Bloomberg Businessweek - USA (2019-09-30)

yearsago,Steve Easterbrookran outof

ence.BeforeflyinghometoChicagoforthe

stmasholidays,hestoppedinMadridtomeet

SpanishexecutivesfromMcDonald’s.Ina con-

ceroomatthecompany’slocalofficeofftheA6

highway,themoodsouredasmanagerslamentedheavylosses

ontheeveningswhenFCBarcelonaandRealMadridC.F.com-

peted.Dinerswerestayinghomeandorderingfromarchrival

BurgerKingfordelivery—aserviceMcDonald’sdidn’toffer.

ConcedingtoBurgerKinginanycircumstanceis anindig-

nity,butlosinghundredsofthousandsofcustomerstothe

enemy’smodernizedtacticsduringoneofSpain’smostimport-

antweeklyfixtureswasthefinalstraw.It representedevery-

thingthatwasdefectiveatthebusinessEasterbrookhadbeen

runningfor 22 months—McDonald’sCorp.wasjusttooana-

log.A weekbeforehewasnamedchiefexecutiveofficer,the

companyannouncedit hadsufferedoneofitsworstyearsin

decadesasdejectedU.S.customersabandonedthebrandfor

ChipotleburritosandChick-fil-Asandwiches.IntheU.K.hun-

dredsofartisanalburgercompetitorshadappearedseemingly

overnightonthefood-deliverymobileappDeliveroo,which

indulgedthecouchpotatodemographicwithanunprece-

dentedeaseofaccessthatfelledtheappealofMcDonald’s

drive-thrus.Thetimehadcometoaddressa weaknessthat

stretchedfarbeyondthecompany’sIberianterritories.

“Helookedatmeandsaid,‘We’renotgoingtogothrough

thetraditionalmarketpilotandstudydeliveryforsixmonths.

We’rejustgoingtodoit,’” saysLucyBrady,whooversees

McDonald’sglobalstrategyandbusinessdevelopmentteams.

Heinstructedhertogeteverycountrymanagerona confer-

encecallonMondaymorning.

Bradycautionedhimthatit mightbedifficulttoreachsome

managerswho’dalreadyleftfortheholiday;Easterbrooksaid

everyonecouldsparea half-hour.Hewouldcommandeach

managertonominatetheirbestexecutivetothetaskofbuild-

inganonlinedeliverybusinessthatwouldaimtobefullyoper-

ationalbythebeginningofJanuary—intwoweeks’time.When

Bradysuggestedtheytargetdeliveryfrom3,000restaurantsby

July1, hetoldherhewouldbedisappointedif theydidn’tgetto

18,000—abouthalfofMcDonald’slocationsaroundtheglobe.

Management’scompensationwouldbetiedtothespeedand

breadthoftherollout,andtheonlylimitingfactorEasterbrook

wouldacceptwouldbethenumberofcouriersincars,on

bikes,andonfootthattheirdeliverypartnerscouldsupply.

Forthewidestpossibledeployment,McDonald’steamed

withUberEats.ThepartnershipwassosignificantthatUber

TechnologiesInc.devotedtwofullpagestoitsthen-exclusive

deliveryagreementwithMcDonald’sina roadshowprospec-

tusaheadofUber’sinitialpublicofferinginMay.Easterbrook

nowregularlyusestheservicewhiletravelingonbusinessto

gaugeitsquality.

“I’ma QuarterPounderguy,”hesayswitha calculatedslow-

nessnotunlikeDanielDay-Lewis’s“I’manoilman”inThere

WillBeBlood. The52-year-oldBritishCEOhasthetall,broad

frameofa rugbyplayer,withthickwavesofblackhairand

piercingblueeyes.He’sdescribedasaninscrutableblendof

mildmannersandobsessivecompetitionbymembersofhis

fresh-facedleadershipteam.(Upontakingthetopjobin2015,

Easterbrookfiredorletgo11 ofthe 14 mostseniorexecutives

heinherited.)Heexpectsthedeliverybusinesstoaccountfor

about$4billioninsalesbytheendofthisyear.

CatchinguptoBurgerKingondeliverywouldbethefirst

itemona longlistofimprovementsEasterbrookalreadyhad

inmindforMcDonald’s.Broadly,hewantstoreconfigurehis

restaurantsintoenormousdataprocessors,completewith

machinelearningandmobiletechnology,essentiallybuild-

ingtheAmazonofexcesssodium.Franchiseeshavebalked

atthecostsofimplementinghisvision,whichincludesdrive-

thrusequippedwithlicense-platescanners(thebettertorecall

one’spreviouspurchases)andtouchscreenkiosksthatcould

ultimatelysuggestmenuitemsbasedontheweather.

Sofar,thestrategyhasprovedcompelling:Onlya hand-

fulofothercompaniesintheS&P500,almostallofthem

Californiatechnologysupplierssuchassemiconductorgiant

AdvancedMicroDevicesandchipmakerNvidia,haveoutper-

formedMcDonald’sreturnssince2015.Thegainshavegener-

ouslyrewardedinstitutionalinvestorslikeBlackRockInc.and

VanguardGroupInc.,who’velongbeenamongthechain’slarg-

estbackers.Easterbrookwantstoreclaimthecompany’simage

asabeaconofinnovation,a designationMcDonald’shasn’t

enjoyedsinceroughlytheTrumanadministration.

In 1940 brothers DIck anD Mac McDonalD reDesIgneD

andrebuilttheirmodesthotdogdrive-in,intheshadowsof

California’sSanBernardinomountainrange,intoMcDonald’s

Bar-B-Q,whichsold 25 items.By 1948 theydropped“Bar-B-Q”

fromthenameandstreamlinedthemenutoofferonlythe

mostprofitablefoods:hamburgers,cheeseburgers,potato

chips,coffee,softdrinks,andapplepie.Therestaurantseated

abouta dozencustomersonoutdoorstoolsandsold15¢

hamburgers,whichwerebaggedwithin 30 secondsofbeing

orderedthankstothepioneeringSpeedeeservicesystem.

Thesystemhadbegunwiththebrotherssketchingoutlife-

sizekitchenblueprintsona tenniscourtwithchalkandhav-

ingemployeesactoutcookingandservingtasks.Aftersettling

onthefastestmethod,theycontractedkitchenequipment

companiestobuildmachinerytosupportthechoreogra-

phy.Breakthroughsincludedcustom-madesaucinggunsfor

thebunsandcurvedsteelrampsonwhichburgerswould

slidedownintocashiers’handstopassontodiners.Atthe

time,onlya handfulofburgerchainswereusingsimilarly

bespokehardware.

NoonewasaspassionateaboutMcDonald’spotentialfor

expansionasRayKroc,a strugglingmilkshakemachinesales-

manfromIllinoiswhometDickandMacattheirrestaurantin

1954 ona businesstrip.McDonald’shadbyfarthemosteffi-

cientkitchenhe’deverseen,andheimmediatelylobbiedthe

brotherstolethimfranchisethebusiness.In 1961 hebought

outtheco-foundersfor$2.7million,andin 1965 hetookthe

companypublic.Today,McDonald’sistheworld’smost

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September 30, 2019