Rising consumer expectations
trigger operational changes
Brands improve healthiness and experience
McDonald's had a difficult year.
But the challenges facing the
world's largest fast food restaurant
chain reflected powerful forces
disrupting and transforming the
For consumers concerned about healthier
ingredients, ethical supply chains and
environmental responsibility, the fast food
formula of low prices for simple meals
delivered with consistent quality in a familiar
setting was no longer sufficient.
To meet these expectations, fast food
brands revisited their operations – from food
sourcing to menu options and restaurant
experience. Some did a better job than
others and in so doing projected a larger
These operators included Chipotle, the
Mexican grill, which led the BrandZ™ Fast
Food Top 10 in Brand Value increase with
44 percent, and Panera, which experienced
a decline in profit because of increased
competition in the fast-casual market that it
invented. Neither brand ranked in the Top 10
when the BrandZ™ Global report launched
10 years ago.
Chipotle's net income increased 36 percent
while same-stores sales improved 16.8
percent in 2014. Chipotle operated in 1,783
locations, primarily in the US. In contrast,
McDonald's operated in 14,350 locations in
the US, its home market, where annual sales
declined 1.1 percent, with a 4.1 percent drop
in customer traffic and a like-for-like sales
decrease of 2.1 percent.
Although McDonald's remained number
one in the BrandZ™ Fast Food Top 10, the
rank it's held since the inception of the
BrandZ™ Global Top 100 report a decade
ago, McDonald's declined 5 percent in Brand
Value, following a 5 percent decline a year
ago. With a sharper menu focus and a boost
from the stronger US economy, Burger King
improved 19 percent in Brand Value on a 9
percent gain a year ago.
A merger of Burger King and Tim Hortons,
the Canadian coffee shop chain, resulted in
an organization of over 19,000 restaurants,
the world's third-largest fast-food operation
(by location) after McDonald's and Yum!
Brands. The transaction signaled plans
to expand aggressively outside of North
Chipotle represents the freshness-focused
end of the fast food brand continuum, while
McDonald's is a pioneer of process, capable
of providing affordable and well-priced
meals with machine-line proficiency across
enormous location networks.
McDonald's operates over 36,000
restaurants worldwide, second only to
Subway, with almost 44,000. But the
McDonald's operation is much more
complicated, and that was part of the
McDonald's experimented with many new
menu options, which added cost and slowed
service. In contrast, Burger King adopted
a strategy of launching few new products
quickly prepared and highly promoted
to meet the needs of its price-conscious
When Ray Kroc established McDonald's
in 1955, the chain's post-war industrial
efficiency was a value consumers respected.
For chains like Chipotle and Panera,
efficiency is an operational necessity that
customers take for granted, but sustainability
is the value they respect more.
McDonald's had taken incremental steps
to link efficiency with sustainability, adding
healthier menu items and refurbishing its
locations. Recently appointed McDonald's
CEO Steve Easterbrook articulated a
strategic imperative to remake McDonald's
as what he called a "modern progressive
Within weeks of Easterbrook's appointment,
McDonald's announced US plans to phase
out menu items made from chickens treated
with most antibiotics. It also offered the
option of milk from cows not treated with
growth hormones. And the company raised
employee hourly wages in US company-owned
stores as a step toward creating a
devoted workforce and improving customer
Starbucks CEO Howard Shultz most
clearly demonstrated the power of a CEO
to connect a brand to a higher purpose.
Before other fast food and retail brands
felt pressured to raise employee minimum
wages, Starbucks paid higher hourly
rates and introduced a college tuition
reimbursement program for employees.
When the recent period of high
unemployment coincided with the return
of many soldiers from wars in Iraq and
Afghanistan, Starbucks pledged to hire
10,000 veterans or their spouses.
And when Americans protested a
controversial grand jury decision regarding
the shooting of an African American by
white police officers, Shultz inserted
Starbucks into the national conversation
These initiatives inspired both supporters
and critics. They reinforced Starbucks'
credentials as a bold and forceful brand from
which customers can expect strong jolts of
caffeine and progressive social opinion and
With 21,366 locations in 65 countries,
Starbucks has enormous impact on the
environment and the lives of people along
the supply chain. But like its competitors,
Starbucks is in business to make money, and
it did. Food sales, including its new sodas,
bakery and other offerings, increased the
average ticket; as a result same-store sales
grew 6 percent.
Similarly, some of the fixes McDonald's
implemented under Easterbrook were
more for driving revenue than clarifying
purpose. The chain announced the plans
to experiment with all-day breakfast, for
example. Extending a popular and profitable
daypart was easier and less expensive than
adding new menu items.
Domino's Pizza enjoyed its fifth year of
like-for-like sales growth following the
reformulation of its pizza recipe. Flavor
improvement was only one part of
the Dominos success story. The brand
also focused attention on fewer, more
impactful offerings and invested in brand
communication and digital.
McDonald's, Starbucks and Panera were
among the first fast-food restaurants to
accept Apple Pay when it was introduced.
At Starbucks, which offered its own
payment system, 16 percent of US
purchases were transacted using mobile.
Starbucks also planned to experiment with
In an effort to be more transparent and
meet criticisms head-on, McDonald's
launched its "Our Food, Your Questions"
campaign, in which a brand spokesperson
frankly answers customer questions such as
why the burger in the box doesn't quite look
like the burger in the advertising.
That kind of transparency has worked
in the past. Domino's Pizza launched its
new pizza recipe with a video of mortified
executives vowing to improve the taste of
the pizza, and courageously revealing that
focus groups at the time compared it with
Chipotle introduced a satirical video series
called "Farmed and Dangerous," which
expanded on earlier videos that demeaned
industrial agriculture and associated the
brand with natural and more wholesome
The company increased the transparency
of efforts to reduce and ultimately eliminate
genetically modified food. Food safety
issues related to meat sourcing in China
hurt McDonald's as well as KFC and Pizza
Hut, both part of Yum! Brands.