Evidence 3: news article
McDonald's U.S. Sales Sizzle, Up 4.3%
June 10, 2009
- Eric Newman
McDonald's announced today that its domestic sales grew 4.3% at comp stores in May. The leading restaurant chain attributed the growth to the success of its breakfast menu, as well as recent menu launches like the Southern Chicken biscuit and sandwich.
The company also said its "everyday affordability" message helped drive customers to McDonald's restaurants.
"We're committed to providing our customers with compelling value, unique menu variety and unparalleled convenience," said CEO Jim Skinner, in a statement. "Our steadfast focus on the customer experience . . . continues to deliver positive results worldwide."
Still, McDonald's is experiencing healthy growth, said Ron Paul, president of food industry research firm Technomic, Chicago. At an estimated $29 billion in annual sales, McDonald's is more than three times that of No. 2 Burger King, Paul said.
"They're becoming their own hardest example to follow. Let's give them credit for a good month in light of what's going on in the industry," said Paul. "Their innovativeness with the menu and putting the marketing muscle behind it is part of their formula that's really working for them.
Clearly looking at this more recent news article it is inevitable that McDonalds are just getting bigger and bigger each year and I would not be surprised that in the next 15 to 20 years McDonalds will have achieved their main aim and will have fully secured the fast food industry. 4.3% in only half a year and as the president of the food industry said, McDonalds expected sales would grow to over $29 billion in the next few years. The final piece of evidence that I have is from their website on the opening page which is updated regularly. From 32,000 restaurants to 33,000 and serving over 58 million people from only 50 million .It shows how much it has grown in the last year from when I first took the figures from the annual report to now.
Evidence 4: Our company front first page...
Now McDonalds had four different objectives that I found from the annual report which would help in conjunction to reaching their main aim. Highlighted in green I will state the objectives in a cut down summary and then in light blue I will quote the objective which has been stated in the annual report.
To build an extra 200 McCafe’s primarily in Germany and France by the end of the year.
In 2009, we will continue upgrading our restaurants’ ambiance through reimaging, including adding another 200 McCafes primarily in Germany and France.
For 2007 through to 2009, they want to return $15 to $17 billion to shareholders through share repurchases.
For 2007 through 2009, the Company expects to return $15 billion to $17 billion to shareholders through share repurchases and dividends, subject to business and market conditions.
To open about 1000 restaurants with $1.05 billion in the next year (950 traditional restaurants and 50 small outlets in supermarkets and service stations
The Company expects capital expenditures for 2009 to be approximately $2.1 billion. About half of this amount will be reinvested in existing restaurants while the rest will primarily be used to open about 1,000 restaurants (950 traditional and 50 small outlets)
To increase a number of stores that offer 24- hour services or extended hours in European countries.
Completing the conversion of our kitchen operating system in most European restaurants and increasing total locations offering extended and 24-hour service.
All these objectives where put into place to be completed by the end of the year 2009.
The first objective that I picked out was basically for McDonalds to build an extra 200 McCafes in Germany, France and possibly some other European destinations. They put this objective into place to try and attract a wider range of people to their brand and to change their stereotypical views that people have of them. Firstly it will attract business people in the morning, in their breaks and lunches and after work, possibly to meet someone or to get some work done with the free Wi-Fi connection that they offer.People who drink coffee such as business people are known as the more upper class, important, high ranking people, with McDonalds actually serving these people, others look upon it as ‘if McCafe/McDonalds is good enough for them well its good enough for me’. This sort of activity will boost their likability and the standards that the brand offers. After examining this news article from The Telegraph it states clearly that their objective was met in the very first sentence.
Evidence 5: News article The Telegraph http://www.telegraph.co.uk/news/uknews/5397149/McDonalds-McCafes-set-to-take-on-Starbucks.html
McDonald's McCafes set to take on Starbucks
McDonald's is set to take on Starbucks in Europe as it rolls out its McCafe coffee shops by the end of the year.
By Chris Irvine
Published: 7:00AM BST 28 May 2009
The fast food giants are planning to open a further 300 McCafes across Europe on top of the 200 just completed in the previous year, as Starbucks is reportedly set to scale back some of its 1,300 European stores, adding these 300 stores to their multi-billion dollar organization will bring them on par with the current coffee tycoons Starbucks.
High end coffee machines have already been installed at McCafes in Europe in an attempt to win over coffee drinkers.
"We can become the biggest seller of coffee in Europe," said Jerome Tafani, chief financial officer for McDonald's Europe.
He told The Financial Times that McCafes wanted to attract new customers by creating a "cosy" atmosphere and target people looking for breakfast on their way to work.
