What’s Wrong with McDonald’s: My 2¢
For the first time in its history, McDonald’s will be closing more stores this year than it opens. I am personally amazed they made it this long before this happened.
I worked for one of their franchisees as a teenager for 2 years. Back then, in the mid-1990s business was booming and the company seemed invincible. Since then, the company has seen some ups and downs but it has largely been business as usual.
I think this latest turn into towards the red may be something more permanent, however. The company is still profitable, but with a 30 percent drop in profits last year, McDonald’s is having to make drastic moves to stay profitable. Here are some of what I think are some structural challenges the company faces.
- Food Quality – Everything I buy at McDonald’s tastes like it comes out of a corporate feedbag. The food is too standardized and is the perfect example of what large corporations do when they shift into mass production. Their product loses all soul. They can produce a lot of burgers, but the quality and individuality of each one goes down. That, and because high turnover and low pay means employees could give two shits less about assembling the product for the consumer, on most of my visits to the chain I get food that tastes like it has been sitting in the back in a warmer for a while. Only during peak hours does the assembly line run efficiently enough (quickly) for the food to be hot and fresh. The food is too standardized to have personality, especially when compared to burger chains that have now focused on the quality of their product rather than mass production.
- Reputation – The brand has become synonymous with trashy food. This isn’t an easy problem to fix when the business model is based on churning out standardized food items as quickly as possible. McDonald’s business model is based on manufacturing the food equivalent of widgets. You can almost hear the kerplunk as the Big Mac comes down the assembly line. People know they’re getting heavily processed food loaded with preservatives and fillers, that’s poorly assembled by employees who just don’t give a damn about their jobs.
- Trying to be Too Many Things to Too Many People – The company needs to focus on burgers and fries and rebuild from there. How about a Big Mac that features some beef that tastes like somebody actually cooked it instead of something that was stamped out of a food chute? As of right now it’s trying to be a burger chain, a coffee chain, a wannabe healthy food chain, and a chicken chain. Consumers are shifting to quality and if your food doesn’t make the grade, they’re going somewhere else. People think of burgers and fries (and chicken) when they think of McDonald’s. Focusing on the core business of making a decent hamburger will help, but this won’t happen if the company focuses on PR and marketing, pretending to be selling quality rather than changing its processes from within.
- Abysmal Service Times – If I’m getting quality food, I will wait a little longer for it. As of right now, nobody considers McDonald’s to be quality food. It’s something to fill the hole, cheaply and quickly. I have waited as long as 20 minutes in the drive-thru for a burger and fries. I can go down the street to Five Guys, pay a couple bucks more, get hot and fresh food that tastes like a person made it and not a machine, and probably get in and out of there more quickly than I could at the Golden Arches. Again, employees have no incentive to excel because of the business model of cheap labor and a dead-end future.
- Give Employees Incentive – This is a problem with most corporations. Employees are viewed as an expense and treated as such, rather than as valued members of a team. Corporations go to great lengths to market themselves as employee-friendly, but almost never deliver on the goods. No, I’m not saying burger flippers should be making $15 an hour, but the work is hard enough and thankless enough that wages should be a little higher. This would help slow the turnover rate and give employees an incentive to perform better. WinCo foods has recently proven this business model can work in the supermarket industry, even against Walmart. Time magazine reported “WinCo has a reputation for doing right by employees. It provides health benefits to all staffers who work at least 24 hours per week. The company also has a pension, with employees getting an amount equal to 20% of their annual salary put in a plan that’s paid for by WinCo; a company spokesperson told the Idaho Statesman that more than 400 nonexecutive workers (cashiers, produce clerks and such) currently have pensions worth over $1 million apiece.” Surely, McDonald’s has some wiggle room when it comes to wages.
There you have it. A team of consultants probably couldn’t come up with better solutions than these.
I do know branding is extremely important in the new economy. Instead of mass-produced, average-quality items for the masses, people are moving to higher quality items customized for individual tastes.
The days of average food for average people are winding down.
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