Do Business Well

Competition is fierce. In any given year in the United States, about ten thousand new QSR restaurants will open. “The barriers to entry for the restaurant business are pretty low,” Babrowski points out. “Anybody with enough money to line up rental space and get a little bit of equipment in it, and knows how to cook, can at least attempt to start in the restaurant business.” This means, she adds, that “there is almost a limitless stream of competitors,” though it is the “branded, organized competitors,” as she calls them, that McDonald’s concerns itself with most: Burger King, Wendy’s, Hardee’s, Taco Bell, and Roy Rogers.

Streamliners look to these branded restaurants for speed, low cost, and dependability (consistency). Of these, speed is the most important. Fast food customers may not have finely honed taste buds, but they do have well-oiled body clocks. Time is their priority. Since all fast food restaurants are competing for the same customer base and the number of restaurants exceeds the need, the challenge lips in providing even faster, more dependable service without diluting the customer base.

Within the fast food business, each chain seeks a feature to set it apart from the others: Some strive to be the cheapest, others the fastest, still others the tastiest. Wendy’s has the most variety in its menu choices; Taco Bell is the cheapest; and McDonald’s is generally regarded as the fastest and most consistent, which is precisely how it wants to be regarded, since speed and dependability are what the fast food business is all about.

Taco Bell’s response to its industry’s glut was to cut costs and lower prices. McDonald’s, too, expended a huge effort to decrease its costs. But its analysis of the market went considerably deeper and led to a bold and surprising course of action.

McDonald’s realized that among frequent users, about a third were so devoted to them that they would patronize another chain only when the McDonald’s nearest to them was too crowded. Another third of the frequent users preferred other brands; Mc- Donald’s picked up only occasional business from this cohort. And the final third didn’t care for McDonald’s at all, and wouldn’t go there under any circumstances.

McDonald’s managers tried to figure out how to attract the one-third who preferred the competition. They decided that since speed was the crux of the matter, it made sense to make the service faster. And they concluded that the speed equation had to include the time it takes a customer to get from his or her home or office to the nearest McDonald’s restaurant, as well as how long it takes to be served. The only way to shorten the arrival time, they finally realized, was to build more restaurants.

The logic was as powerful as it was counterintuitive: The more outlets there were, the closer one would be to a higher percentage of customers. That the industry appeared overbuilt did not stop McDonald’s from embarking on a massive construction spree. In ten years, McDonald’s grew from approximately 8,300 restaurants in the United States (3.4 outlets for every 100,000 people) to 12,600 (4.7 for every 100,000 people). The gambit worked, bringing in more customers, most of them streamliners, for whom the restaurants were now closer and therefore more convenient.

McDonald’s next appeal to streamliners took the form of a new speeded-up cooking process called Made For You, which was more than a decade in development. As early as the mid-1980s, McDonald’s was working on equipment that would allow outlets to cook to order without making customers wait. But it took until 1997 for the company, working in partnership with its equipment suppliers, to finally perfect a critical component called the universal holding cabinet, a piece of equipment that allows Mc- Donald’s restaurants to preprepare hamburgers and chicken in such a way that they don’t dry out or get cold. In addition, says Babrowski, “a modification to our cash register system allows us to read in the kitchen what is being sold at the moment of sale.” The customer gets a fresher burger made to order; McDonald’s gets less waste, which translates into more profit.

Toward that same end, McDonald’s came up with proprietary software that monitors sales in sixty-second increments, so that if there’s a sudden run on cheeseburgers, says Babrowski, “we have the opportunity to get just a bit ahead of it.” Babrowski says she was in one busy outlet recently, and even after a very busy lunch rush, “there was one quarter-pounder with cheese sitting there to be thrown away.” “Waste not, want not,” times thousands.

With innovations like these and the patience to stick with them over a multiyear development period, McDonald’s clearly makes for a determined competitor. Not only did Made For You take more than a decade to conceive and implement, but the company also persisted for nine years to turn breakfast into a profitable business. Today, breakfast accounts for almost 25 percent of McDonald’s business, which, remarkably, represents nearly 75 percent of the total number of breakfasts that are eaten in restaurants each morning. “People finally agreed that McDonald’s could be good at eggs,” says Babrowski with considerable under statement.

Possibly related posts: (automatically generated)
Deliver Dependability (continue…)

• Deliver Dependability
• How do you Smile over the Web? Internet Marketing, top Secrets of Ecommerce, Online Income
• Financial Awareness, Small Business Budgeting
• Financial Issues: How Are You Doing? continue..
• Ask Yourself: Would You Invest?
• The benefits of becoming a network marketer continue...
• Mutual Expectations (franchisees) part 1
• Enrich Their Buying Experience
• Break, Lateness, Daydream, Boosting your Productivity
• Business Online how to answer the Nasty Questions continued

5 Comments »