July 14, 2018

Dumb and Dumber

The year was 2000 and a McDonald's corporate PR person uttered the dumbest words
ever to come out of the Oak Brook headquarters.

By the end of 1999 most McDonald's USA stores had implemented the "Made For You"
cooking system. Reporters and analysts observed that suddenly the service was slower 
and lines were longer.

When asked about service times the corporate PR person said, "People don't mind 
waiting longer if they know the sandwich was made just for them".

Pre-MFY 1999 same store sales were a healthy +4.0%, 2000 +1.5%, 2001 +0.5%, and 
2002 (- 1.5 )%.

Customers on were voting on MFY with their feet.

This week Restaurant Business Magazine published an interview of one of McDonald's 
chefs. Editor Jonathan Maze asked about menu innovation and its impact on service 
times. The chef talked about "indulgent moments". Another editor asked, "So it's the 
opposite of fast-food?'

Answer: "When the food is right, people slow down"

Yikes! Now, it's his job to think that way. But, if that thinking permeates the minds of 
more than a few people at the new headquarters McDonald's USA is about to take a trip
back to the years 2000, 2001, and 2002.

By the way, desperate to get sales turned around, management strong-armed Operators
into launching the original Dollar Menu in the fall of 2002. Same store sales in 2003 were 
a robust +6.4%.

So "Made For You" was the father of the Dollar Menu.

This is a recorded interview and is only seventeen minutes long. The discussion on speed 
begins at the eleven minute mark.

How McDonald’s is working to change its menu by Restaurant Business Magazine

July 10, 2018

But Will Customers Care?

"As for how long the paper straws last after being inserted into liquid, Merran said it depends on the beverage and temperature.
"It should hold for about the time for you to [finish the] drink," he said. "It’s going to become a little soggy, but you can still drink from it. It’s like any alternative. It’s not perfect but it does the trick."
Paper straws are better for the environment, but they will cost you

July 7, 2018

Crazy Bernie

McDonald's is Officially Out of People

Apparently the effort to downsize McDonald's has no plan or logic. For a mature company 
to have a lack of middle management is a sign of incompetence. Of course, the downsizing
is being managed by people who know little or nothing about McDonald's so some of this 
blundering is to be expected.

This Linkedin job posting is interesting. It appears that the new position of "Operations Assistant" has a primary function - reporting Operator food safety problems to HQ.

Will that attract quality people or just nasty, control-freak types?

"The Operations Associates main focus is on evaluating the Franchisee business

and ensuring it is in accordance to operating standards held by McDonald’s. 
The Operations Associate is responsible for immediately reporting restaurants 
below food safety standards to Operations Associate Lead and Operations Officer. 
This position works collaboratively with Franchisee Business Partners, Franchisee, 
and the deployment team.
This role is based in Denver, CO."

Linkedin job posting is HERE

July 3, 2018

Cheesy Lawsuit Frivolous?

Yes, this is a cheesy lawsuit and people who use our legal system in such a way should be stripped of their citizenship. But, there is a point here.

In sampling the never-frozen quarter patties I decided to try a couple of quarters without cheese so I could better examine the patties. When the kiosk charged me full with/cheese 
price I thought to myself "Hey?".

The problem is, the typical McDonald's store charges more for a regular cheeseburger than 
a regular hamburger. And, for customers who remember when the quarter pounder without cheese was on the menu, it cost less than a QPC.

So McDonald's has done a good job of implanting the idea that cheeseburgers are more valuable than hamburgers without cheese.

My humble opinion? Quarter Pounders without cheese should not be on the menu but if a 
kiosk customer deletes the cheese the price of the sandwich should be reduced by a modest amount.

The profit loss to the Operator should be minimal because - face it - very few customers 
are going to delete the cheese. Based on my recent experience the Quarter Pounder without cheese is OK but these days few people will opt for a sandwich as plain as a Quarter Pounder without cheese.

Is this cheesy McDonald's lawsuit frivolous, or have we all been paying too much for our burgers? - Sun Sentinel

Sonic's Digital Strategy

The words "competitive advantage" and "Sonic" rarely go together but in terms of mobile
ordering this might give them a leg up. Customers order on their phone, pull into one of 
Sonic's many car-hop bays, and their phone interfaces with the intercom and POS system. 

