January 30, 2019

At McDonald's, Fewer Restaurants and Fewer Customers



                McDonald's CEOs have been talking about simplifying the menu for 15 years
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25 comments:

Anonymous said...

Easterbrook sez - “We have a collective resolve that service times” need to improve, Easterbrook said. “We will not accept them getting any longer.”


Yet they keep adding more menu items, more complicated recipes, fresh beef,and table service! And KIOSKS are not faster when they cant accept cash! (duh!)
The fact that Clueless Chris and Stockprice Steve have virtually NO operations experience or backround does not bode well for speed of service. Stop trying to compete with mid tier brands like Panera and Five Guys ,and return to our QSR roots! Cut the menu 20% and simplify operations is the only way to improve speed, but these two have no idea what to do.


JOIN THE NOA

MMGA

Anonymous said...

The problem remains the same. There are too many stores and too many operators. I think it will continue to become more difficult for operators to make any money if they own five (5) or less stores of average volume. Costs are escalating and we don't know what they are going to spring on us next. Apparently they are being aggressive about developing robots for our kitchens. Starting with the "Sam Wall" no operator I know of has any idea of what that investment will cost the operators or if it will have any ROI at all. Any operator that is struggling robots could be the the end of the line for them, we just don't know, and the company doesn't seem inclined to disclose anything about it. I hope the NOA will be able to get real information.

Anonymous said...

I think the misconception of the problem with Kiosk is not that it doesn’t accept Cash which slows service, but with the complexity we have in the stores, the kiosk is just adding another 4 order points to the grill area. And it’s hard enough to keep up with just Drive thru and front counter. If MHQ employees actually worked in a restaurant they would know “No good, no service”. Basic Shift Management

Anonymous said...

To be effective the Kiosk's must be staffed on every shift. Customers in their 50's don't want to use it. Staff it and they like it.

Anonymous said...

Who can afford to staff a kiosk, the front line, the drive thru ,the kitchen ,the dining room, and maintenance ?? (and still make money?). We need to be less labor intensive , NOT more like Corp demands! (why do you think they are selling their stores?)

The above comment is foolish. Probably a Corp Pajama boy!

Richard Adams said...

I've been in a lot of McDonald's stores with kiosks and I've never seen a "staffed" kiosk. Occasionally I'll see a crew person or manager stop for a minute to help a first-time customer order on the kiosk but then they go back for their primary task.
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Anonymous said...

Kiosk is a perfect example why “one size fits all” does not work. They work for a store with low DT percent. And in urban areas which high traffic inside. A store in the suburbs with 80% DT does not need kiosk. We need to focus on Mobile order and Pay. That works anywhere. And competes with everyone. Go in a Chik Fil A DT and see how many people stick their phone out to pay. If DT and breakfast is the priority for increase cash flow, stop putting in kiosk and focus on Mobile app and pay. Then let our people figure out the complexities before we add more order points.

Anonymous said...

I have 16 stores and have been an operator for nearly 40 years. I have kiosks in all but one store. My experience is that when the kiosks are staffed they are heavily used. When they are not staffed it is just another decor item. My stores are up 6% twice that of the market.

The nitwit who called me a corp pajama boy is to be pitied and is likely going broke and has no idea what to do about it except to point fingers and blame everyone but himself and call people he has never met names.

Anonymous said...

To the guy that has 16 stores and been around 40 years. I hope you saved a lot of money over the years. Your going to need it to sustain staying in business. Your part of the reason Corp pushes O/O’s around.

Anonymous said...

Explain yourself. My FVA score is a 9. Cash flow coverage ratio 3.25. So, I'm part of the reason Corp pushes o/o's around.

Anonymous said...

There is going to be extremes on each side very profitable O/O's and some on the verge of bankruptcy or sold before going bankrupt. But the 80% of O/O's in the system cash flow is down more than McD's Corp has disclosed, debt payments are up and 80% of O/O's their financial viability score "number" has decreased year over year by comparison.

Anonymous said...

Everyone needs to remember what we make! We make hamburgers! We don’t ‘make’ cash flow. Be better at making hamburgers and the cash flow will improve!

Anonymous said...

well said.

Anonymous said...

Another corporate stooge chimes in !

Anonymous said...

"We make hamburgers" and pajama boys in Chicago don't eat hamburgers, or fries or shakes etc.

THEY make cash flow. They do buybacks and cash in stock options. They cash rent checks by the boatload. They are in a different business than we are. Face it.

Anonymous said...

Correct. MCD is clearly in a different business than their operators. Always have been and always will be. From the beginning selling burgers, fries and shakes was simply a way to pay for the company owned real estate. Percentage rent was a godsend in the go go growth years. Revenue kept increasing to the point what we pay in rent far exceeds on a sq. foot basis what the best real estate in most towns can get. Calculate the rent per sq. ft. you are paying on the building and compare it to the market rent of the best locations in the city. MCD is not just a huge hamburger company it is one of the worlds biggest real estate holding companies. Their revenue from rent is almost their largest revenue stream. Pick up an annual report. It is why they will do most anything to increase store sale even by a little bit. A small one or two percent increase in top line dramatically increases the amount of dollars flowing into Chicago and the promotion many times is unprofitable at the store level. If remodels, rebuilds, relocations increase sales by even a little bit they will keep doing it.

