Any evidence there is an actual business case for Create Your Taste.
What are the hard numbers for remodeling, equipment, and implementation?
What are CYT's increased operating costs after implementation?
What is the actual (not dreamed about) increase in traffic?
Responses can be left as comments here or sent to adams at fegroup.com
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16 comments:
CYT is pie in the sky BS to make it look like Oak Brook is doing SOMETHING , to Wall Street.
The sad truth is that if you signed up for "partnering" on ADB, you are REQUIRED to do CYT, regardless of its cost or results. Its a DONE DEAL
FRANKE bills will be $300.00 to $400.00 per month.
"if you signed up for "partnering" on ADB, you are REQUIRED to do CYT"
So the McDonald's franchise has officially become a suicide pact?
McDonald's woes over the past 10 years can be summed up in five words, "Our customers don't drink espresso." I have been in the system since 1982. Time and time again, we try to be something we are not. Pizza, sirloin, McCafe, salads, wings, breakfast buffet and McLean Deluxe are some of the failed attempts that come to mind.
The latest tactic is "create your taste" or experience of the future. This is going to cost $150,000 up front for equipment and construction. The corporation will probably pay most of this initially to entice financially strapped operators to go along with this scheme; but there will be ongoing costs. At least 2 percent for labor, food, small wares, M&R, etc... These costs don't go away. So, in order for this tactic to break even; there will need to be a permanent 8 percent increase in sales from 30 percent of our customers. (We do 65-75 percent of our business in the drive thru) That means a 24 percent ongoing increase in walk in sales to pay for the costs of this endeavor. Since we can't even give a cappuccino away for free; the odds of our blue collar customer base coming in more often to buy an $8 Hoity-Toity McBurger are slim and none.
I understand why we do these goofy things. Because of media and activist pressure, people are embarrassed to be working in a "fast food joint". It won't be long before the new Euro CEO has us selling wine and cheese. People actually believe that we are making people fat. I would imagine that the McDonald's Restaurant per capita ratio is about the same as it was in the 1970's. We weren't making people fat then. What has changed? People don't move as much. If anything our food has gotten "better" since we took most of the sodium, fat, and taste out of our products. We used to have the best fries in the world, bar none. Now we sell boiled potatoes that we can't even put salt on.
I am not sure how long we can keep doing "progressive" things that make us feel good about our image, and have no basis in math; but the tipping point between feelings and reality is fast approaching.
In his quest to be politically correct and "modern and Progressive", Easterbrook is sowing the seeds of our demise. WE ARE A QUICK SERVE FAST FOOD RESTAURANT, NOT a Fast casual like Five Guys or Chipolte.
The system may be facing its FINAL DAYS
It is all very confusing and not without risk. I recently saw CYT in two high volume stores and it was impressive. The products are the best we have ever put out. The system of producing and delivering product to the lobby customers is fairly smooth. It is the grill area where big problems will arise. Intense training and additional people will be required. The P&L's are going to take a hit in the early going. The required price point will leave a lot of our existing customers behind. This is where it becomes risky. Are there enough customers that will pay the price for a better burger and leave those companies in fast casual to come to us. There are too many questions that have not been asked and too many questions that we don't know to ask. If this is successful the MCD of the future will look nothing like MCD today. My guess is that there will be quite a few operators that will hang up their spatula's as this gets going. There will be a lot of trading areas where this concept will not work. MCD knows this and they are considering allowing the operators to take it one store at a time and not require us to commit the entire organization. That is not final at this point but indications are they are leaning in that direction. My experience tells me that there are a lot of costs that are not expected that will arise. I think labor will increase by at least two per cent (2%). Operating supplies and maintance will increase by at least $400.00 per month. In the lobby about 23% of the customers use the kiosks but with a hostess helping them that goes to about 80%. The hostesses or whatever they are called will need to have the right personality looks and training and they likely could become a high paid position. The company partnering program looks very good but there is a lot we don't know. We have our C.P.A,'s doing a deep dive into it for a recommendation. There are things we are just starting to hear about like music for our Drive thru customers. It is all high tech and over the top. They need 70% approval from the operators to go forward and approval from the board of directors as the company costs just for this region will be over two hundred million. Make no mistake about it there is substantial risk involved. Costs per store is yet to be determined. I'm guessing $150,000.00 per store over time and possibly more. There will be two businesses under one roof, lobby and drive thru. Regional managers are going to visit and selling hard. Some operators have told them they don't like it and are not willing to fully commit. The response, I'm told has been, "Well maybe this is not for you any longer". If you are so inclined this may present some buying opportunity's. If they get 70% this will be the biggest move made by MCD in many years. I'm keeping an open mind with a positive lean but there is so much more to know.