Sonic's Digital Strategy Could be a Game-Changer - QSR magazine

June 27, 2018

Freestanding McCafes to Grow in Canada

...most franchisee agreements contain geographical exclusions which prevent 
cannibalization from new stores within the network, but McCafés would be 
an exception to the rule because they are a different concept with a different 
menu that includes a lineup of grilled cheese and specialty sandwiches. “You 
could put (standalone McCafés) in areas where you would not put an existing 
McDonald’s,” Arifuzzaman said. “It is a way to grow McDonald’s footprint 
and potentially steal more share.”

McDonald’s extends its cafe chain rollout as it battles Tims and Starbucks - Fin. Post

How Do the Third-Party Delivery Players Stack Up?

Restaurant Business reports on Technomic study

June 25, 2018

McDonald's to Close 13 Year Old Oak Brook Flagship Store

This is the 50th anniversary store opened in 2005. We will see more and more of this kind of real estate wheeling and dealing in the future as McDonald's looks for more ways to return cash to shareholders. This time it involves a McOpCo so there's no franchise agreement to terminate. But, if it was franchised the Operator would have to be bought out or be talked into walking away from the remaining seven years.

A McDonald's isn't always the highest and best use for a property.

With McDonald's moving to Chicago, Oak Brook's 22nd Street restaurant will close Saturday

Are Sugar Worries Weighing on Frappuccino sales?

Are sugar worries weighing on Frappuccino sales?

Starbucks Frappuccino sales tell a troubling tale

June 19, 2018

A Reporter's Rant

I've had the same experience - walk into a McDonald's and it appears there is no one
involved in customer service. Everyone's in the grill area and all of the managers are 
working drive-thru. 

It's just me and the kiosks - no human contact.

Kiosks Won't Solve McDonald's Problems

Starbucks Stops Growing - Again

Starbucks Pumps the Brakes in Its Home Market

June 17, 2018

Does McDonald's Have a Plan or Just Following BK?

Aside from a click-bait headline this short article does a good job of summarizing 
what's going on in McDonald's. 

Reporters often write about the McDonald's "turn around plan". Sure there's a "plan" 
but it's modeled after what Burger King (Restaurant Brands International) has been 
doing since 2015.

* Refranchisng

* Larger franchisee organizations

* Stripping corporate overhead to the bone (downsizing).

* Maximum cash returned to shareholders

The McDonald's plan is fancier, has more McSpin, but is the same financial engineering.

There's little new here. Wall Street likes what Burger King has been doing so McDonald's 
must do the same.

McDonald's Discovers Employees Get in the Way of Profits

June 13, 2018

Jonathan Maze on Quiznos’

"... there are lessons to be learned here for the restaurant business. And the biggest one is this: Make sure your franchisees can make money"

A brief history of Quiznos’ collapse

June 11, 2018

Field First?

Here's the place for McDonald's Operators to make anonymous comments about the "Running the Play" 
memo and Tuesday's Town Hall.

June 9, 2018

Kalinowski Upgrades McDonald’s

And yet, because Mark publishes reports with McDonald's Operator comments, McDonald's HQ labels him a "McDonald's hater".

Why Did Kalinowski Upgrade McDonald’s? - Market Realist

June 5, 2018

Waiting For A Clue

Continuing with our theory that McDonald's management doesn't know what's going on 
in the restaurants - here's another example.

On Monday a CNBC host attended the opening of the new Chicago office building. During 
an interview with the McDonald's CEO, CNBC's Jim Cramer popped in with a question 
from their studios in NYC. His question, or complaint, was about the slowing speed of 
service at quick serve restaurants.

The response was pathetic. It was all about the new gimmicks to speed up customer ordering. Nothing about what's going on in the kitchen. Nothing about operational complexities.

Speaking as one with decades of operations experience, and now a frequent McDonald's customer, the problem isn't about the ordering process. The problem is how long I have 
to wait for my food after I order.

