How McDonald’s brand turnaround is starting to take shape
McDonald’s sales in the US edged up in its latest quarter for the first time in two years, suggesting it’s found the right recipe to tempt more people back into stores worldwide.
The fast food feeder’s problems are well documented; from its failure to register with enough millennials to a lack of hot new products, McDonald’s uphill battle has been compounded by its struggle to dispel its image as the poster child of fast food. But there are signs of green shoots of recovery.
Shares of the company jumped around 7 per cent on yesterday’s (22 October) positive earnings release that saw sales at US restaurants open at least 12 months rise 0.9 per cent in the third quarter. And while revenue slumped 5.3 per cent in the period, the first quarterly rise in its homeland for two years serves up the first significant sign of progress.
“Customers are noticing the differences,” said chief executive Steve Easterbrook, who took the reins in March. His predecessor Don Thompson's turnaround attempts laid the groundwork for the changes, which include a leaner global corporate structure, a spruced up brand image and a tighter menu mix, all designed to transform McDonald’s into a “modern, progressive" burger company.
“We are seeing this across all key categories measured, with the most significant improvement seen in the areas we focused on namely: food quality, friendly and fast service and order accuracy,” Easterbrook revealed on an analysts call. We want to focus on fewer, bigger decisions that generate bigger reward".
So what’s driving McDonald’s turnaround? It’s the new structure, with effectively six global major markets, the knowledge exchange is much quicker. It’s meant that the under fire US team have learnt much from its top Australia, Canada, France, Germany and UK markets – which collectively account for around 40 per cent of its operating income. Australia, for example, has gone for a small number of big moves quickly, which Easterbrook noted had created visible change in the restaurants and visible benefits to consumers.
He further explained that these markets were successful because they can “directly link actions to specific customer needs”. Strong quality campaigns in the UK and Canada are “boosting customer perceptions of core classics and successful promotions," he added. New menus in use such as the Chicken Legend in the UK and the Mighty Angus in Canada have driven growth in premium products.
To prove the progress, the McDonald’s chief pointed to improving customer satisfaction scores, with the greatest uplift coming from “food quality, friendly and fast service and order accuracy.
“That said, all markets have adjusted how they think and how they operate to ensure their actions and decisions are grounded in satisfying customers in their local markets today and for the long-term,” continued Easterbrook.
“Ultimately, we want to focus our efforts on fewer, bigger decisions would generate bigger rewards.”
On the brand side, Easterbrook, who is himself a former marketer, said it has been giving customers 2even more reasons to visit our stores” including a new Value Menu at breakfast and “through effective marketing and promotional efforts, including Monopoly”. Marketing investments are also elevating the service experience by offering customers new ways to order and get served. Self-order kiosks are now in more than 90 per cent of French restaurants, with table service available in more than half.
Looking forward, the company will ramp up its digitisation. To date, there have been over 2 million downloads of its mobile app and 1.5 million offers redeems.
"The progress we have made in a short amount of time gives me confidence that we are making the right moves to turnaround our business and reposition McDonald’s as a modern, progressive burger company," concluded Easterbrook.