McDonald’s has taken bold and urgent action to reset its business and prepare for the next chapter in its history by implementing a turnaround plan based on delivering hot and fresh food, fast and friendly service, and a contemporary restaurant experience. FEJ explores how this is all underpinned by a strategy to specify foodservice equipment that meets its needs on multiple levels.
Ubiquitous quick service restaurant chain McDonald’s is undoubtedly on the hit list of many a catering equipment manufacturer. The rewards of doing business with a chain that operates 36,000 restaurants around the globe are startlingly obvious, although getting a foot in the door is another matter entirely.
But according to Bernard Morauw, senior director of architecture and restaurant design at McDonald’s International, the message for prospective kitchen suppliers as far as expectations go is quite a straightforward one. “It is really about keeping the cost down and the quality of the equipment up — and I would like to keep those two elements together,” he says.
24/7 service has really raised the bar in terms of reliability. understanding the harsh working conditions around the equipment and the design of the solutions have become critical”
It might sound a pretty simple statement, but it is deeply indicative of the global corporate behemoth that McDonald’s has become today. This month it will open its first store in Kazakhstan, the 120th country in which its famous golden arches have been erected. 69 million people pass through the doors or drive-through lanes of its restaurants every day, equivalent to around 1% of the world’s population.
Given this scale, not to mention the fact that around 35% of restaurant energy spend is related to the kitchen, it is little wonder the chain demands the top kit at the most competitive prices. The company’s ever-evolving business model, meanwhile, is also impacting the type and brand of equipment it is specifying. Just in the last five or six years, for example, many of McDonald’s restaurants have moved to 24/7 service, putting even greater onus on its kitchen infrastructure to work harder and longer.
“It has really raised the bar in terms of the reliability of equipment — understanding the very harsh working conditions around the equipment and the design of the solutions have become absolutely critical,” admitted Morauw, speaking at the recent CESA annual conference in London.
On top of that, other strategic changes are being implemented. It is expanding into table service, investing heavily in widening its menus — particularly in the wake of competition from gourmet burger rivals — and launching self-service kiosks. In the UK, it is currently piloting a trio of new premium burgers made from a thicker beef patty in 28 restaurants. All of these things require the product to get to the customer quicker and taste better than ever before, and for that to happen the kitchen equipment it uses must be infallible. But it is not only about reacting to the here and now. McDonald’s is also looking for suppliers with foresight into the kitchen trends of tomorrow.
“Future proofing” is a term that Morauw refers to repeatedly, while solutions that can deliver true flexibility are highly prized. “For us, it is about equipment that can evolve the footprint, the type of products we offer and the speed at which we serve. In the early years of McDonald’s we came from the old school where each piece of equipment was designed for one product. But to have the flexibility to cook different products on one piece of equipment is becoming an important element when designing our solutions.”
Morauw, who was formerly director of equipment at McDonald’s Europe, was asked at the CESA Conference what sort of appetite McDonald’s has for working with new suppliers that can prove their innovation. “I would say that our appetite for innovation is very high in all areas, including foodservice equipment,” was his response, as he explained that the chain’s first priority will always be to evaluate what impact any new equipment might have on its core products (namely its French fries and Big Macs). “We have to have a due diligence process to make sure that we don’t impact the quality and image of our core food. But beside that, any innovation that can cook faster, hold better or finish better is always going to be interesting for us.”
Any innovation that can cook faster, hold better or finish better is always going to be interesting for us”
Anything that can reduce complexity and make the operation easier also gets a big tick as far as Morauw is concerned. “There are so many pieces of equipment that are too difficult to maintain, are not easy to calibrate, and those kinds of things are really critical for us when it comes to operational management,” he says. Ultimately, it boils down to a CAPEX versus OPEX calculation. “At the end of the day, when we put together a business case on a piece of equipment the reality is that it is always about the lifecycle cost,” he admits.
At a strategic level, things are certainly changing at McDonald’s. Earlier this year, British executive Steve Easterbrook was brought in as CEO to lead the turnaround and transition of the company’s global business.
He has set McDonald’s capital expenditure budget at around $2 billion (£1.3billion) for 2016 and revealed plans to open another 1,000 new restaurants globally, the equivalent of almost three a day for the entire year. Investment will be split between launching the new stores and reinvesting in existing restaurants. However, capital expenditure is expected to “modestly decline” in the coming years as Easterbrook implements the transition to a more heavily franchised structure in future.
McDonald’s had targeted the refranvchising of 3,500 restaurants previously but has now raised that to 4,000. Accelerating the pace of refranchising is designed to increase the global franchised percentage from 81% to about 93% by the end of 2018. Long-term, the chain’s goal is to become 95% franchised.
“While we are still in the early stages of turning around our business, we are gaining momentum by focusing on our customers and what matters most to them — hot and fresh food, fast and friendly service, and a contemporary restaurant experience at the value of McDonald’s,” says Easterbrook.
“My priorities for McDonald’s as a modern, progressive burger company are three-fold: driving operational growth, creating brand excitement and enhancing financial value. We are taking bold, urgent action to reset the business and prepare the company for the next chapter of its history.”
Underpinning this strategy is the ongoing need for kitchen equipment that meets its demands for quality, price and flexibility on a global scale.
McDonald’s: Top 5 foodservice equipment priorities
1. Keep the costs of procurement down and [the quality of foodservice] equipment up.
2. Provide equipment capable of thriving in challenging restaurant environments under rigorous 24/7 operating conditions.
3. ‘Future proof’ equipment by building in enough innovation today to handle new menu items tomorrow.
4. Reduce complexity and make operations easier for managers and crew members.
5. Maintain a service network that supports 36,000 restaurants around the world.