McDonald’s Corp.
Group #5 Michael Ahern, Asime Mehmeti, Kelsey Middelkoop, Kevin No !eptem"er $th, %&'
()ecutive !ummary *Case ++-
Richard Steinig became a junior partner with a McDonald’s Corp, franchisee in 197! "t that time his two stores each generated #$%,%%% in annual sales! &rom these annual sales he poc'eted more than 1() of that as profit! *n 197, this seemed to be a positi+e for Steinig! owe+er, fast-forward fast-forward % .ears Steinig owner of four restaurants a+erage annual sales of #1!/( million, sa.’s he barel. scraped b.! 0nfortunatel., 0nfortunatel., sales ha+en’t budged since 1999 and costs 'eep rising! McDonald’s profit margins are no more than half of what the. were in 197! Steiningers stated , 23e ha+e become our worst enem.4! &or decades, McDonald’s ga+e millions of "mericans their first job while changing the wa. a nation ate! 5oda., 5oda., McDonald’s McDonald’s is a 2reeling giant that teeters from one mess to another4! McDonald’s continued to suffer through the 6$%s and 69%s with the compan. reported the first uarterl. loss in its 87-.ear histor.! Cantalupo, second top eecuti+e, wanted McDonald’s to rebuild the foundation of McDonald’s franchisees! Cantalupo stated, 23e ha+e to rebuild the foundation! *t’s fruitless to add growth if the foundation is wea'4! &ranchisees, who own $() of all 0!S! McDonald’s, faced stagnant
sales! Cantalupo had to con+ince them to bu. into his plan! owe+er, 1:/ franchisees left the s.stem, with /$, representing 1/9 restaurants, forced out for poor performance! ;ne of the biggest flaws for franchisees is the top-down manner in which ell, formerl. president of McDonald’s =urope, launched a coffeehouse concept called McCafe, which is now being introduced globall.! 5he introduction of McCafe will hopefull. bring sales up for McDonald’s! McDonald’s best hope to succeed is to recapture that lo+e and to become the most inno+ati+e franchisees b. strengthening their brand image, di+ersif.ing their menu, and the. also need understand their consumer preferences!
ro"lems
;ne of the problems that McDonald’s is facing is the current customer trend towards healthier foods! McDonald’s has shot itself in the foot when the franchise was selling their food items for etremel. cheap! cheap! Due to the shift towards towards a healthier lifest.le, profits and sales ha+e been declining for McDonald’s with its stoc' sliding to /%)! "nother problem that McDonald’s has is their attempt towards fiing the prices from being too cheap, product inno+ation and ser+ice and ualit.! 5o 5o speed up the ser+ice and produce new food items McDonald’s tried to install new euipment in order to accelerate the processes, but it did the re+erse b. slowing down the ser+ice in general? another issue with installing new euipment would be the time it ta'es to learn how to use said euipment and preparing the new food items! &ormer Chief =ecuti+e
McDonald’s has gained some strengths as a brand! 5he. pro+ided millions of americans with their first jobs? "mericans relied on this brand to help get them through and pro+ide for their
families! 5he. rose from a single pri+atel. owned store located in a Chicago suburb, to an "merican *con, which is their greatest strength! Mcdonald’s has a wea' business model! 5he introduction of the dollar menu actuall. decreased sales, and onl. cheapened their brand name! 5heir burgers sell for #1 when it costs them #1!%7 to ma'e! 5he. aren’t ma'ing a profit let alone brea'ing e+en! 5heir wea' business model is due to a lac' of strong leadership, which is their second wea'ness! 5he chief eecuti+e was let go after introducing 8% new items and acuiring of a handful of non-burger chains? it was a complete failure causing a stoc' +alue decrease of /%), o+er a three .ear period! 5he compan. relied on a retired successor, to sa+e the compan.! 0nfortunatel., 0nfortunatel., he too was unable to bring their compan. bac' from an all time low! ;ne immediate opportunit. a+ailable for McDonald’s is to wor' on tic'et times! Currentl. it ta'es them 1/ seconds to complete a dri+e through order! Research showed that sa+ing si seconds at a dri+e-through, brings a 1) increase in sales! " more long term solution or opportunit. a+ailable, is to become a 2fast-casual4 restaurant! >. creating healthier options, and branding themsel+es as 2fast- casual4, the. can actuall. increase their prices and start ma'ing a profit! McDonald’s has man. threats or competitors! @eople can bu. fast meals from supermar'ets, con+enience stores, and e+en +ending machines, causing McDonald’s to close 719 stores! Restaurants that adapted to consumers needs, and mo+ed awa. from a fast- food model, ha+e now become successful, completel. surpassing McDonald’s!
