December 11, 2014

CNBC Readers Vote On McMenu Changes

The press is obsessed with the idea of McDonald's cutting "eight" products. 
CNBC is taking a poll on what should be eliminated. So far with more than 
23,000 votes it doesn't look good for McWraps. To see results scroll to the 
bottom of the article.
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McDonald's to cut menu items in order to increase service speed

December 10, 2014

See, I Told You So ... Re: Build-A-Burger

In mid-September I posted:

"the four store McDonald's Build-A-Burger program in Southern California is not a test -
it's the preordained future of McDonald's."

On an investor call today Don Thompson said:


“Create Your Taste is not a test,” Thompson said. “It’s a rolling implementation now.”


McDonald's to cut eight menu items in January
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Where Does the Buck Stop at McDonald's?

Anonymous commenters often put all the blame on Don Thompson but the problem
could also be an antiquated board of directors. Fortune does a great job of looking at
board member's ages, tenures, and cross-connections.

Where does the buck stop at McDonald's? Look no further than the board.
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December 7, 2014

McDonald's Expands Build-A-Burger

The first sentence in this article says it all:

"The future of McDonald's fast food may be slowing it down."

These people who think that McDonald's customers, or potential customers, will
"be willing to wait longer if they know it's being made for them" are delusional.

The wait time for the food was seven minutes with the USA Today reporter watching? 

How long will it take in a real world situation?

And, if it's not a drive-thru product McDonald's is not going to attract millennials. As
I've written before, based on my experience with my two millennial children and their
friends, this is a drive-thru generation and is why the McDonald's drive-thru % has 
increased over the past decade. You're not going to get them to come inside the 
restaurant, even for a Build-A-Burger.

Unless you give the food away - which is why coupons are mentioned repeatedly in this
article. The sales numbers coming out of these test stores are going to be distorted or
falsified in the same way McCafe espresso test numbers were cooked.


McDonald's expands custom sandwich option - USA Today
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November 29, 2014

More From Fortune Magazine - Video

Fortune reporter Beth Kowitt discusses her article from several weeks ago. I worked
with Beth on the Fortune article and found her to be a capable professional. But,
she is a millennial and like all millennials considers her generation to be special
and unique. Here's Beth with a video recap of her article:


YouTube video is HERE
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A Priest, a Minister, and a Rabbi Walk Into a McDonald's

McMass wants to put McDonald's in a church
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November 21, 2014

Franchisors Tell Investors More Than Their Franchisees

We've always encouraged McDonald's Operators (and franchisees from any brand) to follow the
communications between corporate management and their investors and analysts who cover the
company. This usually takes the form of press releases and on-line conference calls following
the publication of a particular quarterly earnings report.

But presentations like the aforementioned Morgan Stanley Conference can be more instructive.
The end-of the-quarter conference calls are 80% about the past and 20% about the future. Investor conference presentations are almost entirely about the future. Since the future of McDonald's is in question it's important to study how management plans to reinvent the brand.

Especially since this reinvention of McDonald's is being orchestrated by executives who've never
run a real restaurant or come face to face with a real McDonald's customer.

Three things stand out of the McDonald's discussion at this conference:

* All of McDonald's problems will be solved through "Technology". Management says their digital
strategy will "revolutionize how the customer experiences us".

* Simplifying the menu and operation while adding customized products was discussed with no
serious discussion about real world conflicts this creates. Technology will take care of everything.

* Other than talk of selling some McOpCos there was no mention during these discussions of the
fact that McDonald's has franchisees. If a Wall Street analyst was new to the industry they might assume that every McDonald's was operated by McOpCo. Menu prices are discussed with no mention of franchisees. Vast technology investments are discussed with no mention of franchisee buy-in. Changes to the kitchen are discussed with no mention that those kitchens are owned by franchisees. 


Normally there is rhetoric such as "our franchisees are aligned with our plan" or some positive statement. This time it was as though McDonald's Operators don't exist. 
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November 8, 2014

Restaurants Find Eliminating Discounts May Hurt Sales?

For the first 35 years of McDonald's history corporate leadership discouraged franchisees
from discounting because it cheapened the brand and was an addictive business tactic.
Now the entire quick service industry is addicted to discounting. 


Isn't this just a result of the industry being over-built and saturated?

That's part of the reason but it's also driven by the fact that most of the major players
are publicly held companies and have to satisfy their shareholder's obsession with same 

store sales increases, profitable or not.

Restaurants find eliminating discounts, coupons may hurt sales, traffic - NRN
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November 2, 2014

October 30, 2014

Back to the McFuture?

McDonald's Divisions being changed back to Zones? What's a "zone insights person"?

Is this another tactic to deflect attention away from Oak Brook?

This is reminiscent of the days when McDonald's USA Zones were changed to Divisions
to be "closer to our customers" yet four out of the five original Divisional offices were
in Chicagoland.

