Feature

Superbrands case studies: McDonald's

Originally published in 'Consumer Superbrands Volume IV', May 2001. The book reviews the UK's strongest consumer brands as judged by the independent Superbrands Council.

Case study provided by the Superbrands organisation.

Market

When McDonald's was launched in the UK in the mid 1970s, the path for quick service restaurants was already well established, with national favourites like fish and chip restaurants paving the way for new international imports.

Since then, the quick service restaurant market has sustained dynamic growth. With the introduction of leading international chains such as KFC, Burger King, and Pizza Hut increasing customer choice and making this a highly competitive market place.

Despite the increases in competitive pressure however, the McDonald's brand is still growing and few others can match it for the power and ubiquity embodied in its familiar Golden Arches.

Achievements

McDonald's is the world's largest and fastest-growing food service organisation, with more than 26,000 restaurants in 119 countries serving food and drink to nearly 43m customers daily. In the UK McDonald's operates over 1,060 restaurants that generate a combined annual turnover of more than £1bn. This success has not gone without recognition.

In 1996, McDonald's was rated the world's greatest brand in a publication by Interbrand. The in-depth study looked at the strength and potential of many worldwide brands, but concluded that "Nothing compares with McDonald's for the power of a branding idea, the skill of its execution, and the longevity and width of its appeal." The study also pointed out that despite having its roots in the US, McDonald's has become an accepted citizen of the world. Certainly this acceptance has been felt in the UK.

In 1999, Campaign magazine voted McDonald's Advertiser of the Year. The award was in recognition of the consistent quality of McDonald's advertising in the UK.

1999 was also the year that saw the brand's popularity with its UK consumers dramatically demonstrated in a two for the price of one Big Mac offer. The promotion was timed to celebrate the company's 25th anniversary in the UK, but nobody could have predicted how successful it would be when, at its height, eight times the usual number of Big Macs were sold due to the massive public demand.

Customer satisfaction is also dependent on well-trained, motivated staff and McDonald's is committed to the development of all of its employees, at every level of the organisation. Training is a continuous process, and employees attend courses in the restaurants as well as at the company's six Management Training Centres.

When they complete their initial training, all employees are eligible to receive an independently validated Basic Certificate in Food Hygiene, and successful completion of the Management Training programme can lead to a Diploma in Restaurant Management -- a nationally recognised qualification accredited by Nottingham Trent University.

McDonald's commitment to the development of its employees was nationally recognised in 1998 when the company achieved the Investor in People accreditation, awarded to the UK's leading employers.

History

The McDonald's story began in 1954 in San Bernadino, California, where a salesman called Ray Kroc was supplying milkshake multi-mixers to a drive-in restaurant run by two brothers, Dick and Mac McDonald. After calculating that the restaurant -- which served 15 cent hamburgers with fries and a shake every fifteen seconds -- must be selling over 2,000 milkshakes a month, Kroc saw the massive potential of the brothers' thriving business and decided to get involved. On 15 April 1955 Kroc became the McDonald brothers' first franchisee when he opened his own McDonald's restaurant in Des Plaines, a suburb just north of Chicago.

Rapid growth followed: McDonald's served more than 100m hamburgers within its first three years of trading and in 1959, the 100th McDonald's restaurant was opened. In 1961, Kroc paid $2.7m to buy out the McDonald brothers' interest and in 1963 the billionth McDonald's hamburger was served live on prime-time television.

The brand proved equally popular outside the US. McDonald's had successfully established markets in Canada, Japan, Australia and Germany by the time the Golden Arches made their debut appearance in the UK in 1974 in Woolwich, south east London. By 1988, worldwide sales had topped $16bn and today McDonald's is represented on all five continents from Beijing to the Arctic Circle.

Product

McDonald's has evolved into an international, multibillion-dollar quick service restaurant industry. Hamburgers and fries remain the mainstay of its business but central to the brand's success has been a menu that constantly evolves and expands to meet the needs of changing consumer lifestyles and eating habits.

A prime example of this is the Filet-O-Fish which was conceived by Lou Groen, a Cincinnati-based franchisee whose restaurant operated in a predominantly Catholic area. After noticing that trade was slow on Fridays, Groen concluded that this was because Friday is a day of abstention from red meat for many Catholics and he set out to develop a fish-based product to meet the needs of the local community. The Filet-O-Fish was launched in 1963 and has since become a mainstay on many McDonald's international menus.

In 1968, another franchisee -- Jim Deligatti from Pittsburgh -- was responsible for the creation of the Big Mac, which is the best known and most successful McDonald's menu item ever. Nine years later, Deligatti developed the McDonald's breakfast menu -- a move that would change the breakfast habits of millions of Americans in the years that followed.

This spirit of innovation has played an important part in the growth of the company which continuously seeks to improve the consumer perceived quality and convenience of the McDonald's experience. A major breakthrough came in 1975 with an idea that sprang from the need to solve a local sales problem: when servicemen from a nearby Army base in Sierra Vista, Arizona, were forbidden to leave their cars in military fatigues, the first drive-thru restaurant was opened. The concept was an immediate success, and today, drive-thru accounts for more than half of McDonald's business in many of its international markets.

