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McDonald’s Turnaround Plan A PRESENTATION TO: MCDONALD’S UPPER MANAGEMENT
GOODMAN SCHOOL OF BUSINESS, BROCK UNIVERSITY
ABDUL, VERA, YANQI, KAJSA
Problem and SoluIon
Problem:
How can McDonald’s improve its customer
sa6sfac6on and revenue?
Solu,on:
Adjust current turnaround plan to address brand
trust, and customer sa6sfac6on.
End Goal McDonald’s future vision: • Organiza6onal flexibility and adaptability • Customer-‐focused
• Stable revenue and cash flow streams • Sustainable long-‐term growth
Agenda • Current Situa6on • Key Issues • Qualita6ve Analysis • Quan6ta6ve Analysis • Alterna6ves • Implementa6on
• Risk Mi6ga6on
• Conclusion
QualitaIve Analysis
Current SituaIon • Q2 2015 • Historically resilient to declining profits • Compe,,ve advantage: Quick service, low prices, powerful franchising network
• CEO, Steve Easterbrook • May 2015, CEO has proposed a Turnaround Plan
• Company decline in revenue and sales • 2014 = “The Lost Year” • Q1 2015: -‐11% revenue • Q2 2015: -‐13% profits, -‐2% sales
Key Issues • Declining profits: Decline in sales and profitability Q1 2015 • Brand trust: Poor percep6on of food quality • Menu: Complex menu slows down opera6ons • Franchisees: Pessimis6c future view • Unfocused: Trying to be everything to everyone
Market Analysis 1. Domes,c Market: 40% opera6ng income
2. Global Lead Market: 40%, Australia, Canada, France, Germany and UK
Well developed franchising organiza6on
Modest opportuni6es for new stores
3. High Growth Market: 10%, China, Italy, Russia, Poland
Growing opportunity for ea6ng-‐out sectors 4. Founda,on Market: 10%, other 100 markets
Focused on local culture and customiza6on
CompeItor Analysis Direct Compe,,ons: Fast food restaurants
Beder fare and faster service Healthy op6ons
Indirect Compe,tors: Specialty restaurants, other causal restaurants
Beder food quality, Various pricing level based on the food
Consumer Analysis Tradi,onal customers:
Changing taste in food Increasing concerns in health issues, like obesity Millennials:
Customizable food
High quality food Healthy food Self image: healthy and savvy
QualitaIve Analysis STRENGTHS
• Global franchising network
• Flexibility in developing new products
• Low price and modestly fast service
WEAKNESSES
• Complex menu
• Low efficiency in global market management
• Low efficiency in premium product
QualitaIve Analysis OPPORTUNITIES
• Growing opportunity for new store in global lead market
THREATS
• Compe66on from direct and indirect compe6tors
• Consumers’ changing taste
QuanItaIve Analysis
Current Financial SituaIon: CompeItor Comparison
-‐0.020
0.000
0.020
0.040
0.060
0.080
McDonald's Taco Bell Chipotle Dunkin' Donuts
Comparable sale growth in 2015 Q2
Current Financial SituaIon: Total Revenue
0.00
2000.00
4000.00
6000.00
8000.00
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Total Revenue ( in US $ Million)
Company-‐operated restaurants Frachised Restaurants
Current Financial SituaIon: OperaIng Income Margin
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Opera6ng Income Margin
Current Financial SituaIon: Net Income Margin
0.00
0.05
0.10
0.15
0.20
0.25
Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Net Income Margin
Current Financial SituaIon: CorrelaIon
Correla6on change from -‐0.85 to 0.28
0.000
0.050
0.100
0.150
0.200
0.250 Sep-‐13
Oct-‐13
Nov-‐13
Dec-‐13
Jan-‐14
Feb-‐14
Mar-‐14
Apr-‐14
May-‐14
Jun-‐14
Jul-‐1
4
Aug-‐14
Sep-‐14
Oct-‐14
Nov-‐14
Dec-‐14
Jan-‐15
Feb-‐15
Mar-‐15
Apr-‐15
May-‐15
Jun-‐15
Propor6on of SGA in Total expense Net income Margin
ProjecIon of the frachisees Cost: Grill, toasters and other equipment : 175 million App, website: 10 million Labeling: 20 million Marke6ng: 25 million Decora6on: 200 million Supervision: 10 million
Benefit: 300 million in saving of SGA expense.
Break-‐even period: 1.5 year
AlternaIve Analysis
AlternaIves
1. Back to Basics • Cut menu items • Leverage compe66ve advantage
2. Reinvent Yourself • Stay current, compete
• Ancillary brand
3. Adjusted Turnaround Plan • Focus on transparency
• Focused geographic segments
AlternaIve 1: Rejected Back to Basics: Tried and tested model of selling burgers + Simplify menu by curng items
+ Leverages resilience
+ Enhances compe66ve advantage
-‐ Does not address changing consumer percep6on
-‐ Not adaptable to poli6cal, environmental, social elements
-‐ Not a compe66ve strategy
AlternaIve 2: Rejected Reinvent Yourself: Through ancillary brands + New brand image
+ Addresses change in customer values (health conscious)
-‐ Building reputa6on and posi6ve brand image takes 6me
-‐ Does not enhance compe66ve advantage
-‐ Alienates loyal fast food lovers
-‐ Risky
AlternaIve 3: OpImal SoluIon Adjusted Turnaround Plan
• Business restructuring • US • Interna6onal Lead Markets: Australia, Canada, Germany, France, UK • High Growth Markets: China, Italy, Poland, Russia, South Korea, Spain, Switzerland, Netherlands • Founda6onal Markets: 100 other countries
• Simplify menu: remove 16 items
• Focus on product quality • Selling 3500 restaurants to franchisees by 2018 • Franchisees pessimis6c about future, but will generate a lot of revenue
• Transparency: promo6ons
JusIficaIon Op,mal Solu,on: Tweaked Turnaround Plan
+ Business restructuring enables growth, quick decision making, and a focused plan per geographic segment
+ Focus on product quality increases consumer percep6on of food quality
+ Transparency promo6ons improve brand trust and image
+ Leverages compe66ve advantage
-‐ Current plan lacks detail
-‐ Trying to please everyone
Decision Matrix 1. Back to Basics 2. Reinvent Yourself 3. Tweaked Turnaround
Plan
Profitability -‐ + +
Timeliness + -‐ +
Risk -‐ -‐ +
Strategic Fit + + +
Compe66ve Advantage
+ -‐ +
ImplementaIon
ImplementaIon Con,nue with Business Restructuring into 4 segments
• US • Standardized menus • Mass customiza6on
• Interna6onal Lead Markets • Healthy menu op6ons • Relabeling
• High Growth Markets • Quality focused • Transparency
• Founda6onal Markets • Local taste
ImplementaIon • US • Preorder • Create a new app • Customize website • Remove kiosks
• Refurbish restaurants • Invi6ng and warm atmosphere
• Standardize menu
• Interna6onal Lead Markets • Replace menu with healthy op6ons • Green label • Marke6ng campaign
• High Growth Markets • Create center of excellence for quality
Risk MiIgaIon RISK
Menu complexity
Image
Cost Franchisee complaints
MITIGATION
Replacing Enhance employee training
Ordering app will reduce wai6ng 6me
Relabeling and marke6ng
Centre of excellence
Removing costs for kiosks
Conclusion
Problem:
How can McDonald’s improve its customer
sa6sfac6on and revenue?
Solu,on:
Adjust current turnaround plan to address brand
trust, and customer sa6sfac6on.
“Transparency and Quality”
