Richard and Maurice McDonald two brothers from California created a mastermind operation by transitioning their everyday drive-in restaurant into a fast food eatery. They began by simplifying their menu and creating an assembly line operation to cook food and serve the customers. They also changed the drive-up service into a self-service counter.
By keeping the menu simple, it was easy to train new employees on food preparation. The other positions within the restaurant were simplified as well, consisting of one task only, for example, there were two employees that only made milkshakes and three employees that only filled orders at the counter. The McDonald brothers also invested in paper products to wrap the food, rather than having dishes to wash. The simplicity of the way the restaurant operated, allowed the McDonalds brothers to keep their labor costs low. Customers were able to be served rapidly, which in turn, increased the volume of sales.
In the early 1950’s a milkshake machine salesman, Ray Kroc, was so impressed by the restaurant operation and initiatives that he purchased the rights from the McDonalds brothers to set up McDonalds restaurant franchises across the country.
The first McDonalds franchise opened in 1955, and the methods of self-service, quick service, and paper service, revolutionized the food service industry. The restaurant began popping up throughout the entire country. In 1962 the restaurant introduced the famous Golden Arches logo and in 1965 the company went public. By 1968 there were 1,000 McDonald’s restaurants across the United States (Hill 2010).
The success of the franchise was as a result of the restaurants uniformity, an innovative concept in the food services industry in the 1950’s (Hill 2010). Each restaurant in the franchise was operated the same way and incorporated standards of operation initiated by Kroc that included, commitment to quality, service, and cleanliness.
Kroc held a stern operation among the franchises, but the individual owners still used their imaginations and creativity to develop new products and ideas. The Big Mac is one example; this specialty hamburger that sold for twice the price of a regular hamburger was created by a franchise owner from Pennsylvania. After much persuasion by the top managers, the Pennsylvania franchise owner was allowed to sell his creation. The Big Mac proved successful increasing the one restaurant’s sales by 2% in just a few short months and not long after the Big Mac became McDonald’s most well-known item (Hill 2010).
A year after Kroc opened his first restaurant; he hired a young man named Fred Turner to manage one of his restaurants. Fred Turner was a fast learner and attention detailed, he was able to quickly master the restaurants operation. Kroc saw great potential in Fred Turner and asked him to help train new franchises. Not much later, Turner began developing standard operating procedures for all McDonald’s franchises and set the groundwork for a successful chain restaurant that lasted for decades.
At this point, McDonalds had a unique operation with great potential to succeed in the food service industry. The franchises innovative ideas of quick service, self service, and paper service are huge strengths for the company’s success; however these same ideas could serve as weaknesses as well. Consumers could begin to not like the idea of the company changing their easy going lifestyles by making them feel rushed with the quick service initiative. There could be potential for the self-service initiative to be not liked if customers prefer to be waited on. And most of all, the paper service initiative has the potential to jeopardize the environment if consumers feel that throwing away so much paper could have the possibility of overfilling landfills.
Throughout its history McDonalds has had 5 different CEO’s, all with a different outlook on the company’s success. In the beginning, Ray Kroc’s stance on the company’s success was to open as many franchises as possible and increase the company’s revenue.
Once Ray Kroc stepped down, Fred Turner became the CEO, in 1973. Turner had already spent years creating specific procedures for restaurant operation and management that included instructions from how to fry potatoes to break down expenses for labor, food, and nonfood supplies. Turner spent so much of his career creating McDonalds manuals that he set up a training center called “Hamburger University” where classes were taught on how to cook and serve food; manage equipment, and management techniques. The Hamburger University handed out degrees in “Hamburgerology” and was even accredited by the American Council of Education.
Turner continued to do big things for McDonalds throughout his career and in the 1960’s he created a field consultant position to visit and evaluate franchises on their service, quality, cleanliness, and overall performance. With this initiative McDonald’s restaurants remained a leader in the fast food industry and continued to increase revenue. Turner then went on to decentralize the organizational structure, increase the number of regional offices, and innovate management strategies. Under Turners tenure McDonalds created a corporate mascot, “Ronald McDonald” who became a national icon appealing to children and was as well known in US households as Santa Claus.
Turner was the CEO of McDonalds during its rising years and brought many successful ideas and projects to the organization; however, there were some negative issues that occurred during his time as CEO. Turner underwent issues with franchise relations and employee relations and quickly addressed both issues by establishing programs and associations that dealt with rebellion and complaints.
After Turner’s retreat, Michael Quinlan stepped up from President to CEO in 1987. Quinlan worked his way up through the organization and held an MBA. He believed in informality and a hands-off management style, both helped him gain popularity among his fellow co-workers and subordinates. With Quinlan’s successful management styles and superior reputation he transformed the company into a global empire reaching more than 100 national markets.
