mcdonalds at a cross road- meeting the future · pdf file · 2016-01-05mcdonalds...

McDonalds at a cross road- Meeting the future LEONARD, NICOLE, NIKLAS & SOFIE

LUND CONSULTANCY GROUP

Agenda

!  Analysis

!  Alternative actions

!  Recommendation

!  Implementation

!  Financial implications

!  Risks

!  Conclusion

Lund Consultancy Team

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Analysis Alternatives Recommendation Implementation Risk Conclusion


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How should McDonalds focus and structure its business in order to meet

changing customer preferences while not diluting the brand

Regain brand identity by introducing ‘Green by McDonalds’ targeting

conscious consumers in developed markets, while going back to the roots

with the mother brand

Main Challenge

Recommendation

The McDonalds brand identity at it’s core



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Value proposition Great burgers

Fast Cheap

Expression Strong colours

Packaging Slogan

Mission & Vision Serve tasty food at a very fast pace to the

world

Relationships Short but loyal

Franchise focus

Great burgers Consistent taste Convenience,

Affordable

Culture Young

Fast paced

Position The number one stop for fast food in a fast

moving world

Personality Young and vibrant

Competencies Sourcing

Market knowledge World presence

Internal

External

McDonalds – the mother brand at it’s roots



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For whom

• Fast moving consumers looking for a quick meal of great tasting burgers • All ages focused on middle class

In the market of

• Fast food • Burgers, fries and add-ons

Promise

• Best possible price for burgers and fast food with great taste • “Im loving it”

Proven by • World presence, history, American burger heritage

McDonalds core identity and its reputation is not aligned



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Identity Fast, cheap, healthy and premium

Communication Marketing and menu updates

Reputation “Cheap, greasy and unhealthy



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Global reach Economies of scale Brand awareness

Health trends Sustainability

Scalability in franchise concept

Reputation problems “too big”

Franchise dissatisfaction

Health trends Increased competition Food safety scandals

Strengths Weaknesses

Opportunities Threats

Internal

External

The competition is increasing from more premium players



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Price level

Perceived quality and/or health

Chipotle

Panera

Shake Shack

Habit Burger

Mcdonald’s

Jimmy john’s

Green by McD

Market segments in different phases and hence with different needs for the QSR* market



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Growth

Time

Take-off Evolving Stagnation Decline

High growth

Int. Lead

Foundational USA

*QSR: Quick service restaurant

The customer preference is changing in the more developed markets



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Demand for heathy options in QSR

Country development

China

India

Europe

Japan

Russia

North America

Stakeholders have different demands



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Employees and society

Work environment

Sustainability

Franchisers

Initial investment at minimum

Operational efficiency

Stability

Customers

Value for money

In-line with self perception

Fast and tasty

Shareholders

Returns and sustainability

Stakeholder needs



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How should McDonalds focus and structure its business in order to meet changing customer

preferences while not diluting the brand

Main Challenge

Three alternatives for future operations



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Status quo 1

Revolutionize the business model and move towards being a healthy alternative 2

Introduce “Green by McDonalds” and go back to the roots with the mother brand 3

Alternative 1, Focus on the development of current business



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Status quo 1



-  Continue with a heavily franchised business model -  Focus on improving efficiency and effectiveness by streamlining global resources

-  Satisfying both healthy trend and original core customers under one brand

Alternative 2, is about going all-in on the healthy trend



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Status quo 1



-  Rebrand the company as a healthy food chain -  Focus on high quality, trend sensitivity and sustainability

-  High prices but with focus on value for money

Alternative 3, “Green by McDonalds” and go back to the roots with the mother brand



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Status quo 1



-  Daughter brand with focus on healthy and sustainable food -  Daughter brand “green by McDonalds targeting conscious consumers in

developed countries -  Mother brand focusing on simplification and quality burgers

Four critical factors for success



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Brand Identity - Is the alternative facilitating an improved brand identity?

Meeting customer demand - Is the alternative in line with what consumers want?

Corporate flexibility - Is the alternative enabling for the company to be agile in it’s

operations?

