The McDonald s Turnaround Plan ERIC POSTMA TOM EPP JESSE PERRY AMANDA MACDONALD ASPER SCHOOL OF BUSINESS

Transcription

1 The McDonald s Turnaround Plan ERIC POSTMA TOM EPP JESSE PERRY AMANDA MACDONALD ASPER SCHOOL OF BUSINESS

2 Agenda Analysis of Opportunity Evaluation of Alternatives Recommendation Financial Analysis Risks and Risk Mitigation

3 Key Issue Everything to Everyone strategy has not worked, leading to declining sales Recommendation: Back to your roots, prepare for the future

4 Analysis: Context Consumer Tastes Health conscious Desire customization Changing Customer Base Bifurcation of middle class Core customer has less disposable income Menu Core menu Create Your Own Taste Premium McWrap and healthy choices All day breakfast

5 Analysis: Sales Sources Drive-Thru In-Store

6 Analysis: Market Segments US International Lead Markets High-growth Markets Foundational Markets

7 Analysis Strengths Brand equity Company history Franchise model Concerns Declining sales Size of organization Large menu Threats Healthy consumer Changing middle class Supply chain problems Opportunities Technology Healthy consumer

8 Evaluating the Alternatives Customized Experience Table Service, customized burger options Flexibility, focusing on the customer experience Acquisition Purchase a start-up chain focused on healthy eating Back to basics prepare for the future Simplify current menu, focus on drive-thru Develop a new healthy sub-brand

9 Alternative 1: Customized Experience Advantage Disadvantage Unhealthy Slower Service Better Experience Smaller Market Unique Product Higher Priced Menu

10 Alternative 2: Acquisition Advantage Disadvantage Cannibalization Expanding customer base Expensive Diversify risk Introducing competitor

11 Alternative 3: Back to basics, Prepare for the future Advantage Disadvantage Capitalizes on strengths Addresses shift in healthy eating Improves Brand Image Expands Customer base Changing customer attitudes Slow delivery

12 Evaluating Criteria Customer Satisfaction Brand Perception Increased Sales Fits Culture

13 Criteria matrix Customer Satisfaction Increased Sales Fits Culture Brand Perception Customized Experience Yes No No Yes Acquisition No Yes Yes No Back to basics, prepare for the future Yes Yes Yes Yes

14 Recommendation Back to Your Roots Traditional McDonalds restaurants Focus on core customers Prepare for the Future New McFresh brand and restaurants Adapt to changing customer expectations

15 Back to Your Roots Simplified Menu Higher Quality Faster Service Return to basics No customization Healthy and natural ingredients Localized supply Double Lane Drive Thru Countdown Clock

16 Prepare for the Future Customer Preferences Healthy Options Customization Fast Service McFresh Separate stores New Identity Healthy Alternatives - Wraps and Salads Fast Service Counter Experience Easy Customization To Go / Seating Area

17 Synergies Healthier Ingredients Family/Child Focus Mobile Application Better Quality/Customer Satisfaction Economies of Scale McDonalds & McFresh Play structures McPlay Healthy Happy Meals Life Time Customers McFresh Loyalty Program Apple Pay / Google Wallet NFC Personalized experience/customer preferences

18 Implementation!! 2015% 2016% 2017% 2018% 2019% 2020% New%Stores%!!!!!!!!!!!! McDonalds! 40! 100! 200! 200! 200! 200!!! McFresh! 60! 200! 600! 1000! 2000!!! Marke5ng%!!!!!! McFresh!!!!!!!!!!!!! Fast!Service!!! Ingredients!!! Supply%Chain% Vegetables!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Beef!!!!!!!!!!!!!!! Eggs!!!!!!!!!!!!!!!!!!! Chicken!!!!!!!!!!!!!!!!!!!!!!!!! Tech%&%Training%!!!! Training!!!!!!!!! Mobile!App!!!!!!!!!!!!!!! In!Store!!!!!!!!!!!!!!!!!!!!!!!

