Posted on 09/17/2002 12:52:15 PM PDT by GeneD
NEW YORK - Making arches more golden is easy; making your workers more professional is hard.
That is the problem facing McDonald's, which has 30,000 restaurants and more than 360,000 employees around the world. Today, the Oak Brook, Ill.-based fast-food giant warned once again that it would see lower-than-expected profit. The world's biggest restaurant chain said it expects earnings of 38 cents to 39 cents per share in the third quarter, well below Wall Street's prediction of 42 cents per share, according to market research firm Thomson First Call.
The news sent McDonald's shares down more than 10% in midday trading.
In a press release today, McDonald's Chief Executive Jack Greenberg called the U.S. marketplace "extremely competitive." Indeed, the chain faces challenges from the higher-priced hamburgers of Wendy's and the cheaper fare of Burger King, not to mention the entrance of higher-quality brands offering "fast casual."
Greenberg outlined several initiatives to counter the challenging environment, all of them focused on the faltering U.S. market, which is responsible for 56% of the firm's total profit. He said McDonald's would pump between $300 million and $400 million into existing U.S. franchises next year, presumably to renovate certain restaurants and introduce new equipment.
The plan will be paid for in part by reducing new restaurant openings. McDonald's, which has reached saturation levels in several important markets, had planned to open up 1,400 new restaurants, according to a Morgan Stanley report. The report said that cutting new openings to 1,000 would do little to change total sales. What apparently gave investors more concern was that the company also said it would cut share buybacks to about $500 million from the $1 billion it spent last year. With stagnating sales, share repurchases have been one of the only things increasing the firm's earnings-per-share ratio in the past few years.
Greenberg said McDonald's will benefit from increased advertising of its $1 value menu. The move is a positive one, according to Morgan Stanley analyst Michael Sherrick. After all, the company needs to compete with Wendy's super value menu and Burger King's recently introduced 99-cent menu. In addition, cheaper items draw customers and result in order add-ons.
Though the franchise is right to upgrade skeletally by sprucing up existing restaurants and reducing prices, it is having a much harder time improving the blood and guts of the operation: its massive and far-flung staff. As Salomon Smith Barney analyst Mark Kalinowski said in a report last week, "We would love to see more details about how McDonald's will combat what we view as its key challenges in the U.S.: rude service, slow service, unprofessional employees and inaccurate service. In our opinion, what we have seen does not go far enough in addressing these issues, which together account for the vast majority of customer complaints in the U.S."
Until McDonald's comes up with a plan for upgrading service, warnings may be a quarterly event.
Except for one franchise in Maine.
Two BK tacos for 99 cents - I haven't been back to McDonald's since discovering them.
McDonald's spent years trying to become the place for kids. To the point that parents hate to even hear the word. The ONLY time I would consider eating at McDonalds anymore is when I had some kids with me (and even then I would try and talk them into someplace else.) What adult wants to eat in a restaurant full of screaming kids?
Other fast food restaurants have figured this out, but McDonald's is in too deep. It took decades to create this image of a kid's restaurant, and it will take decades to undo it. Unfortunatly for their stockholders, they don't have that much time.
I am always amazed anew at how such a clean establishment could have such poor, slow, stupid service. They are getting their clock cleaned by the snappy and accurate service at the Taco Bell right across the street.
I used to feel that way, but McDonalds won me back with their delicious double cheeseburgers for like $0.99. Mmmm mmmm good.
I use drive thru as well :-)
A lot of college kids look forward to the Monday and Wednesday cheeseburger specials. A lot of calories for not much bread.
Unfortunately for the burger masters, beef makes my skin break out (I'm in my 50s). Have to suffer through life with chicken, pork, fish and lamb.
I haven't eaten in one of their burger joints in years for my own reason(s); however, in all fairness to McD's?
The problems Kalinowski describes afflicting McDonald's are a cancer upon this entire nation, effecting businesses of all kinds.
Anyone owning/operating or managing a business knows we're in some deep kimchee on the subject of, "Present quality of employee(s)."
McDonalds must hire the people each community produces -- like all bussinesses must -- & then, TRY to work with what they've got.
Lousy parents (if there're any parents a'tall) &/or parenting, a pop generation influence on what is & isn't "cool" (visa-vi television) combines with a public school system which has succeeded in placing a "I'm right & you're wrong" attitude deep into the little monter's heads so they "feel good" about themselves have produced millions upon millions of stupid, lazy dolts.
The truth of this horrible condition we're in is manifesting in this guy's gripes; &, by God McDonald's can do little about that.
NOT for the $5.00 p/hr wage those jobs merit, anyway.
It's really no more than a simple case of "crap in, crap out."
...& now all the cultural sloppiness comes home to roost.
1) Go back to the beef tallow for cooking the fries, dumped many years ago to make them "healthier." In those days, they were the hands-down best-tasting fries in the business. I didn't have many triathletes eating at mine...
2) Go back to frying the meat patties on a grill then sticking them in a bun while they're still sputtering. Dump the microwaves (or in McSpeech, "Q-ing Ovens" because Q stands for quality, dontcha know).
The kid point made earlier was valid too...
They forgot "service in english" which seems to become more and more difficult each time we go there...
Two best McDonald's I have ever seen:
Subic Bay: waiters...food is brought to you, not in containers, but on plates.
Hong Kong: Food looked like it was straight out of a commercial on TV. And, it was four stories tall! (OK, OK, only 15 feet wide...but four floors)...
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