If all management intends to do is fiddle with the ordering process then things are only 
going to get worse and working at McDonald's will only become more difficult.

As one person put it on twitter, "Thanks McDonald's for the more comfortable furniture. 
It gives us a place to sit while we wait for our food".

It's going to be tough to fix an operations problem when so few of the people in charge 
know anything about operations.

The service question and the weak response is at the six-minute point in this video.

McDonald's CEO: We are evolving the business in a meaningful way:

June 4, 2018

Waiting On A QPC

Feedback from McDonald's Operators, my experience during visits to McDonald's, and chatter on the internet confirm that service times at McDonald's have slowed since the introduction of HOTG. That's understandable during a major operational change. 
Hopefully McDonald's Operators will work the bugs out of the program and service 
will improve.

But in the middle of this change Oak Brook comes up with the idea of deep discounting 
QPCs? An operational change is screwing up service times so Oak Brook wants to vastly multiply the number of HOTGs sold or given away?

Congratulations to OPNAD for rejecting the idea.

It becomes more obvious every day that the lack of real restaurant experience among 
those in upper management has potential to do great harm to the McDonald's system.

McDonald's corporate employees should be encouraged to visit some real McDonald's restaurants. Time some customers, wait for some product, stand around waiting with real McDonald's customers.

According to the mapping function on mcdonalds.com there are 14 McDonald's locations within five miles of Oak Brook. And, about the same number can be visited on a leisurely
walk from the new Chicago headquarters to Navy Pier.

These corporate aristocrats need to get out of their safe spaces and experience what's happening in real McDonald's restaurants.

May 29, 2018

Starbucks - Land of Confusion

Schultz makes emotional decisions instead of business decisions. This incident could
have been handled quickly and internally. Instead he creates an international spectacle 
that implies that every Starbucks employee is ignorant and insensitive.

This will not yield a positive result.

Howard Schultz public statement

May 24, 2018

Chipotle To Add Hybrid Drive-Thrus

Any restaurant with a digital order system that relies on the customer's prediction 
of when they'll arrive at the restaurant is going to serve a lot of cold food or suffer 
lot of food waste.

Chipotle is adding drive-thru lanes, but you can't order food at them

May 23, 2018

Questions About McDonald's Chairman

"At Wells Fargo's annual meeting in April 2017, he received just 53% of shareholder votes, the lowest among the 15 board nominees. Such a result was seen as a harsh rebuke, since the directors run unopposed; it's rare in such corporate elections to receive approval ratings below 90%."

McDonald's Chairman Trailed by Legacy of Wells Fargo Scandals - TheStreet

May 22, 2018

May 19, 2018

Another Source of McLeaks

I've never understood why companies allow their advertising people to network with 
other advertising people and even with people from their competitors. 

This week in Chicago The National Restaurant Association is conducting their annual restaurant show. Are McDonald's operations executives wandering the exhibit floor and meeting with competitors or serving on panels discussing McDonald's best practices? 
I doubt it.

Yet, McDonald's advertising and PR people are constantly appearing at seminars, giving speeches at advertising industry events, and networking with a broad spectrum of other advertising folks. 

Why is McDonald's Corp. paying them the big bucks to take time out from their jobs to promote themselves?

But, it works. Former McDonald's ad execs Mary Dillon and Deborah Wahl wandered the 
land giving speeches while on McDonald's payroll and networked themselves into great 
jobs with other companies.

It's pretty hard to participate in such events without leaking things that should not be in 
the public domain.

A recent example - McDonald's senior VP of communications and PR recently participated 
in a meeting put on by AdAge magazine. Why was he there? Why wasn't he hard at work 
in Oak Brook or attending Co-Op meetings? I'm sure it was good for his ego but how did
his attendance at this conference benefit the McDonald's system? Maybe his attendance 
did harm to McDonald's.

If McDonald's Corp. wants to build market share they should keep their folk's noses to the grindstone and make them do some actual work instead of networking at meetings in search 
of their next job.

Please read this article and ask "why".

