McDonald’s:A, LongWaytoGo - mbacasecomp.com · • Consistency* • Convenience* Weaknesses* ......
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McDonald’s: A Long Way to Go BRETT BURNS, ELLIE GARDNER, ASHLING GRIFFIN, ROSS HOGAN JANUARY, 4 2016
Transcript of McDonald’s:A, LongWaytoGo - mbacasecomp.com · • Consistency* • Convenience* Weaknesses* ......
McDonald’s: A Long Way to Go BRETT BURNS, ELLIE GARDNER, ASHLING GRIFFIN, ROSS HOGAN
JANUARY, 4 2016
Takeaways
Recommenda)on
Implementa)on Plan
Risks & Mi)ga)on
Agenda Company Analysis
Industry Analysis
Alterna)ves
Recommenda)on
Implementa)on Plan
Timeline
Budget
Risks & Mi)ga)on
Problem Statement
Due to a bifurca)on in the tradi)onal customer base and each group’s changing preferences, McDonald’s needs to act quickly to not lose themselves and not lose both bases.
Reality Check
Our customers are changing in a way we can’t completely match
However, we can harness what we do well and ensure we don’t lose what has brought success for
so many decades
SWOT
Strengths • Synonymous with Fast Food
• Consistency • Convenience
Weaknesses • Synonymous with Fast Food
• Size of company
Opportuni)es • Changing customer palates
• High Growth Markets
Threats • Rise of fast casual restaurants
• Changing demographics
The Changing Customer
Middle Class
• Health Conscious
Upper Middle Class
• Price and Value Lower Middle Class
Millennials: Image-‐Conscious
Fast-‐Casual Customizable Quality
Company Image
Poor Quality
Unhealthy Ingredients McDonalds
Previous AUempts:
Expanded Menu Offerings:
• Healthy • Premium
Increased Wait Time
Customers Dubious about Quality
Why Easterbrook’s Plan Wasn’t Enough
• USA • Interna)onal Lead
• Growth • Founda)onal
Structure
Franchising
Create your Own Taste
Target Company Rather than Customers Further Complicate Menu
We S%ll Must Address our Image Problem and Target Customers Effec%vely
InternaTonal SituaTon Sales Declining Abroad by 3.3%
China Quality Problems
India Pulled Best-‐selling Products
Japan Growth in Sales, Legal baUle
Russia Government Backlash
L. Am Economic Crisis decreases sales
Europe Changing Tastes Erode Sucess
CompeTTve PosiToning
• Panera • Chipotle • Chick Fil A
• McDonald’s
• Habit Burger • In and Out • Shake Shack
• McDonald’s • Wendys • Taco Bell
Cost Taste
Quality Speed
Perceptual Map Quality
Affordability
McD
Chick Fil A
Habit & Five Guys
Panera &
Chipotle
Yum Brands
Industry Life Cycle Mature Stage: • Stable/Declining Margins • Established Players • Focus on Costs and
Efficiency
Stakeholders
McDonalds
Customers
Franchisees
Shareholders
Employees
Financial Performance
1,849
1,202
0
500
1000
1500
2000
2500
Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
Quarterly Earnings
Opera)ng Income Net Income
-‐ 5.9% + 9.0%
-‐ 9.3%
-‐ 2.7% + 7.2%
% Change in Revenue
Financial Performance
32%
40%
23%
5% Total Revenues by Region (2014)
US Europe APMEA Other Countries & Corporate
66%
34%
Revenues (2014)
Company-‐Operated
Franchised Revenues
Financial Performance
-‐7.00%
-‐6.00%
-‐5.00%
-‐4.00%
-‐3.00%
-‐2.00%
-‐1.00%
0.00%
US
Europe
APMEA
Other
Percent Change in Revenues from Prior Year
-‐5.00% -‐4.50% -‐4.00% -‐3.50% -‐3.00% -‐2.50% -‐2.00% -‐1.50% -‐1.00% -‐0.50% 0.00%
US
Europe
APMEA
Other
Percent Change in Guest Count from Prior Year
Profit Margin
16
16.5
17
17.5
18
18.5
19
19.5
20
2012 2013 2014
Net Profit Margin (%)
Net Profit Margin (%)
Cost Control
67.5 68
68.5 69
69.5 70
70.5 71
71.5
2012 2013 2014
Opera)ng Costs as % of Sales
Opera)ng Costs as % of Sales
Analysis Recap
Reduced Profitability
Increased Costs
Declining Customer visits
Previous Failed Ac)ons
Fast Casual Entry
Changing Customer Preference
s
CriTcal Success Factors Same Stores Sales Growth
Profits/Shareholder Returns
Brand Image
Customer Service
Franchisee Sa)sfac)on
AlternaTves
Return to Roots Change Value Proposi)on to be Healthier
Integrated Strategic Plan
Analysis of AlternaTves Return to Roots Healthier Value
Proposi;on Integrated Strategic Plan
Sales Growth
Profits
Brand Image
Customer Service
Franchisee Sa)sfac)on
Level of Risk
ImplementaTon Plan Streamline Menu
Improve Customer Service
Ini)ate a Brand & Marke)ng Campaign
Strengthen Supply Chain
Focus on Growth Markets
Effec)ve Change Management
Streamline Menu
Efficiency is crucial for QSRs
Too many op)ons & too much customiza)on hurts this
Have taken 2 steps forward and 1 step back
Streamline Menu
Rule of Thumb: Limit menu size
Allow for customiza)on, but don’t focus on it • Not a core competency
Use ingredients that can be mul)purpose
Menu
Accommoda)ng everyone is not feasible and sustainable
Menu will have staples & some healthy offerings
Customer SaTsfacTon
Long Wait Times Mistakes Poorly Prepared Food
Employee Engagement • Improve Customer Service
Streamline Prepara;on Techniques • Improve Efficiency
Manager Training and Selec;on • Central to Change • Improve Adaptability