Although there are currently none in Britain, they were introduced to Europe in Ireland in 2002, while Germany, Russia and Italy also have a sizeable amount of McCafes in their restaurants. McDonald's did not confirm where the new McCafe stores would be introduced.
In the US, Don Thompson, president of McDonald's USA, said the roll-out of McCafe coffee was "going very, very well... Coffee movement has been good. It's exceeded our expectations."
McDonald's has said it expected the addition of beverages ranging from coffee and cappuccino to water and sports drinks to eventually add $1 billion (£623 million) to annual sales.
The McCafe chain first emerged in Australia in the early 1990s.
The second objective that I picked out from the annual report is basically for McDonalds to return between $15 and $17 billion to the shareholders through repurchases of shares. I cannot find any recent news articles, websites, records or even the 2009 annual report that states they have achieved this aim. However what I did come across was to be a short summary of how much each share was worth and roughly how much was given back to repurchases for the first quarter of 2009. Looking at this report for the first quarter they returned $1.4 billion to the shareholder and making a rough estimate to how much they would give by the end of the year would be around (1.4 x 4 = 5.6) $5.6 billion. This figure is only a third of what they were hoping for of $15 billion, so they have not met their objective here.
Evidence 6: Earning report, first quarter results
McDonalds 3rd objective was to for them to build a further 1000 restaurants with a budget of $1.4 billion. Now I cannot seem to find any results on this objective as McDonalds are always opening store around the world and I was difficult to find whether they only spent $1.4 billion on them. Looking at McDonalds past records when opening new branches they spent, on average per restaurant $19 million. Depending on the size and the whereabouts of the restaurant this will obviously vary. If they were to build 1000 restaurants at this price overall it would cost $1.9 billion, which will take them over by $500 million. As I said before looking at some articles from a few years ago, they are always expanding and now have over 33,000 restaurants worldwide, as opposed to 32,000 around 6 months ago. Looking at recent facts and figures I do think that McDonalds have met this objective in the sense that they have built the 1000 restaurants, but possibly have not met the finance side of the objective, by only spending $1.4 billion.
McDonalds 4th and the final objective I picked out is about McDonalds being more convenient to their customers and being open 24 hours a day 7 days a week, so customers can get the best service from them. One of McDonald’s hierarchies CEO, Jim Skinner announced:
Evidence 7: Quotation from Jim Skinner, McDonalds CEO
“More than 60% of McDonald's restaurants in Europe have extended their hours beyond the basic 6 a.m. to 11 p.m. day. Nearly 40% operate nonstop. As opposed to our 2008 annual report we have successfully managed to increase this figure by 5%, up to 45% are operating nonstop.”
McDonalds met this objective simply by employing more staff for the extra hours that need to be covered. Along with the increase in employment they also had to look at the financial count for the extra cost they might have had to contribute towards the extra hours. They would have needed extra money for their variable costs (increased bills such as electricity, gas and heating). With McDonalds increasing their opening hours according to some of their calculations, worldwide they will increase their customer count by 6% which adds around 3.25 million people a day. The average customer when they order at McDonalds, spend around $5 to $7 per visit, per person. This means that it is possible to raise their daily revenue by around $19.5 million if their calculations are correct.
The Economic factors that may have helped McDonalds in achieving their objectives would have been:
- Economic Conditions
The current economic climate has been the worst to date. The recession that we are currently in has taken over 10,000 businesses across the UK in the last year. Business owners were forced to shut down and try and sell their business sites for money to pay off the debt this recession created. Some business owners went into that much debt were even forced to sell their own house just so they could pay off debts. This recession has turned some people’s lives upside down, except McDonalds... Reportedly this has been one of the best years for McDonalds, ever. Due to the recession taking such a toll on people’s financial situations they look for cheap, convenient and quick ways to eat, cooking a meal at home proved to be too expensive for some (students, benefit claimers and others) so they went for the cheapest, convenient way to eat good quality food. With McDonalds gaining more and more customers as the recession went on the lower the ingredients that they used got cheaper, so the profit on each product that McDonalds made grew by 4p on average per product but going to McDonalds was still a treat to people but at these great prices. This gave them a greater amount of money to give back to the shareholders, more money to develop restaurants for the 24 hour service and the 200 McCafes.