It doesn't matter if the stores are harder to run, that to them is the challenge of the operators.The challenge is to run the stores at a high operational level and be profitable. The stores are more difficult to run than even five years ago but that is not going to change. Plus, adding millions of dollars in debt service will make store operations much more intense. Bitching and moaning results in nothing. They don't care. It's all about the money. Their money not ours. We can bitch and moan, call them names, make fun of them, accuse them of being unfair and it simply doesn't matter. It doesn't. There is still good money to be made in this business but is harder than in the past. Face it. It's a fact.

Anonymous said...

The above comment is one of the best summaries of the state of the business. This all seems like a bad divorce. It might be time to view how we all split the possessions accordingly!

Richard Adams said...

It's true that no amount of bitching and moaning will change the McDonald's Corp. business model. Owning a franchise in a publicly held company is always a tug-of-war between the two sides of the equation. The trouble is, for the past several years the Operators haven't been pulling very hard on their end of the rope, but now they are. The victories will come in small increments, not a remaking of the business model. And a little civil disobedience will be needed along the way.
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Anonymous said...

I have been through more inconsistent/frustrating/emotional roller coasters with this company then it is worth it......in the recent past and predictable future.

Anonymous said...

True, changing the MCD business model is not going to happen by operator actions alone. Basically, the relationship has changed and likely will never return to what it was in the past. Because MCD has changed. They are doing what we should be doing and that is getting laser beam focused on our own profit. Those who don't will simply watch their profit and cash flow melt away. It's like when we got our first store. Few of us knew what we were doing and it took a year or two to get into a comfort zone with our people, the co-op, the region, suppliers. However, the company was a big help. Today, it's sink or swim as far as the company is concerned. They take the position that we are independent business people who have made a significant investment so go out and make some money because that is what they are going to do. That's a lot different than when many of us got into the business. Plus, the company like so many companies became so concerned about Political correctness that it became a high priority at the expense of cash flow and the company is weaker for it in my opinion. Every operator needs to be confident that each store is profitable every day.

Anonymous said...

great comments on the rent per sq ft. I'm sure there will be litigation at some point regarding this issue. McDoanld's will simply switch the "rent line" to the "royalty line" it will be a tough fight. Unless there is some sort of industry average for royalty fees as to work in good faith with its operating partners. IMO

Maybe the NOA can help us investigate this approach?

Anonymous said...

to the FVA score of 9.... I can see why you're part of the problem. A quick glance at the score guidelines. It looks like you're getting 4 points for your cashflow. Then, I'm guessing you're getting 4 points from TTM turnover... However, you're only getting 1 point for net equity. So you have the cashflow and cash on the balance sheet, but equity is within a broad range. Mcd sees the cashflow and cash on the balance sheet and thinks "geez, this person can afford our crazy ideas. let's lump their numbers into the whole of the country and make this seem better than it is. "

my guess is that you've saved essentially zero outside of the business. Not a slight. Just saying, I can see the argument from above. at some point, you'll need to hide the money from Mcdonald's so they do not continue to spend our money.AND use you as an example as to why their initiatives should be pushed through. ie "they can afford it"

Anonymous said...

You simply don't know what you are talking about. My equity is 94%.

You are guessing. You have never once seen my FVA details, never. You are just making up situations to make others think you know something about the business. How anyone can comment on my P&L', FVA score and any other ratios having never seen them is mind boggling! You say I'm only getting one point for equity. How is it possible that you would know something like that. My guess is that if you are having stress in your business it is 100% your own fault. Your guess that I haven't saved anything. How is it possible to make a statement like that.

tell us how is the Benz dealer down the street doing?

Anonymous said...

My conclusions are based on simple math. There are only two possibilities to get a 9 FVA. One, is the previously mentioned post. 2. is by having a high net equity score -- 2pts and high cashflow -- 4 points (which you already boasted about earlier) which equals 6 points..... So stay with me here. your next point option is 3 points to equal 9. which is what you said. so then you could be getting 3 points from the TTM Turnover.

It's either one of the two, based on the information you provided originally. and you didn't rebuttal the not saving anything other than to divert the question. I think my theory still holds true.

Guessing scenarios is not hard when YOU boasted about your financial position earlier. You gave us your Cash Flow Coverage ratio which equals 4 points. and then one just has to look at the other available points to speculate your overall score.... Because you also told us you have a 9FVA.....

it's not rocket science.

And I still think you're a part of the problem.

If you can come onto a blog and anonymously boast about your financial position, there's no doubt in my mind that you are boasting to Mcdonald's saying "I bet they are poor operators because my numbers look great." I don't know you, but I can surely tell that I probably wouldn't trust you.

Anonymous said...

Mr FVA 9 is undoubtedly an NLC leader.