Burger blunders
By Steve Taylor
All is not well in McDonaldland. Can you smell the hamburgers cooking: Is that the sweet smell of success or is there a Grimace in the midst? Perhaps both, but with certainty, Jack Greenberg, the CEO and chairman of McDonald’s Corporation, would undoubtedly prefer the aroma of success to drift his way. But with corporate profits down and the competition increasingly taking a bigger bite of the fast food hamburger market share, Greenberg has a lot to be concerned about.
It seems like ancient history now, but the first true McDonald’s was opened by founder Ray Kroc in 1955 in Des Plaines, Ill. According to McDonald’s legend, the opening day revenue was $366.12; small fries in today’s marketplace. As exemplified in a Sept. 17, 2002, corporate press release, today the gargantuan hamburger chain operates over “30,000 local restaurants in 121 countries serving 46 million customers each day.” To illustrate this growth, suppose an individual had purchased 100 shares of McDonald’s stock for $2,250 when it was first issued in 1965. The total shares by Dec. 31, 1998, would have been 74,360, with a value of over $2.8 million!
Today, for McDonald’s to continue to grow and stay profitable, it needs to avoid the pitfalls of mediocrity and stand at least a burger taller than its competition. In order to achieve this goal, the company’s website at www.mcdonalds.com/corporate/info/history, promotes the “McDonald’s Vision,” which provides guidance and help along the way towards its goals. In this vision, McDonald’s expresses its desire “…to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile.” Unfortunately, this vision has become clouded over time and the image of the golden arches has tarnished somewhat in the public eye.
One of the primary complaints today about McDonald’s is poor customer service and timeliness of food delivery. These complaints run directly counter to the vision espoused by McDonald’s, and apparently have been an ongoing problem for several years. According to a July 9, 2002 internal company memo obtained by Fortune magazine, Vice President of QSC (Quality, Service, Cleanliness) Marty Ranft, had some stern words for franchisees in the Raleigh Region (North Carolina). He indicates in the memo that McDonald’s has “some alarming research that indicates that our service needs to improve.” The memo goes on to clarify this concern: “Our 800 number has confirmed that rude service, slow service, unprofessional employees, and inaccurate service are the source of the vast majority of customer complaints -- and the numbers of these complaints has risen steadily over the past five years.”
Additionally, Ranft expresses concern in the memo about their competition gaining ground while McDonald’s continues “To lag behind our competitors,” and he perceives them as “a major threat to the equity of our brand and the equity of each of your restaurants.”
Although Ranft doesn’t mention the competitors by name, Bob Sperber, a writer with Brandweek.com, notes that McDonald’s has been “discounting and competing on low-margin items…due to pressure from Burger King, Taco Bell and Wendy’s”.
According to David Stiles, a writer with Fortune, “competitors such as Burger King and Wendy’s have emerged to offer hotter and tastier fare.” While McDonald’s still retains 43% of the overall market share for fast food, that share is slowly being eroded by competitors who “have long scored higher in customer satisfaction surveys.” In short, McDonald’s profits and customers are being “Hamburglared” away.
All of this spells trouble for McDonald’s, as additional customer concerns mount. Other concerns relate to the meat of the patty, and the overall nutritional value of the food. This has resulted in many customers demanding low fat and vegetarian choices. For example, a group of scientists and professors associated with the Center for Science in the Public Interest (CSPI) have expressed concern over the Smithsonian Institution’s intention to allow McDonald’s to become the food provider at the National Air and Space Museum. They claim a McDonald’s diet is what the Surgeon General has “recommended against.”
To address some of these concerns, McDonald’s recently reduced the trans-fatty acid (unsaturated fat) content in their cooking oil for French fries. Although it “won’t lower the calorie counts,” according to Bruce Horovitz writing in USA Today, it does reduce the overall saturated and trans-fat content and is a step in the right direction.
Some of these concerns have spilled out of the kitchen and over into the legal arena as McDonald’s had recently become embroiled in lawsuits over the use of beef tallow in French fries. According to Andrew Buncombe a writer for Common Dreams News Center, “…the company used natural beef flavor throughout the production of its fries, while still claiming they were suitable for vegetarians.” This disclosure by the corporation outraged many vegetarian and religious groups whereby McDonald’s eventually agreed to an out-of-court settlement for an undisclosed sum and a public apology.
Another lawsuit filed by three teenagers in New York City claimed that eating McDonald’s food has caused them extreme weight gain, diabetes, heart problems and other health issues. According to Ellen Sorokin of The Washington Times, the boys claim “McDonald’s inaccurately posted nutritional information and deceptively advertised its products.” McDonald’s company spokesman Walt Riker fervently denies these claims, calling them “ridiculous” and a “frivolous lawsuit.” The suit is still pending, but whatever the outcome, it serves to underscore McDonald’s problems and further tarnishes the company’s image.
Part of McDonald’s “Vision of the Future” was implemented
in the “Made For You” kitchen overhaul project. Unfortunately, this
effort was apparently not successful; it dramatically slowed down the service
time, was seen to “infuriate many franchisees” according to Stires,
and cost the corporation and its franchisees unbudgeted cost overruns.
McDonald’s is acutely aware of its current problems and the hurdles it
must clear in order to regain its position of leadership in the industry. But
can McDonald’s turn things around? According to McDonald’s Quality
guru Ranft, it can: “We can create a ‘service culture’ within
McDonald’s which will enable us to deliver the type of service experience
which is such a critical part of our U.S. Agenda”. However, in order to
do so, McDonald’s management must first make their franchisees happy so
they can, in turn, serve up the “Happy Meal” that America has come
to expect from the fast food giant.
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Steve Taylor is an English major at Kennesaw State University and has studied
Science and Management at Georgia State University. He currently works in the
real estate field, is an appraisal graduate and has a Georgia Associate Broker
license.
Copyright © 2002 by Steve Taylor. All rights reserved.
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