McDonald s: A Long Way to Go BRETT BURNS, ELLIE GARDNER, ASHLING GRIFFIN, ROSS HOGAN JANUARY,

Transcription

1 McDonald s: A Long Way to Go BRETT BURNS, ELLIE GARDNER, ASHLING GRIFFIN, ROSS HOGAN JANUARY,

2 Takeaways Recommenda)on Implementa)on Plan Risks & Mi)ga)on

3 Agenda Company Analysis Industry Analysis Alterna)ves Recommenda)on Implementa)on Plan Timeline Budget Risks & Mi)ga)on

4 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.

5 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

6 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

7 The Changing Customer Middle Class Upper Middle Class Lower Middle Class Health Conscious Price and Value Millennials: Image- Conscious Fast- Casual Customizable Quality

8 Company Image Poor Quality Unhealthy Ingredients McDonalds Previous AUempts: Expanded Menu Offerings: Healthy Premium Increased Wait Time Customers Dubious about Quality

9 Why Easterbrook s Plan Wasn t Enough Structure USA Interna)onal Lead Growth Founda)onal 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

10 InternaTonal SituaTon Sales Declining Abroad by 3.3% China India Japan Russia Quality Problems Pulled Best- selling Products Growth in Sales, Legal baule Government Backlash L. Am Economic Crisis decreases sales Europe Changing Tastes Erode Sucess

11 CompeTTve PosiToning McDonald s Wendys Taco Bell Habit Burger In and Out Shake Shack Cost Taste Speed Quality McDonald s Panera Chipotle Chick Fil A

12 Perceptual Map Quality Habit & Five Guys Panera & Chipotle Chick Fil A Affordability McD Yum Brands

13 Industry Life Cycle Mature Stage: Stable/Declining Margins Established Players Focus on Costs and Efficiency

14 Stakeholders Customers Employees McDonalds Franchisees Shareholders

15 Financial Performance % - 2.7% Quarterly Earnings % + 9.0% - 9.3% 1,849 1, Q Q Q Q Q Opera)ng Income Net Income % Change in Revenue

16 Financial Performance Total Revenues by Region (2014) 5% 23% 32% Revenues (2014) 34% 40% 66% US Europe APMEA Other Countries & Corporate Company- Operated Franchised Revenues

17 Financial Performance 0.00% % % % % % % % % % % Percent Change in Guest Count from Prior Year US Europe APMEA Other 0.00% % % % % % % % Percent Change in Revenues from Prior Year US Europe APMEA Other

18 Profit Margin Net Profit Margin (%) Net Profit Margin (%)

19 Cost Control Opera)ng Costs as % of Sales Opera)ng Costs as % of Sales

20 Analysis Recap Increased Costs Declining Customer visits Reduced Profitability Fast Casual Entry Changing Customer Preference s Previous Failed Ac)ons

21 CriTcal Success Factors Same Stores Sales Growth Profits/Shareholder Returns Brand Image Customer Service Franchisee Sa)sfac)on

22 AlternaTves Return to Roots Change Value Proposi)on to be Healthier Integrated Strategic Plan

23 Analysis of AlternaTves Sales Growth Return to Roots Healthier Value Proposi;on Integrated Strategic Plan Profits Brand Image Customer Service Franchisee Sa)sfac)on Level of Risk

24 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

25 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

26 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

27 Menu Accommoda)ng everyone is not feasible and sustainable Menu will have staples & some healthy offerings

28 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

29 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

30 Manager Training Communica)on Training Enable effec)ve management of employees Improve ability to connect with customers Business Skills Improve Business Acumen Increased Engagement

31 Streamline PreparaTon Techniques Rearrange Kitchens Improve speed and morale Evaluate Equipment Make Kiosks Op)onal Dependent on manager preference Standardize Ingredients

32 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

33 Brand & MarkeTng Campaign Channels TV / Radio Social Media Internet Print Means Internal marke)ng team Outsourced consul)ng exper)se Targets Market research and analysis Data aggrega)on Who is our customer? What do they need?

34 Brand & MarkeTng Campaign Middle Class Emphasize price point Convenience Families Family themed TV commercials Millennials Influencers Sponsors Use of technology

35 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

36 Focus on Growth Markets Product Offerings Iden)fy Customer Base Ensure Appropriate Offerings Loca)on Disposable Income Large Untapped Popula)ons Rising Middle Class Careful Selec)on of JV Partners Ethical Record Engage Legal Advice

37 Supply Chain Fully Integrated Supply Chain No surprises, no waste Quality management of inputs Vet Suppliers for Quality Source responsibly High quality & an)bio)c free meats Allow for transparency Ties in with Brand & Marke)ng

38 Supply Chain Can t allow issues with key ingredients Develop con)ngency plans for shortages Reduc)on of ingredients Less strain on SC costs

39 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

40 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

41 Budget Marke)ng / Brand Campaign Focus Market Research Supply Chain Restructuring Dollars in thousands ($000) 0 2 Years 2 4 Years 5 + Years 20,000 10,000 10,000 15,000 5,000-10,000 8,000 - Staff Training / HR 1,

42 Pro Forma Income Statement $ in millions, except per share data Revenues 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 Earnings per share - Basic

43 Key Performance Indicators Customer Sa)sfac)on Same- Store Sales Growth Profitability Decreases in wait )mes Posi)ve growth in guest count (+3%) 5% increase in revenues 20% net margins Brand Iden)ty Franchisee Sa)sfac)on Favorable recep)on to brand and marke)ng campaign Posi)ve growth in store traffic

44 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

45 Thank You!

46 Q&A

47 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

48 Pressing Concerns Q vs. Q Revenue declined 11% Q Profit declined 32% Same Store Sales decline 2%

49 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.

50 African Expansion Currently, not the highest growth poten)al Fastest growing popula)on By /5 of world will be from Africa Over 2/3 of this popula)on will be in Urban areas Expanding middle class Heavy investment in infrastructure

51 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