all coffee for $1, all drinks for a $1 and discount price pointing in the local co-ops. They are apparently using such Operators as a warning to others togo along with what the corporation wants. Playback of the conference is HERE
"Leslie Kerr says catering to the most price-sensitive guests can be both difficult and dangerous for a brand. “At some point, operators need to ask themselves if a dollar is realistic,” she says. “Consumers realize that prices increase, and holding on to the dollar market is not good business. It just doesn’t make sense.” McDonald's Operators should bring in Ms. Kerr to speak at the next OPNAD meeting. McDonald's Higher-Price-Point Value Menu Could Be A Win - QSR mag .
Amazing quote from Neil Golden - "We didn't deliver on simplicity and clarity," Golden said of the Extra Value Menu. So they can expand the menu endlessly and over complicate the operation but marketing must be "simple"?
While I'm the first to gripe about imperfect service this writer makes the point that some people just can't be satisfied. And, as quick service restaurants expand their menus and try to be "all things to all people" the customer base will get pickier and pickier and pickier.
"By adding chicken wings, McDonald's is adding yet another product, however temporary, to what is already the most operationally challenging concept in the QSR business." Opinion from Restaurant Finance Monitor .
We mentioned the recent Nation's Restaurant News article. It's available if
one registers an e-mail address on the NRN website. It's quick and easy and
worth it to see the comments from Jim Johanessen. And, an "expert" is quoted
as saying McDonald's Operators can just say, "Here are the keys, I'm out".
It's more like McDonald's lawyers like Johanessen show up at the
door saying "Give us the keys, you're out". Just go to the bottom of the page and click on "register".