McDonald's PR chief on how to respond to negative news

May 18, 2018

"Leaks" in the McDonald's System

Apparently the nasty-graham McDonald's Operators received from McDonald's USA legal several weeks ago claimed that communicating with others gave some possible advantage 
to "our competition".

In other words, McDonald's Operators leak proprietary information. Nothing could be further from the truth.

If there are leaks in the McDonald's system - Many of the leaks come from McDonald's upper management during discussions with Wall Street analysts.

Case in point, is it any wonder that McDonald's major competitors were ready to launch new value platforms at the same time McDonald's USA launched the $123 menu? McDonald's management had been publicly blabbing about the new menu during much of the fall of 2017.

Prior to launch the analysts knew more about the $123 menu than McDonald's Operators.

The rest of the leaks in the McDonald's system come from employees of McDonald's outside advertising agencies and PR firms.

These people are loyal to no one and are always networking for their next job. It's important they establish connections with reporters who cover the advertising business. They sing like birds.

So Operator leaking is not the problem. Trying to impress shareholders and disloyalty among agency people is the problem.

May 17, 2018

McDonald's Needs This Guy

"We’ve been saying for a long time that it’s not sustainable."

"they’re hurting the profits of the operators responsible for
running the restaurants."

Jack in the Box CEO Lenny Comma takes a shot at QSR discounting

May 12, 2018

Franchisee and Franchisor Attorneys

Attorney Jeff Goldstein lists his best competitors

"Last, I note that I have always held the very strong belief that franchisees should use 
attorneys who represent only franchisees and dealers, and who do not represent both franchisors and franchisees (or who represent only franchisors). I have written extensively about what I view to be the inherent conflicts in such dual-representation, and how such 
dual-representation is counterproductive to the overall mission of franchisees and dealers. "
Jeff Goldstein

May 11, 2018

Thoughts on McBullying

We've had a week to discuss the nasty-gram from Oak Brook about franchisees working with Wall Street analysts and others concerning their business.

After everything I've heard about this memo, I have one word - nonsense.

Franchisees and analysts communicate all the time - not enough - but all the time. And analysts love to boast about these communications in the reports they publish. They don't name names, the term is "channel checks".

Please keep in mind that sell-side analysts live in a very regulated world. We all skip over the last few pages of the typical sell-side report because they contain the fine print "disclosures and disclaimers" related to the report.

If working with franchisees was in any way inappropriate or illegal no analyst would mention franchisees in their reports.

Buy-side analysts are always looking for franchisees to talk with and research firms such as the two listed in the column to the right don't understand if a franchisee declines to join in their work.

Here's fun example: Carrols, a publicly held company (NASDAQ:TAST), is the largest Burger King franchisee with over 800 stores. They issue earnings reports and conduct investor conference calls just like McDonald's. They communicate directly with analysts and investors about their franchised business and are required to do so. Does Carrols get letters like this from Burger King Corporate? I don't think so.

As you can tell, there are no hard and fast rules for this type of communications and people who work in Oak Brook don't write the rules.

Speaking of Oak Brookers, I think this memo was written by a team lead by the contemptible Robert Gibbs and the general counsel of McDonald's USA was made to sign it in hopes of making it more intimidating.

I can't give McDonald's Operators legal advice but I can encourage you to reread the memo a couple of times. I'm told it's full of words like "can result", "may", "may constitute", "proper channels", "unnecessary distraction". All in all, pretty nebulous stuff.

As the McDonald's Operator community comes under more stress in the future you can expect more of this McBullying.

May 4, 2018

McDonald's Operator Comment of the Week

"According to McDonald's Corporation, I am an independent business owner which means I can share the results of my business within anyone I want, I can also share my perspective on current promotions & how they are performing in my business with anyone I choose. I would never reveal or comment on upcoming or unannounced operational or promotional items or McDonald's Corporation results before announced to the public. But I would also never let Mr. Koulouris or his legal council suppress my voice on my business, I do not fear a cease & desist letter followed by a lawsuit. If something such as that ever occurred I would subpoena every known document, electronic file, personal phone logs from known vendors and corporate leakers, the legal fallout and SEC investigation would start a criminal investigation against McDonald's current and former executives my restaurants value would be far greater for them to get rid of me than the current value, of course at that time any poor grading results would be clear retaliation." 

