Can McDonald’s be Saved?


What does a sports team do when performance fails to meet expectations? Often, the coach is replaced in an effort to energize the team and provide new direction. You cannot get rid of the entire team at once, and since the coach is the figurehead leader of the organization it is usually the most prudent course of action to stimulate change. This sports analogy plays out in business, too. A CEO or other leaders in the C-suite tend to take the fall for disappointing performance.

The latest example of a business leader paying the price for unmet expectations is Don Thompson, the CEO of McDonald’s. Thompson is a 25-year veteran of the company and only 51 years old, but he will be “retiring” March 1 after a two-year stint as CEO. McDonald’s has experienced a precipitous slide under Thompson that includes 14 consecutive months of declining store sales and five straight quarters of declining profits. Just as it is easier to for a sports team to fire the coach and not all of its players, the Board of Directors at McDonald’s can at least demonstrate it is making an effort to reverse the company’s fortunes by making a change in leadership. Unfortunately, the problems faced by McDonald’s go far beyond the person sitting in the CEO chair.

“It’s not You, It’s Me”

The problem faced by McDonald’s is not who is in the role of CEO, CMO, or any other individual. McDonald’s has been a mainstay in American culture because it resonated with families. However, many people that were McDonald’s fans as children and adolescents find when they become adults that the value proposition of McDonald’s does not fit their lifestyle. Whether it is young parents wanting to have their children adopt healthy lifestyle practices early on or young adults who have tired of the menu offerings of McDonald’s, many customers have grown apart from the brand. It is not as much about McDonald’s doing something to alienate these consumers as it is changes in life cycle stage and lifestyle have led to them drifting away from the brand.

A Matter of Relevance

Changing tastes certainly play a role in the woes McDonald’s is facing, but it is not the only problem faced. The brand has lost relevance among many consumers. Fast casual brands like Chipotle and Panera Bread give diners an alternative to quick-service burgers. And, the experience of eating at McDonald’s can be more like going to the DMV than enjoying a relaxing meal at a restaurant. To McDonald’s credit, it has invested heavily in updating its stores to be more like a Starbucks than a McDonald’s. Unfortunately, it has looked more like trying to put a square peg into a round hole. The physical environment might be improved, but the menu is largely still the same fare that customers have drifted away from eating. McDonald’s still excels at offering price-based value, but it may have painted itself into a corner that it cannot escape. Is it destined to be perceived only as the value-priced restaurant brand?

Read the Signs

McDonald’s has been a fixture in America’s popular culture for decades, and its foray into foreign markets is a slice of Americana that can be found around the world. As it struggles to find its identity among today’s consumers, McDonald’s may have hit on a sweet spot that resonates with consumers in its “Signs” commercial. The spot shows signs from local McDonald’s displaying a variety of messages of support, sympathy, and encouragement inspired by events in their local communities or major events like 9/11 or the Boston Marathon bombing.

McDonald’s can tinker with its menu all it wants, but the long-term success of the brand will depend less on what new sandwiches are on the menu and more on the impact McDonald’s stores have in the neighborhoods where they operate. “Signs” is a powerful message that there are people behind the McDonald’s brand, people who care about what is going on in the lives of customers and the good of the community.


New Competitor? Chill Out

Competition can be the proverbial thorn in the side. After all, they stand between you and customers. Being concerned about competitors is an appropriate managerial stance, and so is being appreciative of your competitors. Yes, appreciate them because they can make you and your business better. An example of a company that gets it is Jamba Juice, the better-for-you beverage maker of smoothies with more than 700 locations across the U.S. Jamba Juice made headlines recently when it launched a new product, a Cheeseburger Chill. Well, it sort of launched a cheeseburger smoothie. A YouTube video was a tongue-in-cheek nod to McDonald’s expansion into the smoothie category. Jamba Juice’s point is that it is not capable of doing burgers… so should one expect McDonald’s to extend from burgers to smoothies with a good product?

Jamba Juice has every right to be concerned about McDonald’s foray into smoothies. It has a massive distribution network in place, and McDonald’s has experience moving onto new turf from its launch of premium coffee. Instead, Jamba Juice executives view this new competitor as a spark for interest in the smoothie category. McDonald’s’ promotion of smoothies could result in more consumers considering the product category as a beverage option. And, if Jamba Juice can capitalize on that interest by appealing to consumers who would enjoy a premium product, then the outcome could be new customers and increased sales. That scenario is a far cry from the concern and even panic that can occur when a strong competitor emerges.

Competition can be a catalyst for innovation and spur product category growth. You still have to fight for your share of the pie, but there may be a larger pie to enjoy. Competitors can make your organization stronger; you have to determine how to benefit from their efforts and embrace their presence.

Should You Thank Your Competitors?

The connection between the dateline and headline is merely coincidental.

What reason could a business possibly have to thank its competitors? It is because competition can motivate a business to innovate and generally assume a more aggressive stance in the marketplace. A current example can be found in the quick service restaurant industry. Subway, the nation’s #2 restaurant chain, is about to make a nationwide entry into the breakfast business. Restaurant breakfast sales have been hurt by the recession, but that will not deter Subway from competing against McDonald’s and Burger King. The entrenched competitors have already taken steps to counter the weak economy by introducing lower priced menu items. Subway will compete primarily with breakfast sub sandwiches.

Will Subway’s venture succeed? Time will tell if consumers like Subway’s breakfast menu. Whether Subway succeeds is beside the point. When a competitor with 23,000 locations moves into a category that represents 25% of a firm’s U.S. sales, as is the case for McDonald’s, a business should take notice. Competition can provide a spark to develop new ideas, strategies, or products, benefiting customers in the process. And, it is possible for a business to learn not only from its efforts to innovate, but it can gain insight from the successes (and failures) of competition. That is no April Fools joke!

Marketing Daily – “Subway Joins Breakfast Battle of Titans”

McDonald’s Shows How to Succeed in Lean Times

Economic news is bleak daily. Today’s bad news includes Tribune Co. filing for bankruptcy protection and layoffs at Dow Chemical and Anheuser-Busch. But, a glimmer of good news comes from McDonald’s. Its same store sales in November were up 7.7% globally and 4.5% in the U.S. over the previous year. An obvious explanation for the positive results is pricing. McDonald’s low priced fare is less immune to a down economy like casual dining restaurants. As a matter of fact, fast food restaurants probably benefit as people who might not patronize Applebee’s or Chili’s to save money would venture to McDonald’s or Sonic instead.

Attributing McDonald’s growth to low price does not give proper credit to the company’s other marketing moves. Stores have received makeovers, as has the menu. The addition of Southern style chicken sandwiches and biscuits as well as premium coffees has strengthened its offerings. Customers’ needs do not go away altogether when they are trying to save money. McDonald’s shows good marketing goes beyond offering value prices. It is all about meeting the needs and desires of customers.

Link: USA Today – “McDonald’s Same-Store Sales Jump in November”