Four hundred and fifty million dollars. That’s $450 million—nearly half a billion dollars. It’s a big chunk of change, approximately what McAlister’s Deli and Auntie Anne’s each did in system-wide sales last year.
It’s also, according to company estimates, about what Ronald McDonald House Charities (RMHC), the 501(c)(3) nonprofit organization that is McDonald’s charity of choice, raised in 2013 to support nearly nine million children and families in need of medical care globally. While it might seem puny compared with McDonald’s U.S. sales alone—nearly $36 billion in 2013—it’s an enormous amount for an organization founded 40 years ago as a way to help families stay together while a child is undergoing medical treatment.
And for McDonald’s, it’s the cornerstone of a corporate social responsibility (CSR) plan that aims to position the company not just as a better steward of the environment and of consumer nutrition, but also as a global corporate entity with the power to enact long-term social change.
“McDonald’s brand ambition of good food being served by good people by being a good neighbor is part of our DNA,” says J.C. Gonzalez-Mendez, senior vice president of global corporate social responsibility, sustainability, and philanthropy for McDonald’s, as well as president and CEO of RMHC. “But it’s not only employing local people, buying local resources, and paying local taxes; it’s also making significant changes to the community, because today, consumers expect McDonald’s to be part of the solution of societal problems that are not necessarily addressed by governments or other entities.”
Consumer expectation has been a big reason why McDonald’s in the last two years has tinkered with its menu—Chicken McWraps, build-your-own-burger kiosks, and the Dollar Menu & More among
its projects—as it stares at sluggish quarterly results and finds itself stuck between customer demand for value and the pressure to improve menu nutrition and quality.
And it’s a big reason why, this year, in honor of year No. 40, RMHC will double down on the message it’s delivering about the work it and McDonald’s are doing to help children and families in need all over the world.
“I don’t think we’ve done a good job at leveraging both brands,” Gonzalez-Mendez says. “I don’t think McDonald’s has leveraged RMHC, and I don’t think RMHC has leveraged McDonald’s as much as we could. Very few people know this information. … We need to tell the story.”
“Global in our mindset, local in our execution”
RMHC was founded in 1974 in Philadelphia with support from McDonald’s regional manager (and future McDonald’s USA CEO) Ed Rensi; Leonard Tose, owner of the NFL’s Philadelphia Eagles; Eagles general manager Jim Murray; and Fred Hill, the Eagles tight end whose daughter, Kim, had been diagnosed with leukemia. The group partnered with renowned Children’s Hospital of Philadelphia oncologist Dr. Audrey Evans and opened the first Ronald McDonald House, which was partly funded through proceeds donated from the sale of McDonald’s Shamrock Shakes.
Today, RMHC has nearly 300 local chapters in 58 countries and regions around the world and is a three-pronged effort. Not only do local chapters help fund the building of Ronald McDonald Houses, which are facilities close to children’s hospitals where patients’ families can lodge during care, but they also support Ronald McDonald Family Rooms—centers for rest and regrouping within the hospital—and Ronald McDonald Care Mobiles, which are 40-foot-long, 8-foot-wide vehicles built to deliver pediatric health-care services to kids in need all over the world. By the end of this year, there will be 337 Houses, 200 Family Rooms, and 52 Care Mobiles around the world.
“We serve about 8.9 million children and families annually,” Gonzalez-Mendez says. “That sounds like a lot, but there’s a lot of need, obviously. Unfortunately, there are a lot of families we have to turn away because we just don’t have the space.”
The nonprofit operates as a wholly separate entity from McDonald’s and is supported by corporate partners such as The Coca-Cola Company, Southwest Airlines, AT&T, and Ecolab. Gonzalez-Mendez says RMHC also leverages the McDonald’s system, or what the company calls the “three-legged stool”—franchisees (more than 5,000 globally), employees (about 1.8 million), and suppliers (thousands around the world)—to support the cause.
Then there are the customers. About 70 million people visit McDonald’s every day globally, including 27 million in the U.S., and this population helps activate RMHC in local communities through volunteerism.
“We have 305,000 volunteers that help us provide services that our families truly need,” he says. “I’ve seen [RMHC] grow dramatically over the last few years, and within the next three years, we see it growing by as much as 40 percent because the need is there and because we have tremendous partnerships with companies like McDonald’s, Coca-Cola, and many others.”
