Entrepreneur USA - January 2018

(Jeff_L) #1

74 / ENTREPRENEUR.COM / January-February 2018


because it was a logistical


headache. But the chain


kept tweaking, investing in


new kitchen equipment that


would allow franchisees to


cook all breakfast items—plus


the regular menu items—


simultaneously. Helped by


all-day breakfast, McDonald’s


saw four straight quarters


of same-store sales growth


in the U.S. “We had gotten a


little too focused on serving


stuff that works for us,”


says Kempczinski. “All-day


breakfast was the first real


thing where we said, ‘This


is something the customer


wants, and even though


it’s going to create some


complexity in the kitchen, we


have to figure it out.’ ”


Another example of past


mistakes corrected: Despite


being known for its value,


McDonald’s had nixed its


Dollar Menu in 2013 because


franchisees found it hard to


profit off the items. Their


hope at the time was to


punch up at pricier competi-


tors like Chipotle and Panera.


Customers balked; they saw


McDonald’s as a place for


deals, and rather than spend


more, they moved on to


competitors like Wendy’s,


with its four-for-$4 offer.


So in 2017, McDonald’s


introduced its mix of value


items, from its McPick 2


offerings—two-for-$2 and


two-for-$5 deals that included


favorites such as fries and


nuggets—to $1 coffees and


sodas. This struck a balance


of sorts: Customers could


dine without splurging, and


franchisees weren’t stuck


with razor-thin margins. The


company kicked off 2018 with


new Dollar Menu products for


$1, $2, and $3.


McDonald’s is still looking


for ways to reconcile low


prices with a rising customer


desire for quality (or at least


an intensifying disinclination


toward harmful ingredients).


In March 2017, it said it would


start making certain sand-


wiches, including the Quarter


Pounder, with fresh beef to


order—and would roll that out


to most U.S. restaurants by



  1. In response to concerns


about antibiotic resistance, it


also said it would eliminate


the use of chicken exposed to


certain antibiotics in the U.S.,


Brazil, Canada, Japan, South


Korea, and Europe, with the


goal of eliminating them from


all stores by 2027.


“The majority of reasonable


folks,” says Easterbrook, “will


always feel warm toward an


individual or company looking


to improve itself.”


THE LAST PIECE of McDonald’s


puzzle is technology. In the


past year, it has rolled out


app-based delivery to 10,000


restaurants in 20 countries


to boost its sizable delivery


business. Asia and the Middle


East alone logged nearly $1


billion in deliveries. The tech


makeover also includes out-


door and indoor digital menu


boards, and ordering kiosks.


These changes have gotten


mixed receptions. Organi-


zations like the National


Restaurant Association say


most consumers embrace


tech in their dining endeav-


ors, but the pricey remodel-


ing efforts have upset some


franchisees. So, too, has the


introduction of customized


products like made-to-order


McCafé drinks. In a 2017 sur-


vey of McDonald’s operators


released in October by analyst


firm Nomura, 27 franchisees


who collectively own 241


stores rated their relation-


ship with McDonald’s HQ at


less than 2 out of a possible


5 points, complaining of


“forced equipment purchases”


and “slow ordering time, slow


make time, and therefore


slow service time.”


Kempczinski sees fran-


chisee frustration as part of


the deal when things change.


“We’ve been very clear with


them about where we’re going


and what our expectations


are around performance and


investment,” he says. “What


we’ve said since day one is


‘There will be parts of the


plan you may not like. But


are there enough that you’re


really excited about that you


can sign off on it in totality?’”


This isn’t the only issue


McDonald’s must contend


with. It’s also facing ongoing


battles over worker wages,


and whether it should be held


responsible for what franchi-


sees pay employees—sticky


legal, financial, and social


issues that may continue for


years to come.


Still, if McDonald’s track


record is any guide, it will


evolve accordingly and close


rifts with franchisees enough


to boost its bottom line. After


all, franchisees also raised


concerns about all-day break-


fast—which started McDon-


ald’s toward its recovery.


Easterbrook, unsurpris-


ingly, remains confident. “The


beauty of getting momentum


is that we now have an oppor-


tunity to look further out at


future innovation,” he says.


“And we’re restless to find


more.” —J.J. MCCORVEY

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