19 Financial Analysis Total Incremental4Cash4Inflows Franchise*Conversions $********** 750,000,000 $******** 1,350,000,000 $******** 1,500,000,000 $******** 1,650,000,000 $************************* 6 $************************* 6 $ ,250,000,000 Operational*Savings $********** 100,000,000 $************ 200,000,000 $************** 25,000,000 $************ 300,000,000 $******** 300,000,000 $******** 300,000,000 $ ,225,000,000 Total $ ,000,000 $ ,550,000,000 $ ,525,000,000 $ ,950,000,000 $ ,000,000 $ ,000,000 $ ,475,000,000 Incremental4Costs McFresh*Store*Openin $*************************** 6 $************** 48,000,000 $************** 16,000,000 $************** 48,000,000 $********** 80,000,000 $******** 160,000,000 $ ,000,000 Mcdonald*Openings $*************** 4,000,000 $************** 10,000,000 $************** 20,000,000 $************** 20,000,000 $********** 20,000,000 $********** 20,000,000 $ ,000,000 Service*Improvements $************ 75,000,000 $************** 50,000,000 $************** 25,000,000 $***************************** 6 $************************* 6 $************************* 6 $ ,000,000 Supply*Chain $********** 100,000,000 $************ 100,000,000 $************** 50,000,000 $***************************** 6 $************************* 6 $************************* 6 $ ,000,000 Technology $********** 100,000,000 $************** 50,000,000 $***************************** 6 $***************************** 6 $************************* 6 $************************* 6 $ ,000,000 Marketing*Costs $********** 100,000,000 $************ 100,000,000 $************ 100,000,000 $************ 100,000,000 $******** 100,000,000 $******** 100,000,000 $ ,000,000 Total $ ,000,000 $ ,000,000 $ ,000,000 $ ,000,000 $ ,000,000 $ ,000,000 $ ,096,000,000

20 McDonald s & McFresh Store Openings New$Store$Openings McFresh U.S International3Lead3Markets McDonalds$ High3Growth3Markets Foundational3Markets Total3Franchise3Conversions

21 Revenue & Net Income Projections $35, $30, $25, $20, $15, $10, $5, $

22 Controls & Measures Controls(&(Measures Sales&Growth >2% >4% >4% >5% >5% McFresh&stores Customer&Satisfaction >80% >80% >80% >80% >80% >80% Technology&Use&(new&users) &&&&&&&&&&&&&&&& E &&&& 1,000,000 & 1,000,000 & 1,000,000 & 1,000,000 & 1,000,000

23 Risks and Risk Mitigation Sales lost from removal of custom menu Custom menu has had nominal success, focus on what customers want Custom options available at McFresh stores McFresh could split customer base Transition customer base Attract new customers Brand image Marketing & supply chain will focus on fresh and high-quality food New McFresh stores

24 Conclusion Back to your roots Prepare for the future Confused strategy

25 Appendix ! Split strategy Total&Revenues $&&&&&&& 27,441 $&&&&&&& 26,484 $&&&&&&& 27,013 $&&&&&&& 28,364 $&&&&&&& 29,215 $&&&&&&& 29,799 $&&&&&&& 30,395 Company 66% 55% 45% 40% 30% 25% 20% Franchise 34% 45% 55% 60% 70% 75% 80% Company $&&&&&&& 18,169 $&&&&&&& 14,566 $&&&&&&& 12,156 $&&&&&&& 11,346 $&&&&&&&&&& 8,764 $&&&&&&&&&& 7,450 $&&&&&&&&&& 6,079 Franchise $&&&&&&&&&& 9,272 $&&&&&&& 11,918 $&&&&&&& 14,857 $&&&&&&& 17,018 $&&&&&&& 20,450 $&&&&&&& 22,349 $&&&&&&& 24,316

26 Net Present Value $6.2 Billion

27 Appendix Incremental*Net*Income $******************* - $******* 229 $******* 207 $******* 216 $******* 280 $******* 295 Incremental*Costs $****************** 379 $******* 258 $******* 111 $********** 68 $******* 100 $******* 180 Net*Benefit $****************** 379 $******* 487 $******* 318 $******* 284 $******* 380 $******* 475 $ $ $ $ $ $ NPV $6, Rate 8% Growth 3%

28 Store Opening New$Store$Openings Total&McFresh&(Franchise&&&Corporate) Total&Mcdonalds&(Franchise&&&Corporate) Total&Franchise&Conversions