MCD's manic obsession with market share and keeping competition from entering a trading area was always misplaced. There are many existing stores now that should have never been built. Tens of millions of dollars have been wasted. Other stores impacted with the certain impact on quality operations. MCD has basically, done the same thing with the menu board. Too many stores and too many products on the menu board. Regional staff's when questioned about the wisdom of all of this over the years just don't get it. Many of the current problems were predicted as these policies were being rolled out. The arrogance of the company was over the top. They were not going to listen to anyone. They claim that the results on the company is minimual. Maybe so but that is not true of operator organizations. The company bureauocracy continues to have a huge drag on the system. Like unnecessary stores and menu items. Executives and employee's were added for no effective reason. It is amazing that the system has survived as it has.
The McSpin that "If we don't build there someone else will" was always bogus. Actually it works the other way - competitors large and small follow McDonald's into new trading areas. I've always found it interesting that the drive to recklessly build more and more stores coincided with the formation of the underground REIT owned by the big McDonald's suppliers. It might not have been about building sales at McDoanld's but more about expanding the portfolio of the owners of the REIT.
Major leasehold improvement dollars paid for by operators while sanctioned by fellow operators in leadership, increases in service fees from 3% to 4% over the years, and rents base on a high ROI for the Company are the reasons the system has survived as it has. Simple.
Clearly, the MCD model of living off of the top line with a base sales gurantee and a triple net lease, then piling on service fee's is as lucrative as it gets. It worked for everyone for many years. The company, suppliers and operators were satisfied. Then the company (Mike Quinlin) got really greedy and assumed more stores will put the competitors out of business. He said in various publications and in the media that he felt sorry for our competitors. What a fool. New stores on the scale they were building drove average store sales down and give away promotions drove food cost up and average check down. Then they became absolutely obsessed with "Market Share" and continued to build stores while explaining to their dumb operators "we can't let the competition get a foothold in this trading area or market. As stated above what the competition did was simply follow MCD every where we went. In OPNAD meetings we would insist that MCD had become our own biggest competitor. We would tell MCD that the operators were not afraid of the competition we can out market, have better operations and basically kick their butts. We told them that what the operators were afraid of was them. MCD can do more damage to an operator than any competitor could ever do. They wouldn't listen and they didn't care. How dumb do you have to be to get a job with MCD? The new guys in top management seem to recognize that many stores should never have been built and will never be as profitable as they should be to afford the necessary reinvestments, rising labor costs, ect. For them to say that closing 150 stores has only minimial impact on the company is really arrogant. Its not the lost sales it is also the cost of opening those stores and operating them, devalued real estate, maintaining them until sold. If they have closed a net of 90 that tells me they could and should close another 200. There is only one reason MCD will close those stores and that is because they are losing money. There are operators that have stores they would gladly close but they have not had any encouragement.
Terrific comments, thanks to all!
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