March 16, 2019

Poultry in Motion


At the end of February, a memo from the NOA board expressed some frustration with the development of "a better chicken sandwich".

On March 5 a press release appeared on the McDonald's corporate website featuring the "test" 
of "Mighty Chicken" in Augusta GA.

Now, I don't hang out on the McDonald's website very much but I've been there enough to know
that announcing a small market (35 stores) test on a website available all over the globe means 
it's not a "test", it's a done deal.

Local press in the test market? Absolutely. But it's not global news unless all of the decisions 
have been made. I wouldn't be surprised if this product isn't already on the OPNAD calendar.

Otherwise, it wouldn't be on McDonald's global website.

Here's the corporate press release:

Testing Mighty Chicken in Augusta, Georgia - McDonald's Corporation
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March 9, 2019

News on McDelivery

A skilled negotiator knows to avoid making an initial offer that might be insulting to 
the other party. Best example - a home buyer making an extreme low-ball offer that is 
so far below the listing price that it insults the seller's judgment and their beloved
homestead.

That was my reaction to the proposed corporate rent caps on  McDelivery sales. It
will apply to so few stores that it's an insult to the intelligence of the Operator 
community. And there wasn't any real thought put into it. The majority of restaurants 
are still below 20 McDelivery orders a day so they just double that and make 40 orders
the starting point for rent relief?

At least it's a springboard point for discussion. I like the goal of making McDelivery transactions as profitable as drive-thru transactions. A stretch goal but a good one.

And it's also good to hear that OPNAD is holding off advertising McDelivery. Let Taco 
Bell waste their advertising dollars. 

This weekend's WS Journal contains an article about restaurant and grocery delivery. 
It's behind their paywall so you'll need a subscription to their website.


Here's a pull quote: "McDonald’s Corp. started using San Francisco-based Uber Eats
for delivery in January 2017. In a survey that a newly formed association of franchisees conducted of its members in January, 565 respondents said that delivery is not contributing positive net cash flow to the business, while 198 said it is.​"​

Too Many Stock Buybacks? A Debate

"So while franchisors spend billions to make Wall Street happy, they would be wise to 
spend something on the innovation and support necessary to stand out on Main Street."

In the last two years, McDonald's spent more than $16 billion on share repurchases.  

Too many stock buybacks? - Franchise Times - March 2019
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March 6, 2019

Funny or Sad?

It's ironic that while environmentalist wackos are trying to shut down tiny things like plastic straws the restaurant industry is developing more and more packaging for delivery and take-out.

Los Angeles bans self-service plastic straw dispensers

Packaging could be the new differentiator in to-go - Slideshow



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March 2, 2019

McDonald's and Martin-Brower Under Pressure

America's Trucker Shortage Is About to Hit Consumers Where It Hurts - Fortune
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Making McDelivery Famous

Comments here and in other conversations have suggested that McDonald's Operator 
issues with McDelivery should receive media attention.

That job is done. When there's extensive press coverage on an issue or event I usually 
limit the posts here to one or two articles. In this case it was this February 15 post: 

McDonald's Franchisees Dump On McDelivery

This article originated in Advertising Age which is owned by Crain Communications 
which publishes many business magazines in major cities such as Chicago Business
We can be sure the article appeared in most of their magazines and web sites around 
the country.

Nation's Restaurant news and Restaurant Business covered the issue, both in print and 
on-line. CNBC and Fox News did segments on McDelivery. super station WGN conducted
an interview with reporter Jonathan Maze and it's still in podcast form in their website.

I'm sure that's only the tip of the iceberg since I spent a big chunk of February talking 
with reporters and analysts about McDelivery. I think we can assume that all MCD stakeholders know there's a problem with McDelivery.

Now it's up to McDonald's Operators to deal  with the issue internally. 

In my humble opinion McDonald's Corp. will eventually do away with charging rent and service fees on delivery charges and will do so thinking they've solved all the problems 
with McDelivery. It will be up to the Operators to decided if that's enough of a victory. 
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February 28, 2019

Howard Penny on Video


Last week we posted a link to a research report from  Real Vision featuring analyst Howard Penny. At the time the only thing was available was the transcript of the discussion.

It appears that Real Vision has unlocked the video portion and even if you read through the
transcript the video discussion is enlightening. It's eleven minutes.

Here's the original post:  Analyst Howard Penny on NOA, Chris K, and McDelivery
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February 26, 2019

McDonald's Operator Comment of the Week (So Far)

Delivery has to be a balance, and profitability is an issue. However, so is QUALITY - and 
the chargebacks to restaurants because a product isn't meeting quality and accuracy - 
with no ability for the restaurant to challenge that model is simply dumb. Add the complexities of MCD negotiated fees, service charges, etc. - you don't have to be a math professor to realize that McDelivery is a GOLD MINE! Where MCD gets the top line SALES (GOLD) - leaving 
the operator with what's left - the loss (or the SHAFT)

Just like giving capital with $1 ANY SIZE DRINK - just "because". When the closest competitor small drink is $1.89 and their Large is over 2.89. Or $2 McCafe to build the supermarket sales - as the competition is selling for closer to $5

McDelivery worked in Asian markets due to population densities that far exceed even the largest US cities of NYC and LA. Completely different model here in the United States - even 
if these larger markets can get close to the demographics. Still, wasn't that a KROCISM - to Local Store Market (LSM) those sorts of ideas? How is what works in NYC good for a highway market in Kansas? Its not like Asia, where its good in HONG KONG because there isn't a McDonald's outside the limits to be impacted with the expectation of delivery. Unlike the USA, where restaurant saturation fills even some of the most remote travel areas in the country.