Thanks for the extensive comment. Aren't you already operating two businesses under one roof? With CYT won't you be operating three?
This will takes down a road that will take 10 years to recover from, that is if we recover at all.
I am in 5 small towns of less than 7,000 people each. I have higher than average volume restaurants. These are good hardworking rural people. We do not have upscale restaurants and the ones that have tried have only lasted a year at best. (Can you say Bankrupt)
What we do not have is a lot of money. Money for an $8 to $10 burger experience is a joke for us. Everything can not be based off of big metro towns.
What I do need is a more streamlined approach in grill procedures, Less emphasis on Expresso Coffee line, freedom to drop what does not sell, a more child friendly decor and Leadership that will appreciate O/O's.
I would never try to speak for MCD. However, what I have heard makes me think that they are sensitive to what you just said. I'm in a dense urban area and we have trading areas that we believe this concept will not work at all. This is common to every market in the country. Our region is pushing hard for a "store by store" decision on this with no requirement to commit the entire organization. Wednesday our regional manager told me that there is a lot of support for going one store at a time based on local market conditions and uniqueness. No one can say for sure if this will work or if it is the right thing to do that is why it is so risky. My advise is if it is not good for your business then don't do it. You more than the company executives have to live with this decision don't be bullied into doing something that is not good for your business. However, something has got to be done. We can no longer sit back and just hope things will get better. The operators are the victims of a collosal failure of leadership in Oak Brook. They are paid to anticipate movements in the markets they have failed miserably. Regardless, we have got to do something. Whatever is done is going to include risk. Again, if its not good for you then don't do it. The things you said you need ask them to give it to you or at least tell you how to best get them. Act to fix your problems. Don't wait to react to their recommendations or demands. They don't respect much but one thing they do respect is sales increases.
I am an Australian owner/operator of 20 years who is proud to be a part of the McDonald's system worldwide. And I have seen it all: The good, the bad and the ugly inside Australia and in many other countries. A few years ago I attended a (nothing to do with McDonald's) marketing workshop in Las Vegas where some of the worlds great marketers and best-selling authors spoke candidly with our group of 100. On the last day we had an opportunity to speak in front of the group about our industry and I stood up and spoke with pride about McDonald's and its fantastic training systems and world-class facilities.
I was confused as I looked into the faces of the delegates in the audience. They were completely non-responsive to a talk I had been asked to give many times over to community groups back home. The moderator stopped me mid-sentence and explained to the crowd that I was from Australia and that McDonald's there was very different to what they had come to know.
At this point they seemed to be open to the idea that McDonald's could be a place that stood out from the rest of the crowd as fresh, contemporary and innovative.
And this is how I see the system in Australia today.
So, where do I see the difference? In the evolution of the system. I believe there were two potential paths that diverged in Australia in the 1990's and we took the one less traveled. Reinvestment was a dirty-word and operators were very hesitant to invest a dime. Our CFO came up with a reinvestment inventive to encourage HUGE ticket reinvestment to help roll-out McCafe (like you have never seen before) and full-decor remodels nationwide. And while McCafe may only account for about 12% of the business overall, it is the cornerstone of our business bringing in growth to drive-thru, breakfast and reg. menu. My best understanding is that McCafe in Australia grew almost 50% last year. I have a restaurant in a small country town that sits at 18% Cafe sales.
We have recently rolled out our $150K CYT menu nationally and while it is another layer of complexity to our business, it is bringing in near double-digit comps in a tough market and up to 30% comps consistently where the full 'burger-bar' has been included.
I see CYT as the new McCafe and if it were to be embraced, not as a cheap add-on but as a genuine shift for the business, I truly believe it can pull McDonald's USA from its' stigma of selling commodities to treating customers to a real occasion. An occasion worth paying a little extra for.
And while only 12% will be coming for McCafe, and another 5% for CYT, they will be bringing the rest of their buddies for Big Mac's, fries and Coke.
I believe we are in pretty good shape because we were given the encouragement and the incentive to take some really big steps. I cannot imagine what Maccas in Australia would look like today without it. We all need to provide an experience that is truly high-end from the decor, toilets, ambience, playland, staff and service right through to the food and coffee.
Why am I so inspired? Because we took some huge risks as a system and they paid off.
In conversations with the region in meetings and one on one we are hearing a lot about Australia. It is good to hear those positives confirmed by an Australian operator. Here in the USA Corporate management has lost so much credibility in recent years it is hard to know what to believe when they start talking. Corporate credibility was getting very weak and then the MRP program came along and destroyed any credibility that remained. Then they put the cherry on top with the wing promotion. Thus, the operators are servicing more debt. Sales are soft and corporate advice has been off the mark in just about every case. This history is making CYT a harder sell. Clearly, there is risk. No question about it. The operator makes a great point in that we need to look at this as a genuine shift in our business. Not, just as a way to solve a current problem. If approved it will change MCD and how we are perceived by the public. The marketing will need to be at the highest levels right out of the box and last for many months.