McDonalds competitors over the years has pushed and pushed McDonalds to be the very best they can be. McDonalds used to be the brand that would copy and innovate on other competitor’s products and designs. With these companies bringing McDonalds competition they have bought many different and appealing aspects to the fast food market to try and gain an edge over them. With the competition high with all the brands, each franchise has achieved different goals to make themselves better as a company; such as McDonalds has involved themselves in many charity events organised by themselves, along with KFC and Costa Coffee. Competition makes each brand try harder and harder to be the best they possibly can be, they try to make different aspects of their own products and service qualities better than their competitors. McDonalds are now the market leaders over KFC, Burger King, Costa Coffee and they now copy off McDonalds. McDonalds now are left to innovate and find gaps in the market as they are competing against themselves to be better than they where the day before. With McDonalds trying to beat Starbucks, as I mentioned before, by building over 1,300 branches in Europe. McDonalds would not have done this if the competition between the two brands was not there; again this encourages them towards meeting these objectives.
I most certainly feel that McDonalds deserve to achieve their main aim and objectives for the huge amount of things they have offered to their staff, customers and other citizens. Some of the things they did are:
- Hamburger university
- McDonalds sport leagues and sports activities
- Nutrition chart
- Ronald McDonald house
- Customer service
Many aspects like these are why I think McDonalds deserve to achieve their main aim and objectives.
Firstly with Hamburger University they offer employees the chance to go and do a degree in things like management, catering and accountancy. Over the years since it was opened in 1961 over 70,000 mangers have graduated and they could be taught in over 28 different languages depending on which country they were going to work in or where they were from. Making sure that their staff where trained to the highest quality ensures that they offer the best skills and customer service possible to their customers. In doing this it gave McDonalds a good reputation, which brought customers back to their restaurants in the future and made McDonalds their ‘their first choice when eating out’
McDonalds Sports Leagues and Sports Activities
McDonalds hosted numerous sporting activities, for children and teenagers, up and down the country every year to promote a more healthy and active lifestyle. McDonalds have always been stereotyped as being unhealthy after the documentary ‘Supersize Me’ when customers and others have seen the biological affect it had on a fit, healthy, young man. The outcome, after consuming McDonald’s products for 30 straight days, was the man became very ill and had to go to hospital. Using these sports activities for the community it brought McDonalds back a much healthier reputation as the population of the communities and others could see the great lengths they were going to, to promote a healthier lifestyle. In doing this once again it brought more customers to their restaurants to try the healthier options McDonalds had to offer.
McDonalds launched on their newly designed packing in 2008, a nutrition chart. The purpose of this nutrition chart was to show the customers exactly what they were eating. This showed McDonalds honesty with what was in their food and where giving customers the ‘heads up’ on how many calories or fat their were about to consume. Giving the customers the chance to see how many calories they are about to consume allows them to judge a more healthy way of eating for the day, possibly as they have had McDonalds which contained 400 calories they might not have a packet of crisps or something like that for example. It helps customers plan their day of what they are going to eat and how much of it they will consume in the rest of the day. Many customers will go to McDonalds for just that very reason as it is an extremely useful to have and it shows that McDonalds do care about what their customers are eating (refer to appendix for example).
Ronald McDonald House
The Ronald McDonald house is a charity set up by McDonalds themselves to help families with terminally ill children. It provides accommodation for the parents and other members of the family for free so they can stay close to their child if they live a long distance away. With McDonalds opening this accommodation for families going through a sad time, it shows the customers just what McDonalds are doing for people out there especially with helping people in those sorts of situations. This is the main reason why I feel McDonalds deserve to achieve their main aim as not a lot of people know what they are actually doing other than providing fast food for people.
Evidence 8: RMHC website; about us...
What is RMHC?
RMHC – Ronald McDonald House Charities – is an independent Charity which provides free ‘home away from home’ accommodation at hospitals, enabling families to stay close to their child and maintain a degree of normal family life.
The Charity has achieved a lot in the last 20 years. Twelve Ronald McDonald Houses have been built which, along with 29 sets of Ronald McDonald Family Rooms, provide over 350 bedrooms every single night of the year.
However, there is still a great deal to do. Many families still have to sleep on camp beds or in their cars in order to be close to their children, and RMHC is determined to help as many of these as possible.
McDonalds have one of the best customer services throughout the world of business today. They pay out millions every year to ensure that their staffs provide the best service to the customers as possible. They send them on training days, offer benefits and introduce a competition to win prizes every month for whoever completes their job to the best possible standard. They offer their staff the best possible benefits to ensure that their customers get the best possible service, again this shows how much McDonalds care, not only about their staff but about their customers as well. All through my coursework I have come across different attributes and situations in which McDonalds always put their customers first before their own PROFIT! For example the 100% British Beef, McDonalds are willing to increase their variable cost per product just so their British suppliers would have money coming into their business at this struggling time in the recession, then also that their customers would have the best quality product possible for a great price. That is why I feel that McDonalds deserve to achieve their main aim this year.