I pay no attention to 2nd tier McDonald's corporate people so can someone tell me who's
this James Collins? Has he been working somewhere else since 2011? Is this another rehire? 
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October 28, 2014

Burger King Franchisees And Coaches

"Franchisees have complained that some of the coaches are too young and inexperienced, 
 with many of them hired straight out of business school."

Burger King Franchisees And Coaches - Business Insider
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McDonald's: Millennials Aren't The Problem

Howard Penny is one of the Wall Street analysts who asks questions corporate
management hates to answer.


MCDONALD’S: MILLENNIALS AREN’T THE PROBLEM — McDonald’s Corp
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October 27, 2014

MCD CEO on TV

CBS conducts a softball profile on Don Thompson. The Mcspinmasters did a pretty good
job on this one. It appears from this segment that Don Thompson has vast restaurant
operations experience.

"He sees himself-as his wife does -- as the same guy who started on the grill all those
  years ago."

When discussing minimum wage pressures Don missed an opportunity to differentiate an
entry level wage from a living wage.

CBS News Sunday Morning is HERE
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More on "Aggressive Change"

In February we discussed Jack Greenberg’s late 1990s attempt to reinvent McDonald’s.

Our previous post is HERE.

This is where Greenberg said:

"Those of us who weren't with you at the beginning of McDonald's are excited to be 

  with you during the reinvention of McDonald's".

Welcome to the 21st century version of Greenberg's statement.

On last week’s conference call with Wall Street analysts Don Thompson used the phrase “aggressive change” numerous times. This is code for “reinvention” and could be just

as destructive as Greenberg’s attempts to change McDonald’s.

Another key theme of the conference call was “localization” or “A flatter, more nimble organization that ensures key business decisions are made closer to the customer, by 

people with local market expertise.”

It’s hard to believe that a bureaucracy run by control freaks that’s been top-down for 

30 years is going to turn on a dime and encourage creativity and entrepreneurship in 
the field. But, this is a shrewd political move that takes the spotlight off Oak Brook and
puts the onus on McDonald’s Operators and faceless corporate field people.

This buys management time to deflect blame and gets them through the 2015 share -

holders meeting. If things aren’t going better by the spring it will be time for a full
on attack on the Operator community.

Which, McDonald’s veterans will remember, was another Greenberg strategy (one of 

his last).
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October 22, 2014

Minimum Wage Backfire - WSJ

What used to be a starting wage is now supposed to be a "living wage"
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Why Chipotle Will Never Replace McDonald's

"McDonald's domestic sales last year totaled nearly $36 billion, which was greater 
than the entire fast casual industry's sales ($34.5 billion), according to Technomic."

Analysts Discuss
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Is Chipotle Really Healthier Than McDonald’s?





One Chipotle burrito can be twice the calories of a Big Mac and have nearly a full day’s worth of calories. A burrito with chicken, white rice, black beans, fajita vegetables, tomatillo-green chili salsa, guacamole and cheese with a side order of chips is 1,695 calories A Big Mac has 530 calories.

MarketWatch Reports HERE
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October 21, 2014

McDonald's CEO Don Thompson on Q3 2014 Results

If there was ever an important communication between McDonald's Corp. and
their shareholders that impacts franchisees today's conference call is it.

Management is intending to turn the brand inside out and upside down to grow
sales. Do they know what they're doing? ... Study this call and decide.

Listen to the replay here 

Or read the transcript:

McDonald's Q3 2014 Results - Earnings Call Transcript

Hint - Listening to the call is more insightful. 
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Another Tough Quarter for McDonald's

McDonald’s Profit Falls 30% on U.S., China Woes - WSJ
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October 3, 2014

Build-A-Burger Going Global


No matter what the test results show, Australia is taking Build-A-Burger nationwide.
USA operators should just order the equipment now, this isn't a test, it's a reinvention.

Aussie TV reports
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October 1, 2014

Dual-Point: You're Doing It Wrong



I recently had the opportunity to visit 10 McDonald’s stores owned by the
same Operator. Seven of the stores had dual-point ordering, three did not.
As stated before, I’m a big fan of Dual-Point even if all it does is to make
the customer feel better about the process.

Applying my decades of operations experience with my recent experience
as a QSR customer I can make no sense out of the change to only giving the
customer their drink cup when the food is available. Who thinks it’s a good
idea to force the customer to waste that 3 or 4 minutes they’ll wait for
their food? And then they have to carry their food over to the drink station
where there’s really no place to the set their tray or bag while drawing
their drinks?

Dual-Point has eliminated some confusion at the front counter but at the same
time created a bottle-neck at the drink station. Unfortunately the customer
bears the inconvenience and no one behind the counter or in Oak Brook is
concerned. Speaking as your customer, I hate waiting for my food and getting
my drink eats up some time. I’ve already paid for that cup and I want it now!

Can anyone offer a reason this makes sense in the kitchen? Because from my
side of the counter it makes no sense at all.