To grow, RMHC will need to ramp up its fundraising; chapters cannot build a house until 80 percent of the capital needed is in the bank. And Houses, Family Rooms, and Care Mobiles don’t come cheap. Care Mobiles, for example, cost about $500,000 to get on the road. Gonzalez-Mendez says 89 cents of every $1 raised is used for the organization’s core programs, as well as for grants to groups providing health care and college scholarships for students in financial need who have demonstrated leadership and community involvement.
Fundraising for RMHC is multifaceted. Along with the corporate sponsorships, money is raised with help from RMHC Group Give fundraisers, which are driven by individuals who can set up online donations around certain causes; Coinstar’s Coins That Count program, through which people can donate their change to RMHC at Coinstar machines in grocery stores; and, of course, McDonald’s restaurants, which contribute funds through Happy Meal sales, the annual National Give a Hand Fundraiser and RMHC Day of Change, and the ever-present, in-store donation boxes. Around $28 million was raised through the donation boxes in the U.S. in 2013 alone, Gonzalez-Mendez says.
“Against what a lot of people may think when they see McDonald’s as this big, multinational, huge company, we’re really a local company,” he says. “We’re global in our mindset, but local in our execution. We are a community-based entity. [More than 80] percent of our restaurants are individually owned by local owner-operators, and they’re businesses that employ local people that buy local sources and are within the local churches and the local schools. And we encourage them to be involved.”
Demonstrating the local qualities of a brand like McDonald’s is one of the primary ways companies are climbing onboard the growing CSR movement, a movement that is increasingly dictating much of the quick-service industry’s strategic growth.
“Pressure to be a good neighbor”
The general idea of CSR has been around for generations. Companies have cut checks to charity for decades, both as a way to invest in their communities and to leverage the goodwill generated by the gesture in promoting their business.
Today, however, CSR has taken on newfound relevance in the age of Millennial purchasing power, social media, and intense competition. Experts say companies’ CSR activities—which could include environmental, nutritional, social, and philanthropic efforts, among other things—are more critical today than ever before in influencing customer behavior.
“Consumers today are extraordinarily savvy about what companies are doing,” says Alison DaSilva, executive vice president of Cone Communications’ Research & Insights Group and expert in CSR trends. “You can learn about a company’s products or services, or issues they are supporting or not supporting, so easily because of social media.”
According to a 2013 Cone Communications study, 89 percent of consumers agree that they are likely to switch to a brand that is associated with a good cause, while 85 percent consider a company’s social and environmental commitment before making important decisions.
CSR’s next generation hasn’t been lost on McDonald’s. CEO Don Thompson created Gonzalez-Mendez’s position—bringing together CSR, sustainability, and philanthropy—in 2012 in an attempt to better focus the company’s efforts so it can have a more widespread impact. McDonald’s published its first-ever “CSR & Sustainability Report” in April, outlining positive steps made in 2012 and 2013, and created its Corporate Social Responsibility & Sustainability Framework, which establishes goals for the coming years. The Framework includes a commitment to more sustainable sourcing, restaurant recycling, and energy efficiency, among other things. All of the CSR planning is designed around five core pillars: Food, Sourcing, Planet, People, and Community.
But while sustainable sourcing and energy efficiency may be relatively new territory for McDonald’s, the investment it’s made in RMHC—the core of its Community pillar—is rooted in four decades of hard work.
[pagebreak]
“McDonald’s has always been founded as that community neighbor that cares,” DaSilva says. “They were the first to go out there and raise money for a cause, when you look at the restaurant industry. So they have that credibility, they have that authenticity in their brand.”
Margaret Coady is the executive director of CECP, a coalition of CEOs who have banded together over the idea that societal improvement is an essential measure of business performance. The coalition, cofounded in 1999 by late actor Paul Newman and several other business leaders, emphasizes CEO engagement and impact in corporate philanthropy and includes more than 150 CEOs and chairpersons of major corporations representing approximately $14 billion of annual corporate giving.
Coady says other company leaders can learn from McDonald’s partnership with RMHC about choosing charitable partners for the long-term.
“The nonprofit sector is a bit fragile, and if a company were to change its focus areas frequently, that would be difficult for many nonprofit partners to absorb,” Coady says. “Thinking about a cause that your company can commit to over a period of time is advised because, first of all, the depth of the partnership can evolve. It’s something that your employees and customers can get excited about. But it’s also in the best interests in the health of that nonprofit partner to have some consistency.”