Sustainability - Is the alternative a step towards environmental friendliness?

Alternative 3 is the most favorable



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Brand Identity

Meeting customer demand

Corporate flexibility

Sustainability

1. Status quo 2. Going all green

3. Introduce daughter brand and go back to

roots

NO

NO

SEMI

SEMI

SEMI

YES

NO

YES

YES

YES

YES

YES



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Regain brand identity by introducing ‘Green by McDonalds’ targeting conscious consumers in developed markets, while going back to the

roots with the mother brand

Recommendation

The daughter brands position meets a growing demand


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For whom • Conscious consumers looking for convenient food

In the market of

• Healthy fast food

Promise • Fast and healthy food at a convenient location

Proven by • Track record, company size, food knowledge




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Overview: Implementation overview

YEAR 1

-  Research and development

-  Internal communication

-  Preparation of external roll out

YEAR 4-5 -  Expand Green by

McDonalds to new markets

-  Monitor and evaluate

YEAR 2-3

-  Worldwide roll-out of McDonalds “Back to the roots”

-  Roll-out of Green by McDonalds in developed countries

-  Marketing campaigns



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The three step process of our strategy

INTERNAL OPERATIONS

-  Internal communication

-  Change management -  Franchise platform -  Aligning brand identity

MARKETING ACTIONS -  Communicate brand

image. -  Target existing and

new customers -  Increase brand

awareness

VALUE PROPOSITION

Restructure and redefine ! Same core, different offerings -  McDonalds -  Green by McDonalds



23 For every big external change, it has to start with going internally

CHANGE MANAGEMENT Recruit group to work with research, development and communication of new changes.

BRAND IDENTITY ALIGNMENT Look to the corporate identity looking to history, track record, internal organization and future goals. Refocus in order to match all parts with McDonalds core promise.

FRANCHISE PLATFORM Decrease gap to local franchisers through introducing an online platform where franchisers can connect. Platform can be used to monitor, communicate change and support and motivate.

INTERNAL INFORMATION AND COMMUNICATION Be transparent to stakeholders and employees. Inform, explain, support and motivate to get everyone on board with the changes.



24 Increase relevance and competitiveness through redefining value proposition

McDonalds

“Back to the roots: Great products at any time”

-  Re-evaluate menu -  Focus on what you are

famous for. Simple food, no hassle.

-  Same price, new improved menu.

-  Food safety and value for money

Franchise Selection Criteria

-  Track Record -  QSR Experience -  Creative mindset -  “I’m loving it” attitude -  Team person -  Take initiatives -  Global thinking, local

adaptiveness

Green by McDonalds

-  Same core values, different concept.

-  Target conscious consumers

-  Millennials -  Sustainable approach -  Limited menu

-  50% vegetarian -  Higher price but value

for money



25 Gain awareness and successfully perceived image through multichannel marketing

McDonalds

“Same products, same price, better quality”

-  McClassics -  Online marketing

-  Highlight classics -  Bring back oldies but

goodies -  Heritage stamps

-  80+ years of knowledge in business

Green by McDonalds

•  Sustainability campaign •  Green the earth

•  Pop-up concept •  Presence at events,

festivals •  Online marketing

•  Social marketing campaigns

•  McGreen Community

I’m lovin it every day at any time and place

Timeline



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McDonalds ! 2016! 2017! 2018! 2019! 2020!

Internal organisation!

Recruit change mgmt! !

Develop guidelines! !

Brand Identity! !

Internal communication! !

Value Proposition!

Development of new concept! !

Roll-out of concept! ! !

Development of Green by McDonalds! !

Roll-out of Green by McDonalds! ! !

Marketing!

McDonalds Marketing Campaign! ! !

Green by McDonalds campaign! ! !

Monitor! ! !

Assumptions reaching future profit



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Assumptions! 2016! 2017! 2018!

Ownership strategy selling off 3 500 restaurants to franschisees by 2018! 1167! 1167! 1167!

Green by McDonalds 5 % new, 1 600 restaurants by 2018! 533! 533! 534!