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Mom-and-Pop Restaurants Feel Pinch of Minimum Wage Hike

Mom-and-Pop Restaurants Feel Pinch of Minimum Wage Hike
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Wendy's BBQ

While Wendy's food is usually enjoyable I tried the new BBQ pulled pork 
sandwich and was not impressed. Too much BBQ sauce and too much slaw
made the pork invisible to my taste buds. The sandwich comes across as 
scrimping  on the pork.

Wendy's competitors need not worry, especially at $4.49.

USA Today on Wendy's pulled pork
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September 30, 2014


Apparently one way to get ahead in the McDonald's system is to leave the company or 
be forced out, go to work for a lesser brand, then be rehired by McDonald's or a supplier
to a better position than before you left McDonald's. Such is the case for Mike Andres who
left to run a cheesy little restaurant company and Russ Smyth who left to run H+R Block 
for a few years and now runs, and is majority stakeholder of The HAVI Group.
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TGI Fridays Launches Refranchising Initiative

It's shocking how few restaurant companies want to be in the restaurant business
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September 20, 2014

Canada Betts on Coffee


Here's why McDonald's wants to serve you coffee at home





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Accountants are Important, But ...

All too often I’ll come across a McDonald’s Operator who is thinking about selling a really
good store. A store with high volume, reasonable rent, a good facility, etc. The Operator
will say something like, “I’m going to meet with my accountant to determine what the store
is worth”.

What?

This the product of years of focus on cash flow ratios, valuations by experts, and continued
interference in store resales by McDonald’s corporate.

Accountants don’t determine resale prices of McDonald’s stores – the seller and market
conditions ultimately decide the selling price.

Accountants play an essential role in store sales. They can help the buyer decide if they can
afford the deal. They help the seller with tax ramifications and other issues.

But having an accountant determine the value of a uniquely good store?

Nonsense.
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Obama, Unions Trial Bar Take Aim At Franchise Model

Obama, Unions Trial Bar Take Aim At Franchise Model - Investors.com
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Americans Are Tired of Long Restaurant Menus




The Washington Post reports
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September 17, 2014

Build-A-Burger: A National Launch

I previously referred to the four store McDonald's Build-A-Burger program in Southern
California as a "test". It's not a test - it's the preordained future of McDonald's.

When four stores out of 800 plus are conducting an operational "test" one does not bring
in the national media to create a PR stunt. The San Diego and Los Angeles CoOps have
already launched a social media campaign to draw reporters into the restaurants.

How does management back away from this without admitting to a huge failure?

In fact, I don't think there are any real "tests" in McDonald's any longer. Someone comes
up with an idea to copy a competitor, the Innovation Center develops the product, and 
the national roll-out plan is finalized.

Therefore, at the very beginning of the "test", we get this on Twitter:


Breaking Burger News: Media, bring your press badge to McD's @ 3805 Midway Dr. before 2:30 pm for a FREE Build Your Burger

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New Deck Chair in McDonald's Marketing

McDonald's hires Ehle as VP customer officer - CCB
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Why Chipotle Won't Franchise

Entrepreneur Mag Reports
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September 16, 2014

Nothing's Ever Simple Is It?

Can you reach it? Please pull your car closer to the building.


Apple Pay At McDonald's Drive-Through - Business Insider
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Cashing In On The Way Out

On September 12 McDonald's SVP Jeff Stratton sold MCD shares valued at
$2,870,869.00. In addition he exercised his option on 23,172 shares of MCD
purchasing them at $56.64 a share. If he were to sell these exercised shares at
today's closing price he would net another $860,100.00.
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September 15, 2014

McDonald's Build-A-Burger

There is a daily drumbeat of media attention to the Build-A-Burger test being
conducted in Southern California. The press loves this story because it's a chance
to write about their fellow millennials wanting to “Have it Their Way”.

But too much attention to a test product can be a very bad thing for McDonald’s.
If the Build-A-Burger test does not get expanded nationally it will be a checkmark
in management's loss column and the headline will be, “Don Thompson fails with
millennials”.

When a product or concept test gets a lot of press it’s no longer a test, it becomes
a forgone conclusion.

This might be similar to the testing of McCafe. Oak Brook announced a challenge
to Starbucks before the testing of espresso coffee drinks. The test was conducted
in the state of Michigan and showed very little customer acceptance. But, Oak Brook
and a few McDonald’s Operators lied to the rest of the country about the results of
the test and espresso drinks went national in the spring of 2009. That year saw the
lowest sales increase of all the Skinner years because McDonald’s Operators wasted
their advertising budgets on espresso drinks instead of advertising food that sells.

The years 2007 and 2008 had been rough for Starbucks but the many millions spent
advertising McCafe gave them a boost in 2009 and they've been on a roll since.

Of course, trying to reinvent the McDonald’s operation is far more dangerous than
having an idle espresso machine. Especially when the people making the reinvention
decisions have never run a McDonald’s restaurant.

Here's today's Bloomberg article on Build-A-Burger

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