McDonald’s has a long way to go to rebuild brand

Speaking about the turnaround strategy announced by the company yesterday, CEO and president Steve Easterbrook said the company will focus on “driving operational growth, returning excitement to our brand and unlocking financial value” as it looks to become a “modern, progressive burger company”.

This will involve ramping up its franchising plans, with a goal of refranchising 3,500 restaurants by the end of 2018, making 90% of its restaurants franchised compared to the current 81%.

It will also restructure its business into four segments starting 1 July – the US, International Lead Markets (including the UK), High-Growth Markets and Foundational Markets – in an effort to “streamline” its teams and move towards a market-by-market approach that will allow it to “spread insight faster”, according to Easterbrook.

He added that the move towards local ownership and a focus on specific markets will promote “entrepreneurial spirit”, including testing new innovations, and will bring the company closer to its consumers, allowing McDonald’s to gain “true customer knowledge”.

While this may be a start of a turnaround for McDonald’s, the company still has quite a task ahead of them to regain brand trust, even in the UK where it has over performed financially.

According to data from YouGov’s BrandIndex, which measures consumer perceptions surrounding the likes of quality, value, and reputation of a brand, McDonald’s Index score ranks last on both the list of fast food brands and of fast food brands and pubs, placing 8^th and 36^th respectively.

With a score of -10.9, it falls behind competitor Burger King (-6.6), while fast food giants Nando’s and Subway rank 8^th and 13^th on the wider list.

However, McDonald’s score has risen by 3.1 points over the last year, suggesting it is starting to turn around the perception of its brand.

Meanwhile, in April the restaurant chain announced an 11% fall in revenues in the first quarter of 2015 to $5.95bn (£3.96bn), signalling an “urgent need to reset the business” according to Easterbrook.

The company hopes that building a “differentiated customer experience” through “world-leading digital engagement” will help it to do this, with plans for “less sweeping talk to millenials”, according to Easterbrook, who said that the company will instead look to be “more specific on the customer groups where we need to win”.

He added that McDonald’s will create digital hubs around the world which will allow it to “better listen” to consumers and gain insight on eating out occasions through data and analytics, which it plans to better integrate into its “customer-centric” strategy.

It will also look to “return excitement to the proposition and brand” by continuing actions that “disrupt and delight and show a brand on the move”, according to Easterbook, who cited McDonald’s recent global 24-hour imlovinit24 campaign that saw the brand create digital content surrounding the launch of events in 24 cities worldwide as part of its effort to change its approach to marketing by moving away from traditional advertising.

Plans could also include partnerships similar to the brand’s tie-ups with the Olympics and the World Cup or brands such as Apple.

“The most impactful measures of our performance will be through the eyes of our customers,” Easterbrook added.

Turnaround plan details:

• McDonald’s will reorganise into four segments:
  • US
  • International Lead Markets (Australia, Canada, France, Germany and the U.K.
    • Doug Goore, currently President of Europe, will become President International Markets
  • High-Growth Markets (China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands)
  • Foundational Markets (remaining markets in the McDonald’s system)
• Deliver $300m in savings annually with the new organisational structure
• Commitment to innovation as it looks to “try new things faster”
  • The launch of sirloin burgers and artisan chicken
  • Trialing all-day breakfast
  • Trialing delivery in New York City