McDonald's has long been an American restaurant favorite. However, in 2003 sales figures showed the fast food empire was suffering to maintain their status. Stagnant sales, rising costs, failed attempts at new menu items, falling stock price and a lagging quality and service rating by customers all have left the restaurant chain in decline. What’s the Problem?
At the top for so long, McDonald’s has now found itself lacking in the areas it has long prided itself on: quality and service, according to customer surveys. Drive-thru windows are too slow, improper staffing make “rush hours” more bogged down and their products aren’t as consistent as before. However, that’s not the only reason for the company’s situation. McDonald’s is also facing a rapidly fragmenting market, with new quick meals readily available and a growing restaurant category, the “fast-casual” segment (Cravens & Piercy, 2009, p. 282). Competitors like Burger King, Wendy’s and Subway have stolen away customers from the fast but fattening Mickey D’s while they sat idol without significant new menu items or campaigns to reach new customers. McDonald’s most popular products, the trademark Big Mac and Happy Meal, have actually been the target of law suits claiming McDonald's is responsible for America's poor health – a major sign the company needs a change (The McDonald’s Turnaround Story, 2004). Additionally, in price wars with competition, McDonalds created the Dollar Menu that cheapened product value and decreased profits, some stores even taking a loss on the $1 items. The restaurant’s decline along with heavy-handed management including set prices, fixed menu items and forced kitchen upgrades, has caused one of the most significant problems: franchisers leaving the system. With an increase in competition, poor products and service and a lack of response to the changing customer and franchise-owner needs, the restaurant chain has to take action to increase profits and accomplish its mission: to be customers' favorite place and way to eat (Our Company, 2010). "The world has changed. Our customers have changed. We have to change too," said Jim Cantalupo, former chairman and CEO of McDonald’s (Cowed into Change, 2003). Facing Change
McDonald’s has controlled their franchises to their fill. The menu items and pricing are decided solely by McDonald’s corporation without consideration of customer demands at the local franchises. They are forced to enforce a low pricing strategy, which created losses for some. With growing burdens on franchisers and many of them leaving the business, causing in return a burden on the corporation, McDonald’s has to take some initiatives to strengthen the relationship with its restaurant owners. One strategy could include allowing franchise owners to be responsible for their stores’ look and equipment. By allowing owners to choose the style of their store and determine what equipment they want to install, there is more freedom, which increases control in running the restaurant and strengthens the relationship between owners and McDonald’s. Additionally, it offers the opportunity for stores to be more personalized to the area and bring a unique experience for customers in each store. The downside to allowing more freedoms in this area could potentially result in restaurant looks differing too much from the company’s well-known brand image, potentially causing reduced trust and perceived customer quality. Additionally, by choosing to or not to install certain equipment upgrades, locations could provide different levels of speed, quality and service – a staple in standardizing McDonald’s image. With much flex, customers will notice differences and likely label the company as inconsistent. Another part of this strategy would be for McDonald’s to put the authority of menu items in the hands of individual franchises. This would assist in matching local demands with the items to generate the highest revenue. And since many...
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