Looking to build sales - simplify the damn menu to speed service. Declare MFY dead, as the current production engine is dead in its ability to resurrect service times. How dumb is the system simplification focus, when it cant even ELIMINATE the McDouble - a made up sandwich designed to address food cost when the Double Cheese was removed from the $1 menu?

You just have to sit back and scratch your head at the low hanging fruit - but wasting $$$ and synergy on far fetched projects... or taking years to develop simple projects... like digital food safety.
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February 23, 2019

Discounting Killing Papa John’s Franchisees

Papa John’s has a franchisee problem
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Fast Food Franchises Should Offer A Simple Menu - Forbes

Nigel Travis, the CEO of Dunkin’ Brands, regarding a reduced menu stated: “It really started with our franchisees being concerned about how complicated our menus are and how difficult it is to train employees, and find employees as a result”.

Fast Food Franchises Should Offer A Simple Menu
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February 22, 2019

The Robots Are Coming, The Robots Are Coming!

"Longer lines mean potential customers will look for another restaurant, he said."

If only McDonald's corporate leadership could understand this.

At this fast-food drive-through, the person taking your order might not be a person at all
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February 21, 2019

A Website Supports ‘McCafe Dividend’

"Sales through retail channels siphon all revenue/profit to McDonald’s Corporate, 
essentially cutting out the franchisees that built the McCafe brand."

McDonalds breakfast: Market is forecast to be worth over $1 billion by 2020
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Thinking More About McDelivery

Jon Taffer states that delivery customers are different from restaurant customers and 
delivery does not cannibalize restaurant sales.

Of course, his only source for such information would be from the restaurant companies
and the delivery providers. It may or may not be true.

But consider this, other than the pizza companies restaurant delivery has never been 
aggressively marketed. Given the power of OPNAD, if McDelivery is on OPNAD, it's 
easy to think that much advertising will change customer behavior and will cannibalize 
in-store and drive-thru sales.

Restaurant delivery has never seen anything like the clout of OPNAD.

Will McDonald's Operators spend their advertising money to move profitable sales in the
restaurants to unprofitable sales with McDelivery?

Or has McDonald's Corp. already committed OPNAD $$$ in their deal with UberEats?
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February 19, 2019

More on McDelivery From Restaurant Business





Why restaurants missed their chance to get better delivery deals

Analyst Howard Penny on NOA, Chris K, and McDelivery

Real Vision is a research firm and most of their video and audio products are only available
to subscribers. But, their recent interview with Howard Penny is available to the public 
in transcript format. The "Transcript" button is on the right side of the page.

I suggest you print a copy since they might change the link.

Howard Penny - Not Loving It - Real Vision
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February 18, 2019

Howard Schultz’s Candidacy Could be Good for McCafe

If Starbucks' Howard Schultz actually runs for President as an "independent" millions of conservatives will boycott Starbucks (many conservatives already do) because they won't support a liberal and he will take votes from Democrats so millions of liberals will desert Starbucks.

Writers Peter Romeo and Jonathan Maze discuss:

Howard Schultz’s politicking is good for restaurants—even if he doesn’t have a chance
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February 11, 2019

Why is McDelivery Just Like McCafe?

One of the McDelivery articles we posted last week discusses the advertising of McDelivery. 
CEO said, "McDonald’s typically won’t invest in any sort of national marketing campaign
until at least 70 percent of the U.S. system can offer what’s being advertised".

Why is that like McCafe?

OPNAD launched McCafe nationally in April of 2009 when a little more than 60% of U.S. stores had the product. Many major markets did not have McCafe until months after the national launch.

Millions of McDonald's customers were misled and disappointed.

Prior to McCafe 2009 was going pretty well. The year started off nicely with a 1st quarter same-store sales increase of 4.7%. The McCafe OPNAD campaign launched in April The 
2nd quarter of 2009 came in at + 3.5%, 3rd quarter +2.5%, and the 4th quarter was barely positive at + 0.1%.

In fact, the years 2003 thru 2012 were all positive same-store sales years but 2009 was the lowest full-year increase of all at +2.4%. No one can claim that OPNAD prematurely advertising McCafe built same store sames.

So advertising a poorly accepted product that was only available in a percentage of stores pretty much ruined sales momentum for 2009. Most of the money OPNAD spent that year 
was wasted.

