5:36 AM 01/30/15
By Lisa Baertlein
LOS ANGELES (Reuters) – McDonald’s franchisees have a fast order for the fast food giant’s new CEO – get back to basics. In interviews franchisees and advisors to restaurant owners say they hope the new chief will clean up a huge menu to focus on burgers and fries.
McDonald’s on Wednesday announced that Chief Brand Officer Steve Easterbrook would replace Don Thompson as chief executive after he had held the post just two and a half years.
Easterbrook, 48, turned around McDonald’s operations in the UK, where he was born, by putting the focus back on its burgers and burnishing consumer perceptions about the company, according to press reports.
A cricket enthusiast who earned a reputation in the UK as being funny, fair and a lover of simplicity, Easterbrook will also be a rare McDonald’s CEO in that he has experience running other restaurant chains.
“I will be very curious to see if this new guy continues on with what Thompson has been doing … or if he will put some new ideas in. I’m very hopeful,” said Kathryn Slater-Carter, who operates one of McDonald’s restaurants in Daly City, California.
The world’s largest fast-food chain, with more than 36,000 restaurants around the globe, is struggling to appeal to younger and more upscale diners who are seeking out fresher, healthier fare.
Over the last few years, McDonald’s has expanded its menu to broaden its appeal. While that effort initially bolstered sales, franchisees now blame sprawling menus for slowing down service and are calling on the chain to dump menu items ranging from espresso to McWraps.
Some skeptics questioned whether Easterbrook, an insider with some two decades at the chain who takes the helm on March 1, is the right person to make the tough decisions needed to fix what ails the company.
Supporters find hope that fact that from 2011 to 2013, Easterbrook ran PizzaExpress, a British chain that markets itself on quality and freshness, and then became CEO at Wagamama, a Japanese-inspired noodle chain, before returning to McDonald’s.
Easterbrook’s global chops may come in handy as the chain fights to recover from a food scare in China that battered Asian sales and wrestles with economic weakness and political upheaval in Europe, its top revenue market. Its image in the United States is also getting a drubbing from McDonald’s burger flippers, who have held frequent protests calling for higher wages.
Richard Adams, a former McDonald’s franchisee who now consults current ones, said that most U.S. McDonald’s owners don’t have personal experience with Easterbrook but that they are “cautiously optimistic” about his appointment.
Those same franchisees had a rough ride under Thompson.
Monthly sales at established U.S. restaurants increased in fewer than half of the 30 months he was in the top job.
The company attempted to stem market share losses to smaller and more nimble rivals ranging from Wendy’s Co and Burger King to Chipotle Mexican Grill Inc and Chic-fil-A with frequent specials and giveaways.
While such discounts helped the parent company, which gets royalties from franchises based on revenues, they squeezed the profits of franchisees. Beyond that, a push to rebuild or remodel most restaurants burdened many franchisees with debt but didn’t always deliver a promised pop in sales.
‘CHORUS OF NO’S’
Adams said morale among U.S. franchisees is at the lowest point since the late 1990s, when overbuilding hurt franchisees.
“Made For You”, a 90s-era burger customization program that required investments of around $55,000 per outlet, made matters worse by battering service speed and sales.
Thompson revived bad memories of that era with a project called “Create Your Taste,” which he insisted would succeed where “Made for You” had failed due to improved technology.
While Thompson said the plan would allow McDonald’s to become more like Chipotle and Subway by letting customers pick the ingredients in their meals, Adams said franchisees aren’t buying in. Their reaction to the plan, he said, has been “A chorus of No’s.”
While most franchisees are reluctant to speak to the press, they offered blunt recommendations in a survey published earlier this month by Janney Capital Markets analyst Mark Kalinowski.
Change is “moving too slow, let’s bite the bullet,” one survey respondent said.
They suggested dropping McCafe espresso drinks, which critics say don’t sell enough to pay for the electricity used by the machines that make them. Thompson spearheaded McDonald’s McCafe expansion during his stint as head of the U.S. business.
They also want to cut the number of Happy Meal options, to get rid of the hard-to-make McWraps and other poorly performing menu items, and to eliminate redundant items such as the McDouble and Double Cheeseburger.
Thompson had made some efforts to trim back menus, but franchisees say they didn’t go far enough.
“We just have no momentum any more,” one franchisee said.
(Additional reporting by Martinne Geller and Freya Berry in London; Editing by Christian Plumb)
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