Protea  Consul-ng  University  of  Cape  Town BRAD  �  SARAH  �  MARCIA  �   JOY  –  MCDONALD’S  PRESENTATION

       Introduc-on   BRAD  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Current  State  

7  Quarters  of  Decline  

Net  margin  –>  19.8  to  17.3  

Opera-ng  margin  –>  31.2  to  28.9  

Profit  (Q1  2015)–>  down  11%  

Same  Stores  Sales  Decline  

Across  Regions  

Deteriora-ng  Service  

Disgruntled  Franchisees  Changing  consumer  tastes  

Protea  Consul-ng  

Customer  Change  

Emerging  Market  

Premium  

Low-­‐income  

Historical  

Emerging  Market  

Premium  

Low-­‐income  

Current  

CHANGE  

Historical  Market  

Current  Market  ?  

Protea  Consul-ng  

Our  Mandate  

Assess  current  turn  around  strategy  and  offer  strategic  and  tac1cal  nuances    

Protea  Consul-ng  

Key  Issues  

7  Quarters  of  sales,  profit  and  fooZall  decline  

Customer  preference  changed  

Unclear  value  proposi-on  

Over  reliant  on  stagnant  mature  markets    

1  

2  

3  

4  

Protea  Consul-ng  

Recommenda-ons  

1.  Commit  to  Value  Proposi-on  

• Mc  Donalds’s  Brand  •  Focus  on:  • Price  • Delivery  Speed    

• Opera-onal  Efficiencies  

2.  Emerging  Markets  

•  Large  and  growing  consumer  demand  

•  Leverage  Brand  Equity  

3.  Premium  Segment  

• Acquired  Brand  •  Focuses  on:  • Health  •  Flexibility  • Quality  

Customer  Insights  Func-on  

Emerging  Consumer   Mature  Markets  

Marke-ng  Support  

       Current  State  Analysis SARAH  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Current  Financial  State  

Net  Margin  

Decline  2%  since  2012  

Opera-ng  Margin  

Decline  3%  since  2012  

Same  Store  Sales  

Global  decline  2%  

Protea  Consul-ng  

Value  Proposi-on  McDonald’s   Compe7tors    

(Burger  King,  Shake  Shack,  Taco  Bell)  

Price   ?   ?  Convenience   ?   ü  

Taste   ü   ü  Healthy   û   ü  Quality     û   ü  Variety   ü   ü  Flexibility     ?   ü  

Supposed  to  be  about  price  and  convenience.    Trying  to  be  flexible  (menu  growth  70%  in  7  years)  

Adds  pressure  to  store  opera-ons  and  customer  service.    Poor  customer  service.  

Increasing  Compe77on  

Protea  Consul-ng  

The  Emerging  Market  

High  Growth  Markets   8  Countries  

10%  of  opera-ng  income  

Founda-onal  Markets   100+  Countries  

10%  of  opera-ng  income  

The  Emerging  Market  Customer  

Fit  the  original  value  proposi-on:    Price  and  Convenience    

Aspira-onal  -­‐  leverage  the  global  McDonald’s  brand  

Protea  Consul-ng  

The  Mature  Market  

USA   40%  of  opera-ng  income  

Interna-onal  Lead  Markets  

40%  of  opera-ng  income  

The  Customer  –  shiDing  since  2010  

Healthier,  fast  casual  food  

Higher  quality  and  will  pay  for  it  

Atmosphere  and  ambiance  and  will  pay  for  it  

Recommenda-ons  &  Alterna-ves BRAD  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Alterna-ves  Current  Plan   Not  sufficiently  detailed  

Acquire  premium  brand  

Unclear  on  customer  insights  

Premiumize  Mc  

Donald's  

Contradicts  value  proposi-on  and  business  model  

Drive  Cost  Savings    

Further  drive  declining  customer  service  

Protea  Consul-ng  

Recommenda-on  Risks  

1.  Commit  to  Value  Proposi-on  

• Mc  Donalds’s  Brand  •  Focus  on:  • Price  • Delivery  Speed    

• Opera-onal  Efficiencies  

2.  Emerging  Markets  

•  Large  and  growing  consumer  demand  

•  Leverage  Brand  Equity  

3.  Premium  Segment  

• Acquired  Brand  •  Focuses  on:  • Health  •  Flexibility  • Quality  

Customer  Insights  Func-on  

Emerging  Consumer   Mature  Markets  

Marke-ng  Support  

Irreparable  PR  Damage   Vola-le  markets  Franchisee  Buy  in  

Shareholder  Buy  in   Customer  Disappointment   Poli-cal  Instability  

Customer  buy  in  

Opera-onal  differences  

Capital  Investment  

RISKS  

Implementa-on  Plan MARCIA  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Implementa-on  Overview  Customer  and  Market  Insights  Department  