During his time as CEO, Quinlan introduced a service enhancement program, concentrating on customer care to empower employees to focus on customer satisfaction. Quinlan also launched a cost cutting initiative to lower the restaurant construction costs and redesigned buildings using more efficient construction methods and cheaper materials. With the lower costs of construction, the company was able to open smaller McDonald’s restaurants in hospitals, shopping malls, and sport stadiums. Quinlan also reduced the cost of insurance for franchisees by offering several insurers through competitive bidding.
Quinlan was a successful CEO and continued to enter foreign markets, tripling international sales in his first five years of forming partnerships with foreign entrepreneurs. But, because of Quinlan’s focus on the foreign markets, McDonalds domestic sales suffered. This began a downbeat turn for Quinlan’s term. McDonald’s also faced decreased sales during this time due to new products that were launched by Quinlan; veggie burgers, pasta, and pizza were a few items on the menu that did not succeed. Because of these few downfalls under Quinlan’s authority, consumers began to prefer other fast food chains like Burger King and Wendy’s over McDonalds, and McDonald’s market shares decreased.
In 1998 Quinlan stepped down and an outside firm recruited Jack Greenberg as the new CEO. Of all the CEO’s, Greenberg’s occupancy was the lease successful and shortest. Greenberg tried recasting the image of McDonalds by focusing on a global brand, hiring outside executives, extending the menu, and seeking growth through mergers.
Greenberg thought by offering more items on the menu he could turn consumer’s interests away from other fast food restaurants back on McDonalds. He planned to do this by merging with Donatos Pizza, Chipotle burritos, and Boston Market’s home-style meals.
While Greenberg spent his time working on mergers and acquisitions, public interest groups and consumer advocates were working on campaigns that focused on the negative aspects of fast food chains, targeting McDonalds foremost, stating they target children and aid in child obesity. These public groups also blamed McDonalds for using poor farming methods and destroying rainforests to create grazing land for cheap cattle to create beef for their hamburgers. These groups damaged McDonald’s reputation with their movement and even created harsh slogans and cruel names to describe their feelings, such as, “McGreedy” and “McGarbage” (Hill 2010).
Because of the performance decline under Greenberg’s direction, McDonald’s board created a team to turnaround the company, Charles Bell and Jim Skinner. Shortly after the creation of this team, Bell stepped down due to health issues and Jim Skinner became the CEO in 2004. Skinner, like the first three CEO’s, started his career at McDonalds and worked his way up the corporate ladder.
Skinner is McDonalds current CEO and has a low-profile approach, frequenting restaurants to team up with employees by helping in the kitchen and on the grill. Skinner is well-liked by his co-workers and subordinates. Skinner worked diligently to turn around the performance of the organization by addressing customer service and profits, the most deteriorated areas of the company. Skinner began by investing in existing stores rather than creating new ones. Redecorating and remodeling current stores brought in new customers as well as bringing back old ones. Skinner also extended business hours in most restaurants and some stores stayed open 24 hours.
Another initiative that Skinner introduced that helped increase in profits, was installing coffee bars in the restaurants to offer specialty coffee that competed with Starbucks and cost less. This initiative proved successful and Starbucks began closing down stores and laying off employees.
Shortly after Skinner obtained leadership, a documentary film was released that aided in the decrease of McDonalds reputation by portraying a man getting increasingly ill after eating only McDonald’s food for an entire month. Instead of ignoring the attack on McDonalds and letting the film destroy McDonald’s the reputation and potentially the company, Skinner immediately began rebuilding consumer’s perception. Skinner discontinued the large size menu options and began offering healthier food choices, such as salads and apple slices. The company also launched a program focusing on a balanced lifestyle and even gave away pedometers with combo meals.
One trend that McDonalds did not seem to pay attention to in the recent past was the social trend of United States citizens to start eating healthier foods and increasing their exercise to remain in a healthy state. Instead McDonalds continued to sell high fat and greasy foods and in turn were attacked by the media.
McDonald’s should pay attention to the macro-environment and take advantage of trends that may prove beneficial to incorporate within its operations. I would recommend that the corporation look at the demographic macro-economic trend. In the recent future, the baby boomer generation will be growing older and closer to retirement. McDonalds could take advantage of this trend and market to this area of demographics by offering special deals to senior citizens. McDonald’s restaurants in small, close knit towns could offer to host events for retired social groups; for example a portion of the restaurant could be reserved for an hour one day each week for small groups to meet for coffee or lunch and play card games or just socialize.
McDonalds should also pay close attention to the economic trend and the unemployment rate. There are many citizens who may be overqualified but desperate for work. The company could hire new workers that are willing to work at any pay. If McDonalds invests in these types of people, they could potentially bring new attitudes and ideas to individual franchises or the corporation.
Another macro-economic trend that McDonalds could incorporate in their business is the social trend and the public’s attitude toward global warming. There could be potential for McDonalds to take part in green initiatives and sponsor low energy ideas, which in turn could increase the company’s reputation which will bring more people in to the restaurant.
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