If McDelivery goes on OPNAD U.S. Operators should expect soft or negative same-store 
sales for the duration of OPNAD advertising against McDelivery.

McDelivery is different than advertising a new product. It's a service, not a product. I don't recall a time when OPNAD advertised a service. Some markets will benefit, others won't. It makes sense that the New York City area would advertise the service. But, Sioux Falls? Albuquerque? Reno?

And keep in mind, one of the reasons McDonald's management pushes Operators to put something new on national television is to impress investors and analysts. Like McCafe, management has been hyping McDelivery with investors for several years. Once investors
see ads on T.V. it becomes successful in their minds and they raise their expectations for 
sales and earnings. All accomplished with McDonald's Operator money.
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Comments on the Town Hall?

February 7, 2019

Don't Miss This Operator Comment

Anonymous has left a new comment on your post "McCashin In - Chicago Style": 

Your gonna see board members bailing faster than a Crispy Crème Donut at a Weightwatchers meeting...

Remember. even the Costa Concordia was righted by the proper salvage company.

No one knows the MCD system better than its franchisee's.. as there is no one left in McDonaldLand with knowledge. The entire MCD Field Service in most areas has been vacated to BC's with two weeks HU training, a clipboard and a timing device.

Remember a Corporate structure with no history, is a Corporate Structure with no loyalty - even unto itself. They must now live with the monstrosity they created.

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Jimmy John's: We Will Never Use Third-Party Delivery

"According to the data, 35 percent of customers who have used third-party delivery say
they have experienced a problem with their orders. Seventy-six said the restaurant was, 
at least partially, to blame for the errors. Ninety-two percent said they expect food deliveries within 15–30 minutes of placing an order. 

Jimmy John’s added the largest delivery services average close to a 50-minute delivery time."

Jimmy John's: We Will Never Use Third-Party Delivery - QSR magazine
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January 23, 2019

January 15, 2019

Chick-fil-A Expanding Menu?

Chick-fil-A guy - “We’re excited to spice-up the menu and see what happens in these 
test markets,”

Hey Chick-fil-A guy, I'll tell what's going to happen. Your service is going to slow down.

Chick-fil-A Starts Testing New Spicy Chicken Menu Items - QSR magazine
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Trump Serves Up Big Macs



With White House chefs furloughed QSRs step up

White House offers Clemson Tigers fast food feast in championship celebration

One-minute video is HERE

Jonathan Maze Recaps the Creation of NOA

"The best thing for the relationship, therefore, would be stronger sales and traffic growth. 
That makes the first two quarters of 2019 so important for McDonald’s management and 
its franchisees." 

Explaining McDonald’s franchise dispute, and why it’s important - Restaurant Business
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January 12, 2019

I Have a Customer Complaint About McDonald's Customers


It's going to be difficult to grow sales at McDonald's with all of this customization and constantly changing product lines. With all the different value platforms McDonald's is attracting fussy customers looking for customized food at the lowest price.

Example: Last week I visited a McDonald's about 3:30 in the afternoon. As I walked into
the restaurant a couple were at the front counter getting ready to order food. I stood 
behind them. I didn't hear every word but they were having a long conversation about 
what they wanted to order. They kept asking the crew person questions. Turns out they
wanted sesame seed buns on their Filet-O-Fish.

The crew person couldn't figure out how to enter such a product so he ran to the manager working drive-thru. The manager leaves drive-thru to assist. Much discussion ensues. The manager then heads for the grill area, I assume to coordinate this special order.

It took these people nearly three minutes to order and pay. And all they bought were four customized Filets for $10.00. More and more bottom feeders expecting customization and variety, all for $2.50 a sandwich.

How does an Operator make money attracting such customers? And what about the other customers? If I were a normal person I might have walked out and gone elsewhere. 

Now, the restaurant did a fine job. They handled these difficult customers properly and 
had their order to them very quickly.

It seems the drive-thru percentage will continue to climb.

Chicago Tribune reports:

'People love bacon': McDonald's to serve Big Mac Bacon, Quarter Pounder Bacon
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January 11, 2019

Or did McDonald’s Operators "Take" More Media Control?

"The local media review is the latest sign that McDonald’s is taking steps to address 
franchisee concerns amid mounting tension with the company’s operator community."

McDonald’s to give markets more media control
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January 8, 2019

Operator Comment...

 Anonymous said...
In case anyone missed it....the latest email that just came out tonight regarding the transition to new NFLA and officer elections. The company has now added certain “self evaluation” requirements to be eligible to run for the new offices. Everyone please take a look at these requirements. From a legal perspective it seems very vague and puts the upper hand with Stock Price Steve and Crooked Chris to eliminate the possibility of anyone they don’t want in a leadership position. Please help support anyone that is running for office from the NOA....because they will no doubt send in the storm troopers to make them ineligible anyway they can.....Ops people “hiding in the bushes” to take them down one way or another.

Build That Wall?




Operators call for halt to new remodels - Jonathan Maze

Also by Maze - On the NLC Survey
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“Cash-strapped franchisees say a lot 
is happening at once, without much return."