How McDonald’s turned around its fast-food empire

McDonald’s was in the dumps 5 years ago. A focus on franchises and the customer experience righted the ship.


November 18, 2020

In the mid-2010s, McDonald’s — or as it’s affectionately known in Australia, Macca’s — was being dragged by customers and investors alike.

Poor restaurant upkeep, an overly complicated (often unhealthy) menu, and bad PR were chipping away at customer loyalty.

At the same time, the rapid rise of food delivery apps and fast-casual restaurants were bringing new competition to the field.

A turnaround started under CEO Steve Easterbrook

According to a recent article from The Economist, Easterbrook, who took over in March 2015, rolled out a playbook built around simplicity:

  • Refocus on franchises
  • Pare back the menu

In November 2019, Easterbrook was fired by McDonald’s for violating a company policy regarding office romance. The contentious dismissal is ongoing, but the company’s new CEO, Chris Kempczinski, has stayed on Easterbrook’s course.

Franchises

In 2015, 82% of the chain’s ~39k restaurants were franchises. By the end of 2019, that was up to 93%.

McDonald’s typically owns the land of its franchises, providing it with more consistent rental income and royalties. This also incentivizes the company — not just its franchisees — to invest in refurbishing its restaurants.

Menu

On the menu front, the company made a few notable changes:

  • The Big Mac and Quarter Pounders that long defined Mickey D’s have returned to prominence.
  • The rollout of the all-day breakfast menu pleased long-time customers.
  • Most recently, it’s ramping up efforts on hot food trends (chicken and plant-based items)

Collectively, these changes have paid off: In 2019, the chain’s revenue topped $100B — and it managed to generate 43% margins in an industry that doesn’t allow for much wiggle room.

Since Easterbrook’s takeover, McDonald’s has seen its market value rise from ~$90B to ~$160B.

How the fast-food giant has adjusted during COVID

In 2020, Kempczinski has stuck with the strategy of his predecessor and double-quarter-pounder’d down (sorry) on customer experience.

Pre-COVID, the company acquired the AI upstart Apprente to automate ordering and upgrade its kiosk technology. This move has proved to be a game-changer as the pandemic has upended indoor dining.

In other words: Macca’s is backas.

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