Rumor is that Florida has about the same number of stores as Australia (near 900) and that with no bordering states except on one border that region will be given a lot of attention on the roll out and benched marked to show the successes being experienced, if any. I'm told that the company plans on spending over two hundred million just in that region. Its a big risk for them as well at those numbers. They want to duplicate the Australian experience and numbers to help sell the rest of the country. However, they need 70% approval from the operators and approval from the MCD board of directors. This is a big deal.
I've had the pleasure of spending time in Australia and am left with the impression that the pace of life is somewhat slower and Australians are much more patient than Americans. I can see why customers of McDonald's in Australia might be willing to wait an extended period of time for their food.
Another factor (and I'm guessing here) that Australia does not yet have the proliferation of chains such as Five Guys, Shake Shack, Smashburger, etc. so an upscale sandwich at McDonald's might be more interesting to that nation's consumer.
But I do know that, "they will be bringing the rest of their buddies for Big Mac's, fries and Coke." is a marketing pipe dream that rarely happens. So a group of buddies comes to McDonald's - some of them order Big Macs and get their food in a few minutes (hopefully) but some of the buddies order from a CYT kiosk and wait ten minutes for their food while watching the other buddies eat Big Macs? That's a dining experience that won't be repeated.
So if Florida is going to focus on CYT and going upscale will they be exempted from this "Pick 2" idea?
Don't know.
There's some issues when McDonald's tries to focus results on an International level, and make it work in the United States. Its great that other regions of the world have their successes, but the reasoning for that isn't in the difference of its OPERATORS. Its in the difference of its cultures; particularly its business acumen.
Europe, Asia and Australia operations differ greatly from the United States. The age of their restaurants are much younger, The concepts were designed around the building, and the building around the concept. McCafe isn't a machine stuck in a 3x3 cell with a graphic - its a complete separate Business-in-a-business area, with its own resources like dishwashing, display cases and more importantly products that enhance a "coffee" experience.
America grew up on FAST; the drive-thru developed, expanded and now split here. We bred into the business and our customers that fast was essential - and drive thru was better for it saved cost. Its a philosophy that still holds true in many cases.
The McDonald's USA image is tarnished. McDonald's failed to address competition advertising in the United States. McDonald's once was the leading advertiser of the QSR industry. Now our competitors blast our messaging 5 to 1 - and all the competition messages are negative about our brand. Competition has branded FAST with POOR QUALITY and they succeeded. What does OPNAD focus on - REBATES - DIGITAL MENU BOARDS. Is this what OPNAD is for?
Remember, McDonald's actually fought back in Great Britain when its image was attacked. The image of McDonald's there is vastly superior to the United States today.
Then there's NATIONAL VALUE. OK. Want NATIONAL VALUE, then exempt that platform from the RENT and SERVICE FEES; much like the HAPPY MEAL. I remember getting a memorandum once in a COOP meeting from OAKBROOK LEGAL about how discussing pricing in COOPS was tantamount to price fixing. Oh my, the changes since those days?
Unfortunately, the US system created an imagine of SUPER FAST - now we want to SLOOOW it down. Much like training a NASCAR driver to drive 35-MPH. The system focused on throughput, now has to focus on SEQUENCING food with All Day Breakfast. And that's time. And time is money.
More equipment, more M&R, more Labor and more Utilities.
Yet equipment that restaurants can use, like KIOSK to address higher labor cost or under populated areas remain unavailable to build the business.
What's not gonna change is the grading, because some bureaucrat in Chicago still wants to save their job. Much like ROIP, they thrive off measures and its job security for them. Who cares it has tripled management turnover in the last 10-years. What do managers have to gripe about anyways (800 #, mystery shops, VOICE, ROIP, Stop By Shops). The US has created a system in our restaurants where it spends more time focusing on a email complaint, than the actual people in our lobbies.
CYT will not work in all cases, does it mean the entire project should be scraped - NO! McCafe doesn't work in all areas - does it mean the entire program gets scraped - NO! We are in the business of selling, believe it or not.
Individual stores need to have a CORE - but individual stores need their individuality to match the needs of their communities. The system used to call the LOCAL STORE MARKETING (LSM). Put the excitement back in the brand - by allowing the unexpected become the expected. The problem with McDonald's today is this cookie cutter, one idea fits all template. There needs to be a core, but innovation doesn't just occur on a lab in Chicago. Its has to be allowed to develop in the communities where the stores reside and the operators LIVE!
Great comment! Thank you.
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