The Economist this week featured an article about McDonald’s. Despite still achieving double the revenue per store of competitors – surely a key profit driver – last year McDonald’s saw like-for-like declines in sales and a loss of market share. The result is pressure on the share price and challenges about strategy.
The article showed how different experiments in the core US market had not so far succeeded and indeed seemed rather inconsistent. The company also suffered from being market leader and hence always under assault from attacks like the movie Super Size Me. Perhaps more important, a new segment of fast-casual restaurants such as Panera bread and Chipotle seem to be stealing some of McDonald’s turf.
Whatever you think of their products, you have to admire the way McDonald’s have built their brand. I remember the weekly ritual of taking my six-year-old swimming, and then to McDonald’s as a treat. Each week the excitement peaked with the unveiling of the Happy Meal toy. Then she slowly consumed a burger she did not really like. But the brand cachet was enough to overcome the unloved core product for many years.
The article suggested a few opportunities but may have missed some others. There was no mention of network optimization, surely always critical for brands based on multiple outlets. But a bigger opportunity may be through the franchisees.
In common with others, McDonald’s operates few stores itself, but uses franchisees for most outlets in mature markets. This saves costs (including capital), promotes on-site service, and means McDonald’s can partially distance itself from issues like minimum wages and trade unions. Modern IT systems mean the company can still benefit from a wealth of “big data” about buying patterns and trends.
But “big data” can sometimes be too much data or the wrong data, especially when factors are involved such as the time it takes to serve people and how patient customers are. Big data will not easily identify the customer who walked out because the line was not moving quickly enough, or the one who carried through with the transaction but vowed never to use that store again.
The ones who are closest to that sort of action are the franchisees and their staff. McDonald’s had a legendary COO, Fred Turner (who died in 2013) who visited stores nearly every day, observed everything and knew everyone. That is tough for senior managers to emulate these days.
So is there a middle way? Marketers cannot easily visit stores every day. They can’t get all they need from customer data. Focus groups are expensive, unreliable and unrepresentative. Market research has obvious limitations. Experiments are slow.
Use the wisdom of franchisees?
What about asking the franchisees? Companies like McDonald’s can be frightened of doing this. I remember it was the same at Shell:
we wanted to avoid franchisees ganging up on us. Actually, whenever we did engage them, I was always happy with the results. For one thing, franchisees have few qualms about admonishing their peers for drops in standards.
But if McDonald’s wants to engage franchisees about subtle questions like how to tailor menus to different outlets or making trade-offs between simplicity of offer and growing segments of well-served customers, what is the best way to do it? Asking for ideas in writing misses the chance for franchisees to develop ideas from each other. Big meetings are expensive, and maybe dangerous as well.
A solution is to use crowdsourcing methods to engage, listen and capture the wisdom of the franchisees. Synthetron is an ideal method for such an opportunity. It would be simple to secure regular input from the people closest to the customer by running open Synthetron sessions for franchisees, perhaps once per month. The cost would be minimal compared with meetings, visits or focus groups. There would be an uptick in engagement. The discussions could explore topics right up-to-the minute, radically shortening action loops.
As it struggles against new and old competitors, McDonald’s has many advantages. Some of these remain obvious to managers – such as brand appeal, scale and customer buying data. But others might have become obscured and underutilized over time. The wisdom of franchisees could be an example of such an underused asset. And Synthetron could be a perfect method to help rediscover it.
by Graham Bobby – January 15 2015