CHANGES IN BUSINESS MODELS @MCD

I will use three broad classifications for our discussion: the store; quality, service,
cleanliness, and value (QSCV); and marketing. Cant get much broader than that, right?
The 60s were colorful and crazy. Movies, music, culture, and even education were all
kind of out there. The red, white, and yellow McDonalds building grew out of this
atmosphere. It was identifiable, fun, and functional. But by the 70s, we were having a
couple of problems. Planning and zoning commissions were not appreciating our
rainbow-cone buildings on the oak-tree-lined main streets of America.
The second problem was weather. These open buildings worked great in the South, but
come January, business came to a screeching halt in the North, and when the snow
melted, we found defrosting customers clinging to their hamburger, sitting on the
benches on the side of the building.
Solution: a real brown, brick restaurant building with heat and air. How did we get the
operators to make the large investment necessary to open the building? We showed the
building in all of our television spots, starting with the You Deserve a Break Today
campaign. That did it. Problem solved.
When McDonalds first started, the jobs in the store were tough. Peeling potatoes,
cutting them up, blanching the fries, and running the grill were demanding jobs, so
teenage boys were the preferred crew. But as more women entered the workforce, it
became apparent that we needed to change our thinking. The counter seemed the
answer. After all, who brings young men into the store? Teenage girls, of course. Thus,
McDonalds no longer employed just teenage boys.
Speaking of workforce, another condition changed. Teens began to get more allowance
than we could afford to pay them in wages. We were having trouble manning the stores.
Moms with kids in school were part of the answer, but we needed more employees. We
realized: Who is more dependable, hard working, honest, knowledgeable, and caring
than senior citizens? They became the answer to our shortage. They were looking to be
needed, and boy, did we need them.
Lets move on to how the world was changing the requirements of QSCV. When we
started, speed, price, and consistency seemed all we needed to think about. And then
came individualism. The me generation. Its all about me. There was also the double
whammy of Burger Kings Have It Your Way campaign. We had to start thinking about
condiments that personalized the experience, and even altering the products to the tastes
of new customer thinking.
This led to new lines of products, like salads, to satisfy the growing health consciousness
of the day. It even led to a new daypart: breakfast. There was definitely a market for fast,
convenient, priced-right breakfast, and we could provide it. Of course, large sizes
happened, too. But there is an interesting argument as to whether Super Size was an
invention of the quick-serve business or whether the market began to insist on more
food and the industry complied. I wont even attempt to sort this out.
The industry also invented value meals, taking a cue from diners, where the daily Blue
Plate Special was so successful. Taking a few cents off a combination sold a lot of very
profitable sides and drinks.
Lastly, there was price. As the post-war economy wound down, price became so
important. And as costs accelerated, price increases became more commonplace. We
discovered a very important tenet about price increases: Do a lot of little ones, not one
big one. People seem to accept a few cents at a time, but hit them with a buck, and they
rebel.
The last of the three points I wanted to hit on is marketing. This one is a book all by
itself, but here are a few changing conditions that had to be dealt with. Probably the
biggest was the transition from individual store marketing to the co-op to national
marketing. As the company grew, so did the marketing opportunities and the growing
pains. Getting programs approved, keeping an eye on profits and sales, and staying
contemporary with what the customer wanted all became more critical as the company
grew.
But thats not all. The rise in importance of the black and Hispanic markets emphasized
the need for separate marketing programs. Tough economic times brought on the Value
Menu, which squeezed profits. The attacks on Happy Meals came from the obesity issue.
So its rather apparent that McDonalds and the industry have successfully changed with
market conditions, most of the time correctly, with a few sore toes. And this is just the
U.S. example. How you change to fit into the rest of the world is a whole other subject
that many companies have already encountered. Maybe we should all get together and
figure that one out.
The Success of the McDonald's Franchise

The success of McDonald's is the business
equivalent of the American Dream. While
McDonald's was not the first franchise
business, it has possibly become the premier
example of the business model. With roots
that trace back to a single drive-in started by
a pair of brothers, Dick and Mac McDonald, in Southern California,
McDonald's has grown to a network of well over 30,000 locations in more
than 100 countries.
So how did the chain grow from a single restaurant into the expansive
corporation it is today? It's not a question that can be answered concisely
because McDonald's is first-class in every segment of its operation. With
that in mind, this article focuses upon three of the characteristics which
stand out when speaking about the success of McDonald's: consistency,
innovation and resiliency.

Consistency
It doesn't matter if you're visiting a McDonald's in California or
Connecticut, America or Australia you're going to have a similar
experience wherever you are. This highlights Ray Kroc's vision for
McDonald's from the beginning. Kroc was a salesman from Illinois who
ventured to San Bernardino, California in 1954 when he noticed a larger
than normal order for the milkshake multi-mixers he was selling came in.
When he arrived in Southern California, he was intrigued with what he
witnessed a restaurant that was efficiently serving a large number of
customers who seemed pleased with the food they were receiving.
Sensing a business opportunity, he made a proposal to the McDonald
brothers to begin franchising their restaurant concept, which the brothers
eventually accepted. Kroc opened his first McDonald's in 1955 in Des
Plaines, Illinois.
Quality, Service, Cleanliness and Value was Kroc's motto. His belief in
this motto was so strong he went on to found a training school,
Hamburger University, in 1961 whose curriculum is based upon the four
concepts, as well as lessons he had learned from his initial years in
operating the franchise. Consistency, of course, is the lynchpin of any
franchise system and Hamburger University has systematically taught
future franchisees how to run a McDonald's restaurant the way Ray Kroc
envisioned.
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Customers know what to expect and can take comfort in that
knowledge when making a decision on where to eat. These efforts
towards process repetition and efficiency not only set the basis for
McDonald's success from the standpoint of customers' expectations, but
also help McDonald's stay on top in a culture where producing at a quick
pace is commonly expected.