Alternatives and 1he ros and Cons
3hen choosing a course of action to increase McDonald’s profits, there are a couple of alternati+es to consider before ma'ing a final decision! 5he first alternati+e that McDonald’s can implement is di+ersification among their menu! &or e ample, McDonald’s can alter their menu and add different choices for consumers to pic' from to differentiate themsel+es from their other
fast-food competitors, which would be a pro! owe+er, a con to this strateg. is it is often implemented b. other competitors, such as 3end.’s adding their ghost pepper burger or Aac' *n 5he >o adding their new ne w >rewhouse burger! McDonald’s has also tried to use this strateg. in the past when the. offered hot dogs that failed and piBBa that was too large to fit through the dri+e-thru window also causing this new product to fail! " simple di+ersification of the menu at McDonald’s simpl. would not be enough to gi+e them the edge o+er their competitors! =+en currentl., McDonald’s is still tr.ing to implement this strateg. and their success is still on the steep decline! " second alternati+e for McDonald’s to consider is in+esting in ma'ing their production faster! McDonald’s McDonald’s used to be 'nown as the 2'ing4 of fast food, .et the. the . are now currentl. slower in dri+e-thru time compared to Chic'-fil-" and 3end.’s costing them a 1) difference in sales! 5he uestion is, would this 1) ma'e a big enough impact to help the failing compan.! 5he cost of the new euipment to increase efficienc. would be another factor that would ha+e to be considered and the 1) difference in sales ma. not be worth it to pa. for new euipment to increase production! "nother option for McDonald’s is to completel. change their brand and reposition themsel+es into a new mar'et! 5he introduction of the McCafe, which spread worldwide, was actuall. a successful addition to the McDonald’s franchise! McDonald’s could in fact drop their american fast-food half of their compan. and focus on the McCafe brand! 3ith it’s potential alread. pro+en, this complete transition could be great for the compan.! 5he. could focus more on their popular coffee items and ha+e more fresh, fast-casual foods introduced to complement this change! McCafe would enter a mar'et where the. would be the low-cost pro+ider competing with Starbuc's, Dun'in Donuts and =instein’s! Coffee and fastcasual foods to complement it is a big mar'et and there is real opportunit. for McCafe in this area! 5he onl. potential problems identified with this alternati+e is that it ma. be difficult to change the McDonald’s brand in consumers’ minds and the cost of remodeling all of the McDonald’s franchises would be no cheap feat! Decision Criteria
3hen ma'ing a decision about the best alternati+e for McDonald’s, there are a number of things that need to be considered before ma'ing the final decision! 5he first thing would need to be profits and cost! =ach alternati+e will reuire a significant amount of in+estment and would need to ha+e the appropriate return in profits in order for the decided change to be successful! &or the menu items, the cost of implementation would be the least costl., but would probabl. also ha+e the least effect, if an., on McDonald’s profits! 5he cost of new euipment to increase production would ha+e high costs and with McDonald’s losing 1) of sales do to their current production rate, the potential profits ma. not outweigh out weigh the costs! astl., the the greatest costs would be the complete reposition of McDonald’s brand to the McCafe brand! 5he costs would entail new mar'eting campaigns, menu items and complete ma'eo+ers of the current franchises! owe+er, this change could bring in the most profits in result from entering a new mar'et! McDonald’s brand image would also ha+e to be considered with the repositioning alternati+e mostl.! 5he goal of reposition McDonald’s and re-branding the compan. as McCafe would cause a change in the brand image for the compan.! Ronald McDonald has to go as it is a relic of the past? a time where cheap and unhealth. burgers and fries are no longer the staple foods of "merica! *f McDonalds were to 'eep Ronald McDonald as the mascot, then there has to be a drastic design change towards Ronald from being a Clown to being an icon related to the current times! owe+er, b. entering a new mar'et the brand image would need to completel. change from old fashioned "merican fast-food to a new trend. cafe st.le fast-casual restaurant! &inall., consumer preference would also need to be considered with each alternati+e! 3hen choosing new menu items, consumer preference is the biggest consideration because adding new items that consumers will not bu. is wasted efforts! "s "s far as increasing efficienc., efficienc., the epectation of a customer going to McDonald’s is to get food +er. fast! "n increase in how fast the. get the food would onl. match customer preference! astl., ifif McDonald’s tries to reposition themsel+es into the cafe mar'et, the. would need to ma'e sure that consumers
would prefer this change! 5his means choosing appropriate menu items to attract consumers such as coffee and food that meets the mar'et’s demands! Decision
5he decision that we came up with is that McDonald’s needs to do a complete rewor' on their brand image and reposition themsel+es into a new mar'et! 3hat McDonalds should do is scrap most of the franchise’s items, and focus on the McCafe! 5he business can enter a new mar'et b. their standards, with the main threats being Starbuc's and other coffeeba'er. shops li'e Dun'in’ Donuts, =instein’s >agels, @anera >read or Corner >a'er.! 5he McCafe can emphasiBe on selling coffee and healthier items, but at a cheaper price than what Starbuc's is selling their food for! " few eamples of a menu change would be ha+ing fresh salads made from scratch, grilled chic'en instead of chic'en nuggets, and health. sandwiches instead of fatt. burgers! 3e do recogniBe that there are certain costs that need to be accounted for such as changing the euipment, teaching emplo.ees how ho w to ma'e the new food items, shipping perishable items li'e fresh fruits and +eggies to the store and preser+ing perishables? McDonald’s is losing mone. though, and wh. would a business sta. in a d.ing mar'et when the business can shift o+er to a new mar'et with potential profitsE Sometimes there needs to be ris's ta'en in order to sur+i+e, and e+en though McDonald’s pre+ious decisions and ris's caused the franchise to go through multiple slumps, McDonald’s needs a realit. chec'! 5he times ha+e changed, and McDonald’s can’t remain as a fast food chain or else it’ll be erased!
