A strange, head-rattling aftershock followed the release of McDonald’s turnaround plan on Monday. What CEO Steve Easterbrook characterized as a “reset” was detailed first in a four-page statement the financial community and we ink-stained wretches seized like starving sharks. A video of Easterbrook detailing the strategy was released almost simultaneously, but many of us didn’t ingest that for a while.
When we did, we found a plan much different in tenor that what was detailed in the printed account. It sounded far bolder and comprehensive, a jalapeno burger compared with the Big McBlando that preceded it. For instance, the statement had said almost nothing about menus, operations or even innovations in general. Those topics were addressed by Easterbrook with noticeable passion and determination. There was real blood to it—dynamite to the firecracker that was the release.
Then came a closed call with analysts to discuss the plan. Participants remarked that it was different still from the two accountings preceding it. After studying the release, Bank of America analyst Joe Buckley, the dean of restaurant analysts, used terms like “disappointing” to describe certain aspects of the strategy to investors. After the conference call, he advised investors to buy the stock, headlining his argument, “Call Shows Open-Mindedness,” and flat-out said, the “call was more encouraging.” He was apparently encouraged after the third go-round that McDonald’s could do it.
What differed weren’t the specifics of the plan, but how much of Easterbrook was evident in the different ways it was presented. He went from a flat voice spouting corporate jargon to someone whose enthusiasm and determination showed through the scripting, to a smart, bold and open-minded iconoclast who dashed doubts that he could get the Herculean tasks done.
Those weren’t the only revelations. Some of the comments he made in passing suggested just how bold the leader of the world’s largest restaurant empire might be in fixing his charge. Among those head-turning indications:
1. Might McDonald’s add alcohol?
Easterbrook didn’t miss an opportunity to stress how McDonald’s needs to catch up with prevailing tastes, and cites the chain’s operations in France as an example of how to do it. Restaurants sporting the Golden Arches there pulled an impressive turnaround several years ago by stressing high-touch service, like delivering meals to patrons tables, an innovation now being tried in the States. They also switched to upscale ingredients, like artisan cheese—a move echoed by McDonald’s introduction of Artisan Chicken. And all along, the places there served beer and sometimes wine, in keeping with local tastes and mores.
Would anyone argue that beer and wine are now as much a part of the American fabric as burgers and fries? There’s a reason why so many fast casuals are adding alcohol.
Anheuser-Busch certainly thinks it’s a good idea. At a press function in recent months, the brewer showed a picture of a Budweiser against a McDonald’s backdrop. “Why not?” said an executive, underscoring the company’s plan to make its beer available in more places.
2. Might McDonald’s adopt express drive-thru lines?
When reeling off examples of bold moves the new McDonald’s isn’t afraid to try, Easterbrook followed up a mention of delivery service in New York City with a cryptic reference to “drive-thru express menu boards to increase speed and accuracy.” No explanation was given, but plenty of fast-food restaurants, including units of Wendy’s and Burger King, have tried in-store express lanes where customers looking for standard orders can speed through. Easterbook seemed to be suggestion, why not adapt if for the drive-thru?
3. Will there be a Mayor McTweet?
The lack of a decoder ring was also felt when Easterbrook made mention in passing of supercharging the chain’s digital technology capabilities. “Digital hubs will be set up regionally to interact symbiotically with the global digital hub that McDonald’s opened in March,” he said.
McDonald’s opened a digital office last year in Silicon Valley to draw high-tech talent to the operation, and followed with a similar one near the franchisor’s home office in the Chicago suburbs, but in April, not March.
So his comments were puzzling. The gist seems to be that the chain will rely on interactive consumer technology and social media far more than it has in the past, and will act with far more alacrity to adopt it. It’s a point of pride to Easterbrook that a deal to accept Apple Pay went from initial contact with Apple to full rollout within a matter of weeks.
4. Development isn’t braking.
The chain is pruning, not retracting, he stressed. Easterbrook said the system will continue to open about 1,000 restaurants a year.
About half of them will be in what McDonald’s has dubbed its High-Growth Markets, the division that encompasses China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands.
5. Will it change its development model?
Easterbrook left little doubt that franchising will become more important to the chain. But the process for selecting new sites worldwide could be overhauled, he indicated. “China and Korea have spent years perfecting the most efficient and cost-effective restaurant development plans,” he said, citing those markets’ innovations as a best practice that could be implemented elsewhere. He did not reveal the particulars of how development is handled in those Asian hot markets.
6. It’s not an unproven plan.
Many elements of the plan revealed Monday were tried in the United Kingdom after McDonald’s operations there started gasping a few years back. For instance, Easterbrook pledged to adopt more sophisticated ways of segmenting McDonald’s current and potential clientele, and at one point even acknowledged the error of looking at the key millennial market as one monolithic consumer group. He gave a shout-out to the U.K. for having worked through that exercise some time ago.
He also praised the region’s successful efforts to correct the public’s perception of McDonald’s food as factory fare, and its adoption of progressive employment policies, a move Easterbrook copied in the U.S. several weeks ago with an across-the-board wage hike and an increase in McDonald’s education benefits. “The U.K. is far along,” he commented.
And who set the turnaround in motion across the Pond? Steve Easterbrook.