Can McDonald's Shape Up?

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A new McDonald's in Times Square will feature a Broadway-style marquee

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Worse yet, the made-to-order system, which is supposed to give the kitchen flexibility to add new menu items, has made some McDonald's slower — adding precious seconds, if not minutes, to a customer's wait at the counter or the all-important drive through, which accounts for about half the chain's sales. A small but vocal number of franchisees — who invested thousands of their own dollars in the kitchen changes — are seething. And customers are also losing patience. "Since they took away the heat lamps, it takes forever — and the food still isn't hot," an Atlanta lawyer groused at a McDonald's on Peachtree Street.

For now, McDonald's seems to be devoting most of its time and energy to improving its service, not its food. A company memo sent to franchisees in North Carolina in July bluntly summed up the situation: "We are meeting our speed of service standard only 46% of the time, and 3 out of 10 customers are waiting more than four minutes to complete their order. Our 800 number has confirmed that ... the number of complaints ... for rude service, unprofessional employees and inaccurate service has risen steadily."

Spearheaded by U.S. division president Mike Roberts, the company is embarking on a crash program to clean up its act. It's keeping much closer tabs on its employees by sending what it calls "mystery shoppers," who have made 121,000 visits so far this year, to spy on restaurants' operations. In addition to the usual tutorials on how to pile on the ingredients for a Big Mac, McDonald's is for the first time giving its employees thorough hospitality training. The company is also offering cash incentives to more visible, effective store managers. "We're making progress but not fast enough," says Roberts.

The breakneck pace of new-store construction — which only a few years ago had franchisees fuming about nearby newcomers cannibalizing their sales — has eased. Only about 300 new stores are expected to open in the U.S. this year, compared with 1,100 in 1995. But there are critics who say that even that is too many and that McDonald's needs to weed out the worst franchisees and shut down some of the underperforming restaurants. "They've stretched the store managers. There are 1,000 of them that are marginal at best," says Howard Penney, an analyst at SunTrust Robinson Humphrey, who thinks McDonald's should close 500 to 1,000 branches. "They have to stop growing."

Some franchisees agree that slackers should get the boot. "They're dragging the brand through the mud," says Edward Bailey, who owns 44 stores in Dallas and has helped keep his business booming by decorating some of them with Ralph Lauren wallpaper and marble bathrooms. Others disagree, claiming that McDonald's is simply making scapegoats out of franchisees and that discounting helps the corporation at the franchisees' expense, since McDonald's takes in royalties on total sales, even as individual owners are stuck with shrinking profit margins. Though stressing that McDonald's will no longer shy away from forcing out bad owner-operators, Roberts dismisses the notion of scaling back McDonald's presence in the U.S. Says he: "We've got to be accessible to customers."

But for McDonald's to get cooking again, its marketing also has to be accessible. For the past several years, a virtual revolving door of corporate executives and an overreliance on regional campaigns have resulted in a diffuse, largely ineffective message. "Our marketing has become too democratic," says Irwin Kruger, a New York City franchisee, who this week will open his massive McDonald's in Times Square, complete with a video-laced menu board, flat-panel displays with subway maps and movie schedules, and his own creation, Mini McDonuts.

McDonald's new national ad campaign will revolve around a national "dollar value menu" that will eventually include the Big 'N' Tasty burger, the McChicken sandwich and special sizes of fries, soda, salad and various desserts. It may not strike anyone as anything particularly new, but it will transmit a unified, consistent message about a bargain. By moving away from sporadic deep discounting in favor of a permanent two-tier menu that keeps signature products like the Big Mac at the top, Mickey D's is following the model that Wendy's has successfully used to lure in penny-pinching customers and then sell them on costlier items. The problem with occasional promotions is that "you train customers to come only when there's a blue-light special," says Chris Clouser, global marketing officer at Burger King, which has launched a 99 value menu, backed up by an offbeat, Candid Camera-esque ad campaign that shows bemused consumers reacting to a talking menu board.

As for the restaurants, McDonald's may have to do more than just open up a dual drive-through lane or replace the brown-shingled roof with a red metal one. Some of its most successful locations seem to be the ones that stand out from the pack — whether it's the Orlando, Fla., outlet with a pool table and an air-hockey table, or the one near Chicago with a fireplace and leather armchairs. "McDonald's is a restaurant, not a hamburger stand, and we need to treat it as such," says Chicago-area franchisee David Bear. Who knows, some operators may even take a hint from France, of all places, where the company has helped entice more customers with a wide range of unorthodox decors, including a mountain-chalet-style store with wooden beams lining the ceiling and natural-grain wooden tables on the floor. France is one of the few bright spots in McDonald's flagging European business, and maybe that's a sign of hope. If a burger chain demonized by activists as the symbol of American imperialism and poor taste can win over the French, maybe it can rebuild its business at home.

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