May 3, 2018

Security at Franchise Equity Group

When franchisees ask, "What security precautions do you use"? My answer is "all of them".

But it's easy because I'm the only one here. There are no employees, no file clerks, no office manager - just me. There's no one to look over my shoulder or sneak a peek at a memo or a computer screen. No one to overhear conversations.

All family members are off doing their own thing - no Next Generation here.

In this digital world I've grown to dislike paper. When I finish a project everything goes in
the shredder. I also dislike keeping files involving ancient history. If it's not something 
I'll need in the next 48 hours it goes to the shredder.

And of course, I don't blab. I would never (and have never) told anyone anything about my other contacts. 

My overused example is - if I was talking to two siblings, one on the west coast and one on 
the east coast - neither one would ever know about those connections unless they told each other. But they wouldn't hear it from me.

And there's much more but my security precautions don't allow me to discuss this further.

There is no need for paranoia - no matter how many letters the bullies send around.

NRN on QSR Value

Quick service puts focus back on value - Nation's Restaurant News

May 2, 2018

9 Minnesota Burger King Restaurants Close in Minnesota

Two reasons this is interesting:

* This is my original Mcstomping grounds.

* McDonald's Operators should follow Burger King, not just as a competitor but as a 
   business model. Many of the changes McDonald's Corp is making to the domestic system 
   are imitations of what Restaurant Brands International has been doing to Burger King -           selling off company stores, going to larger and larger franchisees, etc, etc.

                  9 Minnesota Burger King restaurants close in Minnesota - Business Journal

Face It - Environmentalists Are Nitwits

Of all things to keep out of the waste stream, they pick the tiniest item? There aren't enough decimal points to calculate the percentage of waste that plastic straws make up.

I've participated in a lot of beach clean-ups, it's a great way to spend a Saturday morning. 
I don't remember plastic straws being a big factor. I do recall that most of what we were picking up came in from the surface of the ocean, obviously from fishing boats or cruise ships. Any food packaging waste is faded and deteriorated from the sun and salt water and was obviously out there for a long time. It's not as though people go to the beach and leave 
cups and straws in the sand.

Environmentalist wackos start every initiative with the question. "How can we cause maximum discomfort in other people's lives?"

McDonald’s pushed to ban plastic straws in the United States – Orange County Register

Restaurant Business on McDonald's Traffic

McDonald’s finds again that traffic is hard to come by - Jonathan Maze

April 20, 2018

Walmart Brings McDonald's CEO on Board

Walmart Nominates McDonald's CEO To Board - Nasdaq.com

Why Pizza Has Little to Fear from 3rd-Party Delivery

Reporter Jonathan Maze covered the Restaurant Leadership Conference in Phoenix this
week. Here's more reporting on restaurant delivery.

"If they (delivery companies)charge more to restaurants—and many, many chain executives
we speak with complain about the losses they take on delivery orders—then those companies will be less likely to promote or push the service."

Why pizza chains have little to fear from third-party delivery

The Ever Tightening Labor Market

Is Uber competing with restaurants for workers?

April 19, 2018

Is Starbucks Making Things Worse?

Having been around food service and also having experience dealing with the media ...
in my humble opinion Starbucks is turning this unfortunate event in one store into a 
national scandal.

Starbucks could have terminated the managers who made all the wrong decisions, 
maybe closed that store for while, and conducted a national internal audit of their own 
corporate culture.

But no, they plan to close 8,000 stores for a one day training effort. So instead of
admitting they had a problem in one store they are demonstrating that they have a 
systemic nationwide problem.

This is one publicity stunt that will backfire, turning an embarrassment that would
have faded away in a few months into something that will be with the brand for years.

Could McDonald's gain fresh hangout status amid Starbucks controversy?

April 16, 2018

Why McDonald's Stock Turnaround May Fizzle

Why McDonald's Stock Turnaround May Fizzle - from Investopedia

And Now a Word From the Left Wing Wackos

The contemptible Robert Gibbs has a dream job. In addition to his huge McDonald's salary and perks he gets to infect the system with fake science from the Obama administration.