Increased revenue growth 8 %!

SG&A $300 Million savings to 2017! -150! -150!

Revenue from Green McDonalds 20 % increase

Split view of change in ownership strategy introducing Green franchise



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Overview restaurants (Million USD)! 2015! 2016! 2017! 2018!

Total franchise! 25,300! 26,467! 27,633! 28,800!

Revenue per franchise! 0.396! 0.409! 0.423! 0.438!

Total owned restaurants! 6,700! 6,066! 5,433! 4,800!

Revenue per owned! 2.93! 3.49! 4.21! 5.15!

Green franchised! -! 533! 533! 533!

Revenue per green franchise! -! 0.49! 0.51! 0.57!

Total restaurants! 32,000! 32,533! 33,066! 33,600!

Total revenue increase! 29,636! 32,269! 34,838! 37,637!

New investments to secure the implementation of future success



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Investments (Million USD)! 2016! 2017! 2018!

R&D of menu both existing and Green! 10! 2! 2!Sustainibility campaign! 3! 3! 3!Online! 0,5! 0,5! 0,5!TV comercial! 2! 2! 2!Green sponsored events! "! 2! 2!Green concept marketing! 1! 1! 1!Green online! 0,5! 0,5! 0,5!Employee training! 10! 5! 1!Change-management-group! 0.8! 0.8! 0.8!Total investment costs! 26.8! 15.8! 11.8!

High future increase in net income



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Income Statements!US$ Millions! 2012! 2013! 2014! 2015E! 2016E! 2017E! 2018E!

Sales by company owned restaurants! 18602! 18874! 18169! 19622.5! 21192! 22887.7! 24718.72!

Revenues from franchised restaurants! 8964! 9231! 9272! 10013.8! 10815! 11680! 12614.45!Revenues from Green franchises! -! -! -! -! 261.4! 270.3! 303.5!Total Revenues! 27567! 28105! 27441! 29636! 32269! 34838! 37637!Operating costs and expenses!Food & Paper! 6318! 6361! 6129! 6190! 6252! 6315! 6378!Payroll etc.! 4710! 4824! 4756! 4804! 4852! 4900! 4949!Occupancy etc.! 4195! 4393! 4402! 4446! 4490! 4535! 4581!Franchised restaurants! 1527! 1624! 1697! 1714! 1731! 1748! 1766!SG&A! 2455! 2385! 2487! 2512! 2414! 2304! 2189!Other operating costs! -243! -247! 18! 18! 18! 19! 19!Total operating costs! 18962! 19341! 19492! 19687! 19884! 20083! 20283!Operating income! 8604! 8764! 7949! 9949! 12385! 14755! 17353!Interest expense etc.! 525! 558! 577! 583! 589! 594! 600!Provision for taxes! 2614! 2618! 2614! 2640! 2667! 2693! 2720!Net income! 5464! 5586! 4757! 6726! 9130! 11468! 14033!

37 % Increase

More than doubled!

Risks are manageable



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RISKS 1.  Daughter brand not able

to wash off McD’s image of being unhealthy

2.  Loyal customer not supporting McD stepping

away from their core

3.  Long start-up time to find suitable franchisers

4.  Problems with monitoring

the increased number of franchisers

MITIGATION 1.  Marketing campaigns

together with research reports on new healthy

food alternative

2.  Inform about benefits of healthy food and that the daughter brand is an add-

on

3.  Take advantage of McDs global reach to ensure

franchisers fulfilling criteria 4.  Setup clear milestones

No risk at high



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3 4

1

2

Impact

Probability



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How should McDonalds focus and structure its business in order to meet

changing customer preferences while not diluting the brand

Regain brand identity by introducing ‘Green by McDonalds’ targeting

conscious consumers in developed markets, while going back to the roots

with the mother brand

Main Challenge

Recommendation

Presentation overview

Analysis Alternatives Implementation Finance Risks


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mcdonalds at a cross road- meeting the future · pdf file · 2016-01-05mcdonalds...

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