Still, she says, CSR has evolved in the last decade so that companies that previously just donated money through a foundation or charitable arm are now designing programs and choosing cause areas that leverage their expertise and resources. In addition, companies are increasingly looking outside their four walls to causes that aren’t directly connected to their business.
“It’s very common to hear CEOs now talking about the interdependency of communities and business and issues like illiteracy and domestic violence and access to education for both genders,” Coady says. “They’re issues that touch a company even though they’re outside its operations skills.”
That’s been key to McDonald’s work with RMHC for four decades; children’s health care and family support do not directly impact McDonald’s restaurants, but they do impact the communities in which McDonald’s does business. And now, as RMHC turns 40, the company is trying to figure how best to expand the organization’s global reach while more intricately weaving it into the fabric of each individual community.
“There is a lot of pressure on the individual businesses, and especially when it’s franchised, that presents a whole other level of complexity,” DaSilva says. “But they’re getting a lot of community pressure to be a good neighbor.”
“A lot of good music”
The new era of CSR importance may be applying increased pressure on quick-service operators, but some might say it’s happening at a fortunate time, coinciding with the rise of social media and big data.
Whereas donating money to children’s health-care efforts may once have been a sell made purely on good feelings, Gonzalez-Mendez says, today the organization has tangible data available to detail how successful RMHC has been. The nonprofit sponsored a 2012 “Global Impact Study” that detailed its effect for families; for example, it found that it helped parents of sick children save about $311 million annually in hotel costs.
He says the organization can now adjust in real time as it analyzes data points such as whether or not children heal faster with RMHC’s help and how long families of children undergoing medical care stay together.
“You can deduct that well, yeah, [the investment] makes sense, but now we have data that supports it, which allows us to go to the rest of the hospital world that does not have Ronald McDonald Houses or Rooms and sell the idea,” Gonzalez-Mendez says. “Today we’re in 78 percent of the leading children’s hospitals in the world. That sounds impressive, but we’re still leaving 22 percent that are not touched. Now that we have this data that talks about the impact RMHC is having, it’s a lot easier for us to get partnerships with the different hospitals and different medical organizations that give the opportunities for the families to have a place to stay, a place where families can heal together.”
The social media piece to the puzzle, however, is part of a broader storytelling effort that RMHC is hoping to improve.
Due to the fact that McDonald’s and RMHC are separate entities, Gonzalez-Mendez says, the nonprofit organization may be missing out on opportunities to tie positive RMHC stories to the McDonald’s brand—stories like the playground built in Sochi, Russia, for special needs children before the Olympics, or the president of Guatemala serving Big Macs at a restaurant to help raise $1.5 million for the country’s local chapter. He describes RMHC’s global efforts as “a lot of good music being played around McDonaldland, but we’re just not singing the same song.”
“The work that they do is great and it’s been around for a long time, but also feels very separate from the business and separate from the brand,” says Dan Wald, partner with The Boston Consulting Group, a global management consulting firm. “There are a lot of newer places that are trying for something more like what Starbucks has done, which is much more integrated into the fabric of the business.”
DaSilva says companies need to leverage social media and other communication channels to show the impact they are making in their communities. Social media has turned company communications from a one-way conversation into a two-way, she says, and consumers—especially Millennials—are eager to share positive brand stories with their friends and followers.
She points to the fact that RMHC’s donation boxes raised $28 million in 2013 as being a failed opportunity to show off RMHC’s impact. “Where’s the story? Where’s the content? Start showing what the impact is of that $28 million,” she says. “Only 16 percent of Americans feel that companies are having a significant impact with their CSR efforts. That is unbelievable. Only 25 percent feel that they themselves are having an impact by buying or visiting those companies, products, and services. Where’s my motivation to continue doing so?”
Showing McDonald’s customers around the world just how much of an impact RMHC is making, and how much every individual can play a role, will be critical to building on the $450 million raised last year. But tying the organization more tightly to the Golden Arches, Gonzalez-Mendez says, isn’t about sales or brand loyalty or strategic growth.
“We don’t do it because McDonald’s needs to get the credit,” he says, “but because we believe that if we leverage our assets … we can truly change the world.”