Employee Engagement Training • Standardize from HQ
Opportuni)es for Promo)on • Employee Value Proposi)on
Onboarding Overhaul • Increase reten)on • Improve readiness to work in high turnover workforce
Manager Training
Communica)on Training • Enable effec)ve management of employees • Improve ability to connect with customers
Business Skills • Improve Business Acumen • Increased Engagement
Streamline PreparaTon Techniques Rearrange Kitchens • Improve speed and morale
Evaluate Equipment
Make Kiosks Op)onal • Dependent on manager preference
Standardize Ingredients
Brand & MarkeTng Campaign
Emphasize value proposi)on • Consistent quality • Affordability • Convenience and availability • Speed and service
“Back to basics” • Return to what McDonald’s does best
Brand & MarkeTng Campaign • TV / Radio • Social Media • Internet • Print
Channels
• Internal marke)ng team • Outsourced consul)ng exper)se Means
• Market research and analysis • Data aggrega)on • Who is our customer? What do they need? Targets
Brand & MarkeTng Campaign
Middle Class
• Emphasize price point
• Convenience
Families
• Family themed TV commercials
Millennials
• Influencers • Sponsors • Use of technology
Focus on Growth Markets
Brand Image is Changeable
• Address previous issues
• Implement changes to ensure quality
Growth Poten)al
• Capture Customers Earlier in the Industry Lifecycle
• Establish Image Aggressively
Focus on Growth Markets • Iden)fy Customer Base • Ensure Appropriate Offerings
Product Offerings
• Disposable Income • Large Untapped Popula)ons • Rising Middle Class
Loca)on
• Ethical Record • Engage Legal Advice
Careful Selec)on of JV Partners
Supply Chain
• No surprises, no waste • Quality management of inputs
Fully Integrated Supply Chain
• Source responsibly • High quality & an)bio)c free meats
Vet Suppliers for Quality
• Ties in with Brand & Marke)ng Allow for transparency
Supply Chain
Can’t allow issues with key ingredients • Develop con)ngency plans for shortages
Reduc)on of ingredients • Less strain on SC costs
Change Management Sure fire way to fail is to mismanage change
Get everyone on board • Communicate Why’s & How’s
Empower Managers & Employees • Show Execu)ves are sensi)ve to concerns about change
Timeline Year 0
Year 1
Year 2
Year 3
Year 4+
Brand Image/Marke)ng Campaign
Customer Service Ini)a)ves
Expansion in High Growth Markets
Change Management
Assess Success of Changes
Supply Chain Revamp
Expansion of Founda)onal Markets
Budget
0 – 2 Years 2 – 4 Years 5 + Years
Marke)ng / Brand Campaign
20,000 10,000 10,000
Focus Market Research
15,000 5,000 -‐
Supply Chain Restructuring
10,000 8,000 -‐
Staff Training / HR 1,000 500 500
Dollars in thousands ($000)
Pro Forma Income Statement $ in millions, except per share data
2014 2015 2016 2017Revenues 27,441 28,813 30,254 31,766 Operating Costs (19,492) (19,593) (20,573) (21,601) Operating Income 7,949 48,406 50,826 53,368
Net Income 4,758 5,763 6,353 6,671
Net Margin 0.17 0.20 0.21 0.21 Earnings per share -‐ Basic 4.85 5.87 6.48 6.80
Key Performance Indicators • Decreases in wait )mes • Posi)ve growth in guest count (+3%)
Customer Sa)sfac)on
• 5% increase in revenues Same-‐Store Sales Growth
• 20% net margins Profitability
• Favorable recep)on to brand and marke)ng campaign Brand Iden)ty
• Posi)ve growth in store traffic Franchisee Sa)sfac)on
Risks & MiTgaTons
Risks
• Lack of response to menu changes or brand campaign
• Supplier instability • Compe))ve pricing pressure
Mi)ga)ons
• Undertake adequate research in customer tastes and preferences
• Reserve suppliers • Market awareness
Thank You!
Q&A
Appendix Takeaways Problem Statement
Reality Check SWOT
The Changing Customer
Company Image
Interna)onal Situa)on Why Easterbrook’s Plan Wasn’t Enough
Compe))ve Posi)oning
Perceptual Map
Financial Performance
Cri)cal Success Factors Alterna)ves
Implementa)on Plan
Focus on Growth Markets
Streamline Menu
Customer Sa)sfac)on
Employee Engagement
Supply Chain Brand & Marke)ng Campaign
Change Management
Timeline
Budget Risks & Mi)ga)ons
Con)ngency Plan African Expansion
Pressing Concerns
Q1 2015 vs. Q1 2014 • Revenue declined 11% • Q1 2015 Profit declined 32%
• Same Store Sales decline 2%
ConTngency Plan
Ancillary Brand
• Acquire a premium burger restaurant • Acquire a fast casual restaurant outside of burger market
Implement delivery services where necessary and where feasible
If minimum wage increase in US or abroad, ordering kiosks will become more important.
African Expansion Currently, not the highest growth poten)al
• By 2050 1/5 of world will be from Africa • Over 2/3 of this popula)on will be in Urban areas • Expanding middle class
Fastest growing popula)on
Heavy investment in infrastructure
African Expansion ConsideraTons Sourcing always a concern
Availability of food in Africa will become an issue
Mi)ga)on Plan
Develop rela)onships with farmers
Invest if outlook will be insufficient for needs