McDonald's is committed to providing its customers with food of the highest quality. This is achieved by using the best raw ingredients, sourced from approved local suppliers and ensuring that food is prepared to a consistently high standard. The menu is continually reviewed and enhanced to ensure that it meets -- and wherever possible exceeds -- expectations. In the UK, the McDonald's menu includes beef, chicken, fish and vegetarian products, a full range of desserts, shakes and hot and cold drinks. To help customers make informed decisions about their diet, McDonald's was the first quick service restaurant to publish a complete ingredient listing and detailed nutritional analysis of all its products.

Recent developments

Two of the most successful innovations from McDonald's have been its Extra Value Meals and its Happy Meals.

Extra Value Meals offer customers a hamburger, drink and fries sold together at a fixed money-saving price. The meal offering combines variety in the choice of food as it incorporates current promotions, ease of purchase and above all excellent value for money.

Similarly, McDonald's Happy Meal boxes offer parents a simple and appealing package, with a smaller portioned meal served in a fun box with a toy. The unique alliance that McDonald's has with Disney means it is able to combine the popularity of its food with all the magic of Disney.

It is innovations like these that have been instrumental in building the McDonald's family business and establishing the brand's ownership of value within the quick service restaurant sector.

In 1999, the 1000th UK McDonald's opened in the Dome at Greenwich. As the Official Community Sponsor of the New Millennium Experience, McDonald's investment created the 'Our Town Story' programme, which invited children from every local education authority (approximately 21,000) to tell their story in the form of a show performed live at the Dome in the specially designed Our Town Story theatre.

Promotion

McDonald's has always recognised the key role of marketing in the brand-building process. Advertising is certainly not the only cause of McDonald's success but the two are inseparable. As Ray Kroc put it: "There's something just as basic to our success as the hamburger. That something is marketing McDonald's style. It's bigger than any person or product bearing the McDonald's name." To this day, a fixed proportion of restaurant sales is reinvested into advertising and sales promotion in every market in which McDonald's operates.

In the UK, high profile brand advertising has been instrumental in building a powerful emotional relationship between McDonald's and its customers. The fundamental warmth and humanity it has demonstrated in its communication remains unmatched by its competitors.

One of the strongest relationships that McDonald's has managed to build in the UK has been through football, the nation's favourite sport. Through a combination of the high-profile sponsorship of professional events and also the work it has done on a grassroots level, McDonald's has linked the brand with sport in a way none of its competitors can rival. McDonald's uses its association with such prestigious global events to reinforce its international brand stature, whilst its television advertising in the UK uses national heroes such as Alan Shearer, to endorse its association with the game on a local level.

McDonald's continuously displays a rare ability to act like a retailer while thinking like a brand; delivering sales for the immediate present, while building and protecting its long-term brand reputation.

In 1999, McDonald's successfully demonstrated its ability to do this by offering a series of themed new menu items, based on foods from around the world, such as Italian, Indian and Chinese. Each promotion was supported with heavyweight above-the-line advertising that communicated the theme of each promotion with a McDonald's twist, presenting the products from a very British perspective.

The Curry and Spice promotion parodied the old Pearl and Dean cinema commercials for local curry houses, and the Chinese promotion parodied the dubbed Kung Fu films of the 1970s, with classic speeded up fight scenes. The commercials served to strengthen the position of McDonald's as part of the fabric of British culture.

In 2000 McDonald's launched the McFlurry in the UK (whipped dairy ice cream with a choice of Cadbury's Dairy Milk, Crunchie or Smarties pieces mixed in). This type of innovation in its regular menu ensures incremental sales for McDonald's. In addition to national advertising and promotional campaigns, McDonald's is strongly committed to local restaurant marketing. This commitment is an enduring testimony to Ray Kroc, who subscribed passionately to the belief that McDonald's should contribute to the communities which it serves. Local activity takes many different forms, ranging from free coffee mornings for senior citizens to fund-raising work with local schools, youth groups and hospitals.

In 1989 Ronald McDonald Children's Charities was established in the UK. The charity has raised more than £10 million to date and makes grants to charities which benefit children with special needs, as well as providing support to the families of sick children through Ronald McDonald Houses and Family Rooms which provide accommodation for parents of children who are in hospital.

Brand values

Ray Kroc developed his brand vision for McDonald's around a simple but effective consumer-driven premise: quality, service, cleanliness and value (QSC&V). These values remain the cornerstone of the brand and as a result, McDonald's has become known as a trustworthy brand that places the customer at the centre of its world.

The key to the company's success has been its capacity to touch universal consumer needs with such consistency that the essence of the brand has always been relevant to the local culture.

Things you didn't know

  • Worldwide, McDonald's is the largest franchised food service organisation.

  • At the start of the new millennium McDonald's opened its 1000th restaurant in the UK.

  • Every day McDonald's provides food and beverages to nearly 43 million people per day worldwide.

  • Around the world McDonald's food is available in locations such as a Swiss aeroplane, a ski-thru in Sweden and in Liverpool's Anfield football ground.

    © 2002 Superbrands Ltd