The beauty is, Operators will absorb the cost of many unnecessary changes to the system.

Then Gibbs will leave to assist with Senator Elizabeth Warren's 2020 presidential campaign.

April 12, 2018

Hepatitis A Warning Linked to McDonald's in Kentucky

McDonald's stock drops on hepatitis A investigation - Business Insider

"Unfrozen" Will Be The Next Disney Movie

I've sampled enough unfrozen, HOTG sandwiches to have some opinions in my role as 
a McDonald's customer.

Is it a better product? ... Sometimes.

As I consumed the first few QPCs I was struck with the thought, "For 45 years McDonald's
has been over-cooking all those millions of quarter pound patties".

I've sampled about 40 sandwiches over the past few months and my impressions are:

* In a Quarter Pound with Cheese it's better than frozen but only when everything is 
   done perfectly.

That's because the QPC is a pretty simple sandwich.

 * In the Signature Sandwiches the difference in meat patties is unnoticeable. There is so much going on in each of those sandwiches, so many flavors, so many textures that the actual meat patty gets lost in the battle. This lack of difference will become even more noticeable as the builds become more exotic, Angus flavoring, etc.

* One in five patties were pink enough to have failed previous food safety standards. Now, 
don't get me wrong, I like them that way. As a McDonald's Operator I'd often cook a couple 
of quarter pound patties as a low carb, high protein lunch. They were quite pink in the center and I would have never served them to a customer.

However, McDonald's has been overcooking beef patties for so many decades McDonald's customers don't know what a "medium" patty looks like. I foresee many returned sandwiches.

* I was served a few sandwiches that were dripping with fat (very unusual at McDonald's). And, about a third of the sandwiches did not have the brown wrapper, just the box and
the sandwich. That wrapper is essential, especially with the Signature sandwiches and if 
the sandwich is eaten on the road.

* There is a perceptible slowing of service times at the stores I visit regularly. I'm seeing 
more cars pulled to the side and more long waits at the presentation window. Since I'm 
not in the kitchen I can't tell what's holding things up or if this slow down is related to 
HOTG. It might be the nationwide staffing problems. Maybe it's the three patty thing.

Will this change increase sales at McDonald's? Will it be worth the hassles and risks? I'm 
sure there will be a lot of trial when the advertising begins but only time will tell if it 
will build sales.

Meanwhile, Wendy's and other competitors will continue to bark about frozen beef at McDonald's. Unfrozen quarter patties will not solve that problem.

April 7, 2018

Better Hope That High Volume Store Isn't Too Valuable

In Washington DC McDonald's is selling the land under a store for $31 million. 

It's hard to get a rewrite if McDonald's Corp. sells the property

JBG Smith pays $31M for NoMa McDonald's - Washington Business Journal

April 5, 2018

5 Reasons McDonald's May Be Unstoppable

Normally we don't pay much attention to what's published on Seeking Alpha (except for their transcripts) because most of the articles are written by want-to-be analysts looking 
to make a few bucks for the article.

But, this is written by a substantial company and their comments about refranchising and McDonald's Operators are interesting.

5 Reasons McDonald's May Be Unstoppable - Seeking Alpha

April 2, 2018

What Do Hotels Have To Do with Food Deliveries?

"Incremental Sales" can be a misleading term. Of course in a franchise system corporate 
and shareholders love incremental sales because they get their slice of the action no 
matter what happened down the line.

The example of a hotel operator being happy to pay a commission to rent an empty room 
is apt. The room's sitting there ready to go and all the hotel has to do is hand the guest 
their key and re-clean the room the next day.

But incremental sales at a restaurant are different. The restaurant operator has to pay 
for the food, packaging, labor,and all other misc. costs. Plus pay the franchisor rent and royalties on the sale. Plus put up with a distraction in their operation. In the end, the 
restaurant operator absorbs all the liabilities of a delivery order and would probably be 
better off without that "incremental" sale.

Thanks to "anonymous" for this link.

What the fast casual industry can learn from hospitality's $2.5 billion braw.