The McEmpire is in turmoil.
Like the ancient Roman emperor Honorius as he watched the Visigoths pouring over the seven hills of Rome, McDonald's management may now be witnessing the decline of its own empire.
In December, McDonald's announced an anticipated quarterly loss for the first time in its 47-year history. Regrettably, the company's direction and focus over the past decade has as much to do with the decline as does the pressure from competitors.
A few years ago, my sister felt a tap on her shoulder as she stood in line at McDonald's.
“What are you ordering?” came the question from the woman in line behind her. “I will buy your lunch if you will order 10 Happy Meals for me.”
It was the height of the Beanie Baby craze and McDonald's had timed the trend just right with its Mini-Beanie Baby Happy Meal promotion. As gaggles of Beanie mavens formed lines that wrapped around its stores, McDonald's management exercised its right to limit quantities on the purchase of the highly desired Happy Meals.
My sister ordered 10 Happy Meals and got her lunch for free. What was not foreseen were the thousands of meals that were not eaten, but simply thrown away after collectors had removed the prized Beanies.
I was dismayed at human nature that day. But, I was also reminded that McDonald's is not really about food.
Although it is not scientific, I enjoy visiting Epinions.com to do a gut check of consumer opinion. Looking at the fast-food ratings, I noticed that less than half of consumers would refer someone to eat at McDonald's.
In batting averages and shooting hoops, that percentage might be satisfactory. However, when the approval ratings for fast-food rivals like Wendy's and Chick-fil-A score in the 80 to 90 percent range, the degree of distain for Mickey D's becomes more apparent.
In his book Fast Food Nation, author Eric Schlosser documents the founding of McDonald's and its rise to a global empire starting in the 1950s.
In the beginning, McDonald's Ray Kroc sought opportunities to partner with a growing co-empire, Disney. Reportedly rebuked by the House of Mouse, McDonald's set its own course in targeting “kidsumers.”
McDonald's took a slightly different approach than grand theme parks and affable mice. Clown spokesman Ronald McDonald appeared on television ads and PlayPlaces began to spring up in selected McDonald's stores.
The harassment of parents by their children about going to McDonald's is almost a rite of passage in American parenting. (It raised the art of whining to the level of Olympic sport.) The phenomenon is so well understood that the McDonalds.com site hosts a feature that will help parents plot the location of a series of McDonald's as part of their vacation planning.
So, I am reminded that McDonald's is not really about food.
Talk to franchisees and you hear that the problem lies with McDonald's Corporation. Many feel that the brand has its challenges. Young kids (and some adults) respond to certain offerings in the Happy Meal, particularly when connected to a film or other merchandising property.
However as kids become teens, the McDonald's destination is discarded in favor of other dining options with friends. Those consumers return to McDonald's only in significant numbers when they, in turn, become parents and renew the trans-generational consumption cycle by bringing their kids.
Needless to say, the intervening 20 years is a long lead time for repatriation.
Talk to McDonald's Corporation and you are likely to hear that many franchisees are not maintaining quality standards. Scan the McEmpire for consistent food quality, cleanliness and service and you will understand the problem.
All Quarter Pounders™ are not created equal and are served in varying states from hot off the grill to cold as a deli plate. And cleanliness ranges from spic-and-span to strewn with wrappers, uneaten fries and unwiped tables.
This would undoubtedly disappoint the late McDonald's founder Ray Kroc, who reportedly used a toothbrush to clean the holes in his mop ringer.
And so the public battle rages on between franchisees and McDonald's Corporation: McDonald's, unable to wield a stick against the formidable consortia of franchisees; and franchisees who feel that corporate does not do enough and is constantly asking them for more advertising money.
If only the problem were as small as advertising, it would be comparatively easy to fix.
So what exactly is the issue? Why is McDonald's in deeper trouble than they realize?
Put simply, it has lost touch with its core value: Food.
Don't get me wrong. When properly prepared and served, McDonald's french fries are the most delicious among quick service restaurants (QSR). Fortunately, I am not a vegetarian, so the recent revelation about the inclusion of beef flavoring in McDonald's fries did not personally affect me--unlike millions of vegetarian consumers.
And throughout the years, my research team and I have been known to take a McFlurry™ break when we could research no more.
However, the QSR world has changed in the past two decades. Today, a host of regional and national competitors are chipping away pieces of market share.
Wendy's and Jack-in-the-Box continue their assault with national advertising campaigns that focus on food quality, variety and innovation. Other regional and niche competitors like Chick-fil-A, Culver's and In-N-Out Burger offer fast-food experiences that far surpass McDonald's in food quality, taste and cleanliness.
What should McDonald's do?
There have been signs of late that McDonald's has started to accept the reality of its situation. Late last year, it was announced that 175 of their stores would be closed, based largely on sales performance. That may sound like a significant number until you consider that there are more than 30,000 units in the McEmpire.
Marketing efforts of the past several years have focused on McDonald's Dollar Menu. Granted, the economy indicates that consumers should be price-sensitive. But, that seems to assume that there are no QSR competitors with “value” offerings. And of course, today many fast-food chains have such menus. Which leaves us again to consider food quality and taste.
Perhaps more significant is McDonald's announcement in December of a planned “reformulation” of its beef. I'm not certain what's involved in beef “reformulation,” but there's probably a lot of taste testing involved. In the spring of 2003, all new sandwich buns are also expected to arrive.
Hopefully for McDonald's, this is not too little, too late.
One thing is for certain: Consumers will choose with their taste buds. And, the best of plans must be executed well and consistently in the field.
It appears that only time will tell: Is McDonald's truly awakened to the fact that it's really all about the food? Or will they remain a sleeping giant?
Ultimately, will it be little more than an inert empire, destined to be picked apart by invading hoards?