McDonald’s Regroups After Burger War Setback
McDonald’s Corp. shocked the fast-food industry last year by losing market share in the United States for the first time. To make matters worse, arch-rival Burger King used savvy marketing and new product introductions to gain share.
McDonald’s responded by dumping its longtime national advertising agency and dividing the U.S. market into five geographic regions, a move the company says will help it forge stronger links with operators and customers.
Michael Roberts, a 20-year McDonald’s veteran, is running the Western region from a new office near John Wayne Airport. About 50 McDonald’s executives and support staff members will eventually move to Southern California from Illinois. The Western division encompasses 2,500 restaurants in California, Oregon, Washington, Nevada, Arizona, Colorado, Alaska, Hawaii and Guam.
Roberts, who is commuting between Oak Brook, Ill., and Irvine, plans to move to Newport Beach in a few months. Roberts has served as Western division zone manager, based in Oak Brook, and previously was a regional vice president and the company’s first regional vice president of environmental affairs.
Roberts, 47, on Wednesday discussed McDonald’s new corporate structure and the company’s marketing plans during an interview with Times staff writer Greg Johnson.
Q: What is the reorganization supposed to accomplish?
A: A lot of what’s going on reflects an understanding of how McDonald’s operated when the company was smaller. We’re now a very large worldwide organization. Yet we’re at a point when it’s important to act like when we were smaller. At times, we had gotten to where we were Oak Brook-based, Oak Brook-driven and bureaucratic. To a degree, we were layered beyond what was healthy. The vision that [McDonald’s USA Chairman] Jack Greenberg had was to breathe fresh life into the organization by creating smaller, more responsive entities. I think in every organization’s life cycle there comes a need to change so you can be current, competitive, viable and flexible. The organization that existed was built over many years, but was no longer servicing operators and consumers the best way possible.
Q: This is your second tour of duty in Southern California. What are the major differences you see from a decade ago when you were a district manager in the Los Angeles region?
A: The American consumer has changed dramatically during the past decade. People’s lives are much more complex. Customers are on the go. We have working moms, fathers who are struggling to keep a balance in their lives. And they’re looking to quick-service restaurants to be much more responsive to their needs. And when it comes to food, we know that consumers’ tastes have changed.
Q: How have their tastes changed?
A: They want more variety, more different tastes. McDonald’s has to be offering, has to continue to offer, a variety of tastes. Yet, at the same time, they want better service, speedy service and convenience. They want a restaurant environment that’s warm, friendly and inviting. They want landscaping that’s fresh, and they want to feel safe in the restaurant, whether it’s early in the morning or late at night.
Q: But hasn’t speed of service been a constant demand in your business?
A: Yes. But the percentage of our drive-thru business continues to increase, and that has to be a consistent focus in our West division. We’re working with operators to make the drive-thru experience fast and easy. We need to fit into consumers’ busy lifestyles.
Q: How does the new regional management approach help make McDonald’s more responsive to customers?
A: Two examples are the Big & Tasty sandwich and the value-priced hamburgers and cheeseburgers now available. We put the Big & Tasty into over 1,000 restaurants in the West division. And that happened very quickly. The other example is the 29-cent burgers and 39-cent cheeseburgers, which are in over 1,700 of our 2,500 West division restaurants. That happened in a 60-day time period. In the old organization it could have taken much, much longer. And consumers’ reaction to the value pricing tells me we’ve hit a nerve with them.
Q: Hasn’t value pricing been around for more than a decade?
A: From our perspective, [McDonald’s founder] Ray Kroc’s idea of value was to offer consumers the best product and service at the best value--and consistently do it better than anyone else. So, sometimes when I say “innovation,” I mean a return to our roots. Consumer support for the 29-39 pricing tells me there’s lots of appreciation for the fact that McDonald’s recognizes that many people have limited funds. Large families are coming into our locations in record numbers on Sunday [when 39-cent cheeseburgers are available], and we’re delighted.
Q: McDonald’s is testing a new “made for you” system in Colorado that’s supposed to bring better taste to the food. Will that test also take place here?
A: Yes. In fact, the heaviest concentration of testing in our division is right here in California. At some point in the future, our plan is to have consumers standing in front of the counter be able to see their Big Mac being prepared. So many great restaurateurs want customers to see food in the making because that lets customers know their food is indeed tastier, hotter, fresher. If you remember, in the early days, Ray Kroc and our Senior Chairman Fred Turner had glass all around the stores so consumers could sit outside and watch the food being prepared.
Q: McDonald’s is an international brand. How can you be more effective with regional marketing?
A: As the days go by, you’ll see us become much more aggressive on marketing at the regional level. Look up in San Francisco, where operators have the McDouble, an 89-cent chicken sandwich. Then look in L.A., where we have the 29-39 pricing strategy rolled out. You’re going to see a lot more embellishing of the menu in the regions. A Cajun chicken sandwich or a McRib might work well in Southern California, but not somewhere else. We’ve got menu experiments going in Seattle, Portland, Denver and Phoenix that might work well here but not in New York City. What we’re trying to do is ignite innovation at the local ad agencies, to get the local operators and regional staff to be more innovative. And this new regional structure makes us much more capable of doing that.
