Hanna Pisera

McDonalds Write up
What characteristics of McDonalds production system have been most
important in building its record of success and growth in the industry?
The initial success of McDonalds resulted out of the restaurants
unconventional speedee service system. The system was built around
short, easily learnable steps, and resembled Fords car assembly line in its
efficiency, ease and speed. McDonalds system was so efficient that they
were able to significantly cut labor costs and offer their products, namely
their hamburger, at a much lower price than their competitors. When Ray
Kroc acquired the rights to sell McDonalds as a franchise, he swore by a
three legged stool model, emphasizing the equally important roles of
suppliers, franchisees, and corporate headquarters. Krocs efforts helped
McDonalds grow at a rate of 500 stores per year in the US, a rapid growth
made possible by the franchising model.
Starting in 1990, McDonalds went global, opening its first international
store in Moscow. Its success internationally stemmed from the companys
ability to adhere to local tastes in different nations, something not seen in
the uniformity of the US menus.
As McDonalds grew, their Speedee Service which initially accounted
for so much of their success began to create major problems. Most apparent
was the fact that about 40% of customers now wanted to customize their
orders, while the initial methods of McDonalds production had the products
being made in batches, not allowing for special requests. McDonalds
implemented a new Made for You production process, which allowed for
customers specific orders to be transmitted to the kitchen where workers
could customize the sandwiches as needed. This model not only
accommodated custom orders, but also helped cut costs McDonalds
previously faced of needing to throw out ingredients that had gone bad (an
element of the new process was keeping the sandwich ingredients away from
heat where they would spoil.)
In 2001, the company noticed that its sales in established stores had
been declining, and responded with a better, not bigger repositioning,
where they focused on increasing revenues in existing stores. An increase of
1% in sales in stores already opened resulted in a $115 million pre-tax
income, compared to $35 million in new units. McDonalds refocused on their
5 Ps people, products, price, place, and promotion and saw revenues
grow and service times decrease.

(2) What are the advantages and risks/potential problems of McCafe for
customers, franchisees and McDonalds corporation?
The coffee market is massive, with 82% of adults in the US being
coffee drinkers. McDonalds has a huge potential to establish a name in this
market and gain a large share of it. McDonalds has already positioned itself
as the leader in fast food, and could use this brand to their advantage by
advertising themselves as a quick and easy way to get a cup of coffee in the
morning. McDonalds employees were trained in serving a large number of
customers as quickly as possible, something many coffee shops cannot do.
In addition, the McCafe concept had been successful in other countries
around the world shops with the McCafe saw 15% higher revenues. McCafe
also has the added benefit of being perceived as higher quality, helping
elevate the perception of McDonalds as a whole.
Though the recognition of the brand among customers could serve as
an advantage, it could also be perceived negatively in association with
efforts to serve coffee. Customers in the US have already been exposed to,
and likely have high loyalty towards shops like Dunkin Donuts, Starbucks, or
maybe a local coffee shop. Convincing customers to stop at McDonalds,
where they get their on-the-go burgers, for quality lattes and cappuccinos
may serve as a challenge.
(3) If you were Bob Marshall, responsible for implementing McCafe, what
concerns would you have?
A major concern of mine would likely be ensuring that the McCafe
concept was implemented successfully and consistently among all franchised
restaurants. Having completely different setups for cafes from store to store
would likely be received negatively by customers, who want to see
consistency within a brand.
Another concern would be how to best operate the McCafe station,
something that can only be decided through seeing all the concepts in
practice. Failed concepts will result in a loss of sales and also a decrease in
customer satisfaction.
The new concepts must also be implemented in a quick and seamless
manner, so as to not drive customers away or having to close for
construction.
Implementing the caf with the drive thru could also result in a loss in
operational efficiency. Employees need to be trained how to best manage the
flow of both coffee and food orders, and an optimal method of production
needs to be devised.

(4) Which of the alternative new product processes for McCafe should
McDonalds adopt? Would you offer at Drive Thru and where would you
locate the McCafe Station?
First, I would elect to offer McCafe at drive thru. Offering coffee on-thego has huge potential, and could result in significant lost sales for
McDonalds if the company decided not to implement it. Customers will be
frustrated if they wait in the drive thru line and are then told that they
cannot be served unless they go inside. Consistency must be implemented
within the store.
In terms of where to locate the station inside the store, I would place
the McCafe station on an extension to the front counter. Adding the McCafe
at the front counter helps encourage customers to buy both coffee and a
meal, helping to boost sales. Customers shouldnt see McDonalds and
McCafe as two completely separate entities, as this makes them inclined to
order from only one. Connecting McCafe directly with the McDonalds counter
helps customers to see it as an extension of the food menu.
Out of the two FC concepts, FC east (concept 2) would have a less
significant negative impact on sales. Concept 2 also has the benefit of not
resembling the store-within-a-store concept that did not test well within the
US. In addition, it is less costly than concepts 1 and 3, and though it does
have the consequence of a 24 hour restaurant having to close for
construction, construction could likely be completed relatively quickly and
the restaurant could be operating fully within a short period of time.
(5) How might other retailers use concepts like the McDonalds Innovation
Lab?
The Innovation lab proved useful in helping visualize how McDonalds
could implement a consistent design for McCafe within all of its stores
(though the success of the caf and how workflow would have to adjust
cannot accurately be simulated, this has to be determined through actually
building the caf and seeing how the restaurant responds.) Other retailers
could use this concept to test any store-within-a-store concepts they could
have. A tech store, for example, could use this model to determine where
and how to build a customer service center. Another instance where it could
have been useful would be in Apples creation of the Genius bar the lab
could have aided in the decision to place the bars typically in the back of an
apple store, and also helped begin to forecast how many people would need
to be working at a time to best optimize flow of customers. The lab could
also be used for restaurants that want to implement a new menu. They could
use the kitchens to determine the new cooking times needed and the best
way orders should be produced.