Innovation
At first, the characteristics of consistency and innovation seem to
contradict one another. But in fact, they work together to allow for
McDonald's continued growth. Staying
consistent on the core components of your
business doesn't mean the products you sell,or
even the way you deliver them, have to stay
the same. It's a delicate balance. However, if you take the necessary
steps, and put the work in ahead of time, you can tweak your product
without causing disruptions, and potentially better serve your customers.
Innovation stemming from responsiveness to customers and franchisees
has played a big role in McDonald's fending off stagnation over the years.
For example, in 1975 a group of potential McDonald's customers had a
problem: at that time, soldiers in a certain locale weren't permitted to get
out of their cars while wearing their fatigues. After learning of this
problem, McDonald's came up with a solution: add a drive-thru. The first
McDonald's drive-thru was located near military base Fort Huachuca in
Sierra Vista, Arizona to serve the soldiers with additional drive-thru
locations in Georgia and Oklahoma City soon following.
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In addition, McDonald's product offerings have evolved over the years
alongside the tastes of their customers thanks in part to some observant
and innovative franchisees. A few examples of products that were
introduced after being developed by McDonald's franchisees or
owner/operators are:
Filet-O-Fish
Big Mac
Hot Apple Pie
Egg McMuffin
McFlurry
These menu innovations (along with items developed in their test kitchen)
have allowed for McDonald's to hold product offerings for all meal times,
and the snack periods that fall in between, allowing for greater
profitability. But McDonald's takes great care not to effect the consumer
experience when a new item is introduced. As McDonald's CEO James
Skinner said in a 2010 interview with CNBC, [McDonald's doesn't] put
something on the menu until it can be produced at the speed of
McDonald's.
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Resiliency
Though the trajectory for McDonald's has been primarily upward
throughout its existence, the company has had to weather several
challenges and controversies. For decades, McDonald's has had many
lawsuits directed at them for various issues, and has been the subject of a
large amount of negative press. What does McDonald's do combat this
negativity? It appears part of their strategy entails acknowledging the
concern, and then dedicating resources in-house to staying on top of the
issue as the following examples illustrate.
Many of the challenges McDonald's has faced over the years are related to
health concerns, particularly related to children. In response to these
concerns, McDonald's formed the Global Advisory Council (GAC) in 2004.
The GAC is an international team of independent experts assembled by
McDonald's to provide us with professional guidance in the areas of
nutrition and children's well-being.
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Several additions to their menu items have come in answer to critics' and consumers' desire for healthier
choices. Some examples of these choices include an increased variety of salads, fruit and maple
oatmeal, and the option of being able to order a Happy Meal with apple dippers and apple juice or 1%
low-fat milk as the drink. In addition, McDonald's was one of the first fast food restaurants to provide
nutrition facts on their packaging, beginning in 2006.

When it comes to sustainable environmental
practices, activists have been raising concerns
over McDonald's policies for decades. In the mid-
1980s, McDonald's began facing one of its
staunchest challengers in the activist group
London Greenpeace (not affiliated with the
international Greenpeace organization). In a leaflet
entitled What's Wrong with McDonald's? the
group alleged that the food that McDonald's served
was bad for people's health and that actions used
to produce their food products and packaging
contributes to the destruction of rainforests,
among other things.
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In response, McDonald's
formally established a Global Environmental
Commitment in 1990 that outlines the steps they have taken to reduce
solid waste, conserve and protect natural resources, along with
encouraging others to be accountable for their actions.
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One of results of
this commitment is that currently 82% of McDonald's consumer packaging
is made from renewable materials.
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But, McDonald's did take a big PR hit
through the actions of members of the London Greenpeace group that is
well documented by the McLibel case and subsequent accounts of the
litigation.
In spite of these and additional controversies, McDonald's ranked in the
top 10 overall, and number one in food services, in CNNMoney.com's
survey of the World's Most Admired Companies for 2011.
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How can
McDonald's turn these tribulations into bumps in the road instead of them
have a devastating impact on business? Part of the reason McDonald's
can be resilient when they are challenged is an established rapport within
the community. When controversies arise, having goodwill with
consumers can help any company weather the storm. Ways McDonald's
cultivates goodwill with consumers include their involvement in youth
sports programs and charity programs such as Ronald McDonald House
charities.
Very few companies will ever come near the magnitude of operation
McDonald's has achieved. However, the lessons the corporation
showcases are on display to be learned by entrepreneurs striving to make
their company the best it can be. The success of McDonald's can be
attributed to many more factors that have been discussed in this article,
but these are three which have contributed heavily to it. Here are some
takeaways from the discussed factors that can be applied to virtually all
businesses:
Developing strong, efficient processes and procedures and remaining
consistent on them allow for businesses to develop consumer
confidence in the brand.
Having the foundation of consistent processes allow businesses the
flexibility to innovate and adapt to consumers' concerns, and improve
the brand with minimal disruption.
Problems and downtimes will happen in business. Having an
established rapport with consumers can help businesses be resilient
when difficulties arise.