Has McDonald’s ‘gourmet’ overhaul failed?

MCDONALD’S has splashed out millions on transforming itself to a hip, modern fast-food chain. But some argue it’s all been for nothing.
Frank Chung
JULY 25, 2018
FOUR years after McDonald’s kicked off its much-hyped build-your-own-burger experiment, thousands of dollars worth of special kitchen equipment franchisees were required to purchase is gathering dust.
The fast-food chain would not confirm exactly how much equipment was now sitting idle after Create Your Taste was ditched last year.
But McDonald’s Australia vice president of operations Sharon Paz said: “The majority of equipment has been repurposed and it’s likely we’ll find uses for anything remaining for future platforms (or) initiatives.”
Following complaints from franchisees that it was slowing down kitchens, Create Your Taste was replaced with the non-customisable Gourmet Creations range, having already been ditched a year earlier in the US in favour of Signature Crafted Recipes.
“The McDonald’s franchise structure means if corporate office makes a decision to extend the range, move into a different segment in the market or develop a different menu, franchisees are obligated to comply,” QUT marketing professor Dr Gary Mortimer said.
“While consumers saw the menu evolve and change, behind the scenes franchisees were tasked with purchasing new assets, new menus and new products that obviously struggled to gain traction in the marketplace.”
According to Business Insider, US franchisees forked out up to $170,000 ($US125,000) per restaurant installing the self-service kiosks alone.
One McDonald’s employee posting on Reddit said the new equipment included a special toaster, a new work bench, a heating cabinet and a new fridge, as well as various tools only available from one supplier.
In a rant about being “forced” to use a touchscreen kiosk, another user questioned McDonald’s foray into gourmet burgers, self-service ordering and table service.
“When and why did Macca’s get like this?” they wrote. “They used to be fast and cheap, you line up, order, pay and get your meal. Now I can get a parma with salad and chips cheaper than a Big Mac meal. What’s the point going there any more?”
Dr Mortimer said McDonald’s had “confused” its customers with its push into “fast casual” to take on the likes of Grill’d and Guzman y Gomez.
“It was a reaction to a shift in the marketplace because clearly some of their customers were shifting to a better quality burger offer,” he said.
“The challenge for any business, however, is if you stray too far away from your core, sustainable, competitive advantage, you dilute your market. So those customers that sought a good value offer from McDonald’s became confused and the market was still too small for McDonald’s to make it a viable business.”
He said the fast-food chain “many years ago saw how consumers were looking for a good value cafe experience and very quickly moved into that market”, with McCafe continuing to “work exceptionally well for them”.
“I suspect McDonald’s saw the success they had moving into that segment and imagined they could replicate it with a better-quality fast-casual dining offer, and that hasn’t been the case,” he said.
“The cafe market was dominated by a number of smaller players that had higher prices. McDonald’s were able to enter the market with a cafe experience at a low price offer. When they moved into gourmet casual, already players were established like Grill’d and Oporto with much better quality burgers, and it wasn’t their core business.”
Last year, US franchisees responding to a survey by Nomura analyst Mark Kalinowski slammed head office, saying “the partnership is dead”. Franchisees complained about costly and complex changes including installing self-service kiosks, remodelling stores and adding gourmet options.
“We are doing so much, so fast and we aren’t doing any of it properly,” one franchisee wrote. “Combine that with our staffing problems and we might be close to breaking McDonald’s.”
Another said: “Every week there is a new initiative for the managers to focus on. They need to slow the initiatives down and have less of them, as even our long-term employees are now quitting … McDonald’s Corporation is thinking short term, not long term.”
The survey covered 27 franchisees with 241 stores. In 2015, a similar survey elicited fierce criticism of All-Day Breakfast, with franchisees complaining that it had slowed down service, lowered average bills and sparked chaos in the kitchens.
Last month, McDonald’s chief executive Steve Easterbrook said self-service kiosks were delivering results.
“What we’re finding is when people dwell more, they select more,” he told CNBC.
“There’s a little bit of an average cheque boost. If you think about only two years ago, if you were a customer there were two ways you can get served at McDonald’s. You walked to the front counter and line up and take your drink and find a table or you go through the drive through.
“We’re introducing many options. They can order through mobile, they can come kerbside and we’ll run it out as well as the existing traditional ways. You can pay in different ways and customise your food in different ways. I think we’re trying to add more choice and variety.”
Ms Paz said in a statement, “At Macca’s, all of our innovation is driven by customers. This is not only about the food on our menu, but also giving our customers choice in how they’re served.
“Whether you want to grab a burger on the go from a drive-through, have Maccas delivered to your door, or sit down in a restaurant and have your meal served to your table, we now offer that choice.
“Our app and digital kiosks have been popular with people choosing those options, but customers can also still order at the counter if they would prefer.”
frank.chung@news.com.au