Sometime in the past decade or so, something went wrong under the Golden Arches.
McDonald’s, the company built up by Ray Kroc in the 1950s, had slung hamburgers, fries and shakes at Americans for half a century. When that got old, the company invented Chicken McNuggets. Hash browns and hot apple pies were in the mix. So, eventually, were chef salads and the McRib sandwich. As the restaurants’ signs said, billions and billions were served.
But the empire couldn’t rule unchallenged. People started worrying about calories and cholesterol. Soda fell out of favor. A guy named Michael Pollan wrote a book with a philosophy that seemed to strike at the heart of McDonalds mission: “Eat food. Not too much. Mostly plants.” And the company was accused of exploiting its workers and sued for making its customers fat not long before purveyors of slightly more upscale “fast-casual” cuisine — Chipotle, Coyote Café and Shake Shack — crashed the party.
Now, as Shake Shack plans a hotly anticipated initial public offering of stock — and is being hailed as the hottest thing since Starbucks — McDonald’s is scrutinizing disappointing balance sheets and has just dismissed its chief executive.
“It’s tough to say goodbye to the McFamily, but there is a time and season for everything,” soon-to-be former CEO Don Thompson said in a statement, as The Washington Post’s Roberto A. Ferdman reported. Steve Easterbrook, a McDonald’s veteran, will replace Thompson.
“I am grateful to have had the opportunity to work with Don and congratulate him on his remarkable career at McDonald’s,” Easterbrook said in a statement. “I am honored to lead this great brand, and am committed to working with our franchisees, suppliers and employees to drive forward our strategic business priorities to better serve our customers.”
As Easterbrook takes the reins, McDonald’s faces an identity crisis. By focusing on healthier offerings, should the company offer a more Pilates-and-yoga friendly version of its triple-bypass-inducing cuisine?
Some say not. Some say the variety of its offerings as it seeks to please one and all has given McDonald’s menu its own body mass problem.
“In recent years McDonald’s has added myriad items, from chicken wings to wraps, and created a menu that some argue is so bloated that it confuses customers and slows down service,” the Financial Times wrote.
The Sydney Morning Herald was even more brutal: “McDonald’s has already started culling menu items but still has a long way to go,” it wrote.
Okay: Should the Golden Arches instead focus on its traditional customers — harried parents looking for a cheap meal and older customers instead of millennials? Picking your battles is, after all, is a version of Shake Shack’s strategy.
“McDonald’s diffused focus starkly contrasts with the singular brand focus behind Shake Shack’s success,” Denise Lee Yohn of the Harvard Business Review wrote. “Shake Shack has become one of the category’s most remarkable success stories in recent years by committing and staying committed to its brand mission: being ‘the best burger company in the world.’ Its CEO, Randy Garutti, explains his organization’s commitment to the principle ‘Do what you want to do really well in its most basic version.’ ”
By this line of thinking, Happy Meals are where it’s at.
“If the company had kept its focus on its brand essence — appealing to the child in all of us — it would have managed to diversify in more integrated and distinctive ways, and it would have steered clear of menu items, promotional strategies, and operational developments that detract from delivering a playful experience,” Yohn wrote.
Stuck between an uncertain future and a past that’s, well, in the past, Easterbrook will have to chart the course of a company with a stock trading near a 52-week low. McDonald’s will have to be healthy, but still appeal to children; cheap, but upscale; hip, but welcoming to Middle America; and sophisticated, but just as relevant in Georgetown as it is in innumerable bus stations across America. If it can’t do all of these things, it risks becoming the Chevy Vega of the fast-food industry.
Charting course through these uncertain waters, Easterbrook will have to find the essence of McDonald’s business.
“Whether your company is large or small, or has been around for decades or days, focusing on the core of your brand — and staying committed to that focus — is the key to successful, sustainable growth,” Yohn wrote.
But what if the core is melting down?