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    How Jim Skinner Beat the Recession

  • There are five P’s at the basis of McDonald’s recent success, and the company’s CEO says it’s not rocket science to figure out how to make a profit in this industry.

    Technology can be a tougher investment to swallow because of the delayed gratification, says Jan Fields, the newly appointed president and chief executive of McDonald’s USA. “Unlike with a new product, you don’t see an immediate return on it,” she says.

    With the new POS system, “yes, it’s an investment,” Fields says. But “technology today does not last as long as it once did. We have to take advantage of what becomes available. It helps us in accuracy. And for every 10 seconds we can shave off our transactions, we can handle 15 more cars through the drive thru an hour.”

    Skinner Speaks Value pricing vs. building checks:
    “Yes, we like to have items that add to the check average, but we also like to have traffic. That’s the most important thing, to maintain traffic. One thing we know is the pricing power is not there for now. Even when commodities are going through the roof, you had to hold the line and absorb the harm.”

    U.S. operations are also seeking to boost the accuracy of drive-thru orders by enhancing the clarity of the speakers that order takers use to communicate with customers.

    She echoes Skinner’s assessment that franchisee resistance to the initiatives developed under the Plan to Win has been “grossly overstated.” With the beverage program, for instance, “They’re pulling frappes and smoothies onto their menus like nothing we’ve experienced before,” she says.

    The cold whipped drinks are the last phase in the program’s roll out, which followed the introduction of new hot and cold coffees and espresso-based drinks. The systemwide addition of the treats is scheduled to be completed before the summer.

    As for the new breakfast Dollar Menu, Fields says, “It was passed with 97 percent of the system approving it. How much dissention could there have been?”

    Not enough sales data exists yet on the new bargain array, according to Fields, who spoke with QSR days after the roll out. But “it’s certainly increasing traffic into the restaurants.”

    True to the overriding aim of Plan to Win, Fields says, the new value menu is more of a unification of systemwide efforts than a new price-cutting program hatched by the home office. Virtually all U.S. stores were offering a bargain at breakfast in one form or another, she says. “We just got them all focused on the same one.”

    “The key drivers of our system, we have to stay focused on them, to continue working on each of those items because we haven’t realized their full potential yet,” Fields says of the latest initiatives launched under the Plan to Win. “My goal is to keep it going.”

    Skinner would not say what specific undertakings might follow the beverages, morning Dollar Menu, and POS roll outs.

    “I even get that question from the board, ‘What’s the next big thing?’” says Skinner, who also serves as the vice chairman of McDonald’s Corp. “I have no idea. But I do know our protocol will bring us to the right consumer insights at the right time and the choices for innovation.”

    He strongly indicated it wouldn’t be the six-second scrambled eggs a visitor would find in the Menu Innovations Center on the day of the interview. Enhancing drive-thru operations, the source of 65 percent of McDonald’s sales, is a higher priority, he says.

    Skinner Speaks Angus burger vs. rest of the menu:
    “The Angus burger is outstanding. It’s now my favorite. … I have a lot of favorites on the menu, but that sandwich is a good sandwich.”

    Because of McDonald’s position of strength, Skinner says, it will put more emphasis on areas where many chains have slashed their budgets. For instance, “training and educating our people, we’re ramping up our efforts around that,” he says.

    More attention will also be paid to staffing. “We’re one of the fortunate companies today that can hire, and continue to hire, not just because we’ve opened new restaurants but because we’ve been successful.”

    Similarly, McDonald’s is raising its capital expenditure budget by $300 million, to $2.4 billion, for 2010. Part of that is earmarked for opening 1,000 new restaurants, with much of the remainder used to redesign some 500 U.S. units (2,300 globally), the continuation of a project begun five years ago to keep a contemporary look in stores. “People ask, ‘When are you going to be done?’ We’ll never be done with our reimaging,” Skinner says.

    One of the things that won’t change, he stresses, is the Plan to Win. “The opportunity to strategize through the Five P’s is infinite, the continuum of trying to do a better job for your customers.

    “I’m a stickler for consistency and staying the course,” Skinner says. “One of our values is staying focused on continuous improvement. It’s easy to throw a bunch of bricks and mortar at a bunch of countries. The hard part is trying to get existing restaurants to be better, all the way from relevant reimaging to executing at the counter.

    “I used to take it personally when someone says, ‘Well, they’re the industry leaders now, but will it last?’ We don’t hear that too much anymore.”