Six weeks after McDonald’s new CEO revealed his turnaround strategy to revive business, some former executives still aren’t sure how he plans to fix the struggling chain.
“To be frank, I haven’t seen a plan yet,” says Richard Adams, who worked in McDonald’s corporate offices for nearly two decades and spent 12 years as a franchisee. “It seems like a lot of talk.”
McDonald’s CEO Steve Easterbrook revealed his strategy to great fanfare in early May with the release of a rare 23-minute video. In the video, Easterbrook speaks directly into the camera about how he will turn McDonald’s into a “modern, progressive burger company” by restructuring management, refranchising restaurants, and listening more to customers.
“Our recent performance has been poor. The numbers don’t lie,” Easterbrook said. “I will not shy away from the urgent need to reset this business.”
The video struck many as a bizarre move by the CEO of the biggest burger chain in the world.
“I thought the execution was disappointing and dull,” says former McDonald’s CMO Larry Light, who is now chairman Arcature, a brand management consulting firm. He left McDonald’s in 2005. He said the message seemed like it was written for Wall Street analysts, not customers.
“I was shocked that in the turnaround plan the customer was not addressed at all,” Light says. “Refranchising and reorganising doesn’t help the customer.”
The plan also failed to address McDonald’s two biggest issues: Haemorrhaging of the customer base and deterioration of the brand, he said.
McDonald’s has to find a way to stop the bleeding in the next three to six months if it wants to achieve a successful turnaround, according to Light, who was involved in a similar turnaround at the brand in 2002.
Near-term steps should include improvements to the food quality, service speed, and cleanliness of the restaurants, he said.
But the strategy unveiled in May lacked any of those details.
“He seems to be reluctant to announce what his three-to-six-month plan is to halt the decline,” Light said of Easterbrook. “Maybe it’s because there is no plan.”
McDonald’s spokeswoman Lisa McComb said Easterbrook plans to announce more specifics in the future.
“Steve Easterbrook has shared only the initial steps of his turnaround plan, not full details,” McComb said. “This is an ongoing, comprehensive strategy and more specifics will come at the stages our leadership team deems appropriate.”
McDonald’s same-store sales have fallen for the last six consecutive quarters in the US. The chain is battling declining traffic, a damaged public perception, and a relationship with franchisees that has hit an all-time low.
McDonald’s hired Easterbrook in March to replace former CEO Don Thompson and reinvigorate the brand.
The 47-year-old Easterbrook has been credited with leading a turnaround in McDonald’s UK restaurants by focusing on better-quality food and boldly taking on the chain’s critics.
He reduced salt in the fries, introduced organic milk, and in 2006, he went on British television to debate one of McDonald’s fiercest opponents: Eric Schlosser, the author of “Fast Food Nation.”
“Everyone likes a burger every now and then,” he said in the debate, according to the Wall Street Journal. “If you don’t want fries with your Happy Meal, you can switch it for a fruit bag.”
‘He’s a stranger to everybody’
Easterbrook’s courage in the face of criticism could be effective at a time when McDonald’s is battling a deteriorating brand perception in the US.
But Light points out that the 1,200-store UK system is a much different animal than McDonald’s in the US, which is comprised of more than 14,000 restaurants.
“What worked in the UK is not the same as what will need to be done in the US,” he says.
Easterbrook will need to gain the trust of franchisees — who operate 90% of McDonald’s US restaurants — to get anything done. That could be a difficult task considering he spent almost his entire career working for the UK system, according to Adams.
“Nobody knows Easterbrook. He’s a product of the European market and there is no cross-pollination between McDonald’s US and the UK system,” says Adams, who now runs Franchise Equity group, a consulting firm for franchisees. “He’s a stranger to everybody.”
It doesn’t help that McDonald’s has had a revolving door of CEOs over the last two decades.
“Franchisees think long term,” says Adams, who surveys about one third of McDonald’s franchisees every quarter. “Over the last 20 years, McDonald’s has had seven CEOs. So if you are a franchisee, you might just ignore [Easterbrook] until he goes away.”
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