McDonald's to localize and customize

by Keith Nunes
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OAK BROOK, Ill. – During many recent earnings calls with financial analysts, the McDonald’s Corp. has introduced several new strategic endeavors designed to improve results. The company’s most-recent call on Oct. 21 was no different. Endeavors the company has committed to in 2015 include a focus on customization and regional choice.

“While our underlying goal is to change the trajectory of our financial performance, our internal projections assume continued sales and earnings pressure on the business in the near term,” said Pete Bensen, CFO. “Let me assure you that there is an acute understanding of the situation, along with a strong sense of urgency to take the necessary steps to address our current challenges.”

The fast-food chain posted net income of $1.068 billion in the third quarter ended Sept. 30, equal to $1.09 per share on the common stock, down 30 percent from $1.522 billion, or $1.52 per share, in the same period a year ago. Revenues were $6.987 billion, down 5 percent from $7.323 billion.

“The key to our success will be our ability to deliver a more relevant McDonald's experience for all of our customers,” said Don Thompson, president and chief executive officer, during the call. “Customers want to personalize their meals with locally relevant ingredients. They also want to enjoy eating in a contemporary, inviting atmosphere and they want choices, choices in how they order, choices in what they order and how they’re served.”

The fast-food chain plans to give its regional managers greater autonomy in order to improve business performance. This will open opportunities for the local markets to pull from the company’s pipeline and introduce such local tastes as a chorizo burrito, cheddar bacon onion sandwich, a clubhouse burger or mozzarella sticks.

“The step after enhanced local relevance is providing greater personalization and customization on the menu…,” Thompson said.

The customization component of McDonald’s strategy will be the launch of a concept it is calling “Create your taste,” which will feature a burger platform and allow customers to customize the end product.

To make the customization platform work from an operations perspective, Thompson said the company is simplifying other aspects of its menu. For example, McDonald’s is working to remove the complexity required to prepare low volume items so its employees may focus on higher volume items that may require more steps to prepare.

When asked how shifting attitudes toward organic foods and those formulated with non-bioengineered ingredients may be affecting the company, Thompson said it is less about specific ingredients and more about transparency.

“We believe that if you look at the broader market and you look at what customers are asking for, they are asking for transparency, they’re asking to know what’s in the food, they’re asking for integrity of the food,” he said. “There are cases and there are markets where organics are drivers at a higher level, but I would offer that the highest level is more about their transparency, integrity and also the ability to customize and have what they want on a sandwich or a burger.

“For those of you who visit our restaurants and have been behind the counters, you’ve seen the freshness and the quality of our produce. However, not everyone has done that and seen that. So we want to make sure that we're transparent enough to do that,” he concluded.
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