McDonald's 'small test' has big implications

by Ketih Nunes
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McDonald's is testing fresh beef in its Quarter Pounders.
 

NEW YORK — Mike Andres, president of McDonald’s USA, has freed up the fast-food chain’s 23 US regions “to have some fun at the local level,” said Steve Easterbrook, president and CEO. The results of Andres’ efforts include all-day breakfast, which originated in Southern California, and more recently, a focus on fresh beef to be used in McDonald’s Quarter Pounders. 

Steve Easterbrook, McDonald's
Steve Easterbrook, president and CEO of McDonald's 

“There is some passion around how can we help serve the best burger possible, but still with a speed of McDonald’s and a value of McDonald’s,” Easterbrook said June 1 during a presentation at the Sanford C Bernstein Strategic Decisions Conference taking place in New York. “And so we are challenging some of the legacy thinking.”

The initiative is currently running in 14 stores. Easterbrook called it “early days” and noted there are many operational issues that need to be addressed before it could expand into other regions. Such basic internal parameters as maintaining food safety, consistency and quality all must be evaluated.

Other operational issues include storage. Stores have freezers to accommodate the frozen beef needed to produce burgers. Shifting to a fresh product would require the addition of refrigerated chillers to accommodate the fresh product.

“So, we’re working for that type of stuff,” Easterbrook said. “But in terms of some existing grills with existing platforms, there’s no capital (that) will be required.

 
McDonald's stores have freezers to accommodate the frozen beef needed to produce burgers. 
 
“It’s a small test, but I think it’s more symptomatic of unlocking the mindset, which is what excites me more than anything else. We are getting the entrepreneurial spirit back."

The test of a fresh burger concept may portend McDonald’s efforts to enter the “better burger” category and challenge such concepts as Five Guys or Shake Shack.

“… There is more opportunity for us to move up the pricing ladder than for the mid-tier or that fast-casual (concept) to move down,” Easterbrook said. “Their business models aren’t really built on the basis where they will have to compete on a price basis and reduce.

“For us, our ability to step up the price ladder is greater but we’ve got to earn the right. We can’t just do it by just moving prices, we have to enhance the entire experience, the whole restaurant design and facility, the service experience, the food and continue to (be) best in the quality.”

Looking 5 or 10 years into the future, Easterbrook said there is a “wonderful void” to be filled between QSR and fast casual.

“Our ability to move up there will be dictated by customers and not by use,” he said. “But if we keep enhancing our broader experience then I believe there is upside to it, but don’t expect (it) anytime soon.”

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