Head  office  in  USA  with  regional  representa-ves  

Customer  segmenta-on  research  

Food  and  menu  preference  trend  research  

Refine  your  Core  Offering  

Simplify  menu  

Auto-­‐ordering  

Franchisee  flexibility  

Marke-ng  and  PR  Campaign    

Boost  Emerging  Market  Growth  

Op-mize  Menu  

Walk  through  

Marke-ng  and  PR  Campaign  

In  store  environment  revamp  

Scope  Out  Premium  Chain  Opportunity  

0  to  6  Months   6  to  12  Months   12  to  24  Months  

Protea  Consul-ng  

Customer  and  Market  Insight  Department  

Head  Hunt  CMI  Lead  from  Burger  King  /  Taco  Bell  

Locate  Lead  in  USA  Regional  representa-ve  in  four  major  regions  

Customer  Segmenta-on  research  Profile  and  Sizing  Preferences  in  Markets  

Menu  Preferences    Food  Trends    Guide  Menu  Simplifica-on  

Protea  Consul-ng  

Refine  Your  Core  

Remove  Customiza-on  

In  store  Auto  Ordering  

App  Drive  Through  Ordering  

Redirect  Staff  to  Back  of  Store  

Introduce  Franchise  Flexibility  

Walk  in  with  me  and  picture  the  scene!  

Protea  Consul-ng  

Brand  Support  in  Developed  Markets  

360  Campaign  

TV  Led   “Feed  the  Family  for  $15”  

Food  in  5  Minutes  or  your  money  back  

Addi-onal  Channels  

Radio   Outdoor   Online  

Sampling   Outside  stores   Coupons  in  magazines  

PR  Support  

American  Heart  Associa-on    

Protea  Consul-ng  

Grow  Emerging  Markets  

Simplify  the  Menu  

No  customiza-on  

One  local  dish  per  store  

Improve  Availability  

Peak  traffic  areas   Walk  through   SMS  Led  

Redesign  in  store  

environment  Comfort  for  families  

Entertainment  for  Kids  

Protea  Consul-ng  

Scope  out  Premium  Chain  for  Acquisi-on  

Market  Research  

Food  Trends  and  

Preferences  

Ea-ng  and  dining  out  experience  

Due  Diligence  

Assess  viable  

acquisi-ons  Acquisi-on  

Financial  Considera-ons JOY  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Implementa-on  budget  

$350,000.00   $40,000.00  

$5,000,000.00  

$100,000.00  $1,000,000.00  

$750,000.00  

$1,000,000.00  

$1,250,000.00  

CMI  dept   research   auto  machines   app  development  

marke-ng  campaign   walk  through   mkt  campagn  EM   store  enviroment  

Total  cost   US$  9,  490,000  

Protea  Consul-ng  

Forecasted  Revenue  

0  

5000  

10000  

15000  

20000  

25000  

30000  

35000  

2012   2013   2014   2015   2016   2017   2018   2019   2020  

Revenue   Revenue  inlusive  of  recommenda-on  

Projected  revenue  Historical  revenue  

CAGR  3.5%  

Summary BRAD  �  MCDONALD'S

Protea  Consul-ng  

Protea  Consul-ng  

Current  State  

7  Quarters  of  Decline  

Net  margin  –>  19.8  to  17.3  

Opera-ng  margin  –>  31.2  to  28.9  

Profit  (Q1  2015)–>  down  11%  

Same  Stores  Sales  Decline  

Across  Regions  

Deteriora-ng  Service  

Disgruntled  Franchisees  Changing  consumer  tastes  

Protea  Consul-ng  

Customer  Change  

Emerging  Market  

Premium  

Low-­‐income  

Historical  

Emerging  Market  

Premium  

Low-­‐income  

Current  

CHANGE  

Historical  Market  

Current  Market  ?  

Protea  Consul-ng  

Recommenda-ons  

1.  Commit  to  Value  Proposi-on  

• Mc  Donalds’s  Brand  •  Focus  on:  • Price  • Delivery  Speed    

• Opera-onal  Efficiencies  

2.  Emerging  Markets  

•  Large  and  growing  consumer  demand  

•  Leverage  Brand  Equity  

3.  Premium  Segment  

• Acquired  Brand  •  Focuses  on:  • Health  •  Flexibility  • Quality  

Customer  Insights  Func-on  

Emerging  Consumer   Mature  Markets  

Marke-ng  Support  

Protea  Consul-ng  

Key  Issues  

7  Quarters  of  sales,  profit  and  fooZall  decline  

Customer  preference  changed  

Unclear  value  proposi-on  

Over  reliant  on  stagnant  mature  markets    

1  

2  

3  

4  

Ques-on  &  Answers BRAD  �  SARAH  �  MARCIA  �   JOY  –  MCDONALD’S  PRESENTATION

Protea  Consul-ng