Forever Young

By Reid A. Paul • Editor-in-Chief | May 01, 2006

To understand where McDonald's is now, it helps to look back a few years and remember where the world's largest restaurant company was. Not so long ago, just before the company turned 50, in the first quarter of 2003 McDonald's seemed to be in trouble. Coming off the first quarterly loss in the company's history, share prices had dropped to a nine-year low ($12.38) and the company had announced it would close more than 700 restaurants worldwide. Fast Food Nation, a book highly critical of QSRs in general and McDonald's specifically, stood near the top of many best seller lists.

Amid that gloom, McDonald's announced it would offer Wi-Fi Internet access to guests at 10 restaurants in New York. That single move, perhaps more than any other move made by McDonald's, represented a seminal shift in how customers would experience McDonald's. And although few Wall Street analysts would attribute the dramatic turn around (at last check, stock was at $35.20) for McDonald's entirely to offering Wi-Fi, there can be little doubt that the customer experience has shifted and that the 50-year old company is as young and relevant as ever.

Whereas prior to 2003 technology was behind the scenes, today, new McDonald's technologies are front page news and on the front counter. Perhaps no story in the global outsourcing debate captured American attention like the use of a Call Center for remote drive-thru order taking at McDonald's (even though the Call Centers were located in the US). Credit card terminals with Ã.‚¬Å"tap-and-goÃ.‚¬ RFID readers stand side by side with collection boxes for the Ronald McDonald House Charities on the front counter. Both are seen as essential parts of the McDonald's experience. It all works together and once again McDonald's is seen as an industry leaderÃ.‚¬"not just in terms of locations and sales, but innovation as well.

Behind the counter
Recently, I sat down with McDonald's USA's Gina Pfeifer, vice president business integration, and Jim Sappington, vice president of information technology, to understand how it all works together at the QSR giant and how the company leverages technology for shaping the evolving customer experience at its restaurants.

Of course, many of the underlying principles laid out by Ray Kroc have not changed insist Pfeifer and Sappington. Quality, service, cleanliness and value (QSC&V) remain the constants and the company continues to strive to ensure all company-owned and franchised restaurants keep to the same exacting standards. Ã.‚¬Å"Ray Kroc was always focused on the customer and what the customer wanted,Ã.‚¬ notes Pfeifer, Ã.‚¬Å"and technology has now become a key enabler in meeting that.Ã.‚¬

While technology plays across all four elements, it has had the greatest impact on convenience and speed. From an early point, McDonald's recognized the need for a robust point-of-sale system, developing its own in-house POS software system for domestic units and working with Savista (which was just recently acquired by Torex Retail) for its international NewPOS system. Other projects, like McDonald's Innovate real-time reporting system, illustrated the limitations of the keeping technology solely focused on operations.

Central to the turn-around plan that CEO Jim Cantalupo outlined in 2003 was turning the refocusing on the customer. For much of its history, McDonald's was created first as a place to get food quickly and the customer experience was secondary. Beginning with the introduction of Wi-Fi access and continuing to the introduction of premium coffee at McDonald's U.S. restaurants earlier this year, McDonald's continues to focus on the customer's overall experience.

Ã.‚¬Å"Technology has come out of the back of the restaurant,Ã.‚¬ explains Sappington. Ã.‚¬Å"Technology really wasn't focused on the customer, but over the last several years that has changed and allowed us to have an even more significant impact on customers.Ã.‚¬

Integrated approaches
Bringing technology into the front of the house is one thing, but implementing it successfully--especially to 13,700 locationsÃ.‚¬"is an entirely different matter. As vice president of business integration, Pfeifer's role is to ensure that technology moves past the implementation stage and that it is successfully integrated in the entire business with complete buy-in. Ã.‚¬Å"One of the things that Ray Kroc introduced to the industry is the concept of a three-legged stool and I think the way we execute it is very unique,Ã.‚¬ she offers. Ã.‚¬Å"We make sure that the company, its owner/operators and suppliers are all in balance so that the stool stays strong. It is a relationship of collaboration. Owner/operators play a key role in everything we do, whether it is technology, supply chain or marketing. We really partner with our suppliers and we value them.Ã.‚¬

True business integration Pfeifer argues, means that a technology roll out is not goal, it is just the beginning. Success depends on bringing together marketing efforts, recognizing the operational impact, instituting training and planning for future growth. Ã.‚¬Å"It is not enough to simply put a credit card device in the store to make us cashless,Ã.‚¬ she notes. Ã.‚¬Å"Our approach is to integrate it into the rest of the business.Ã.‚¬

Ã.‚¬Å"Gina's role is so important because it is very easy to approach technology from the perspective of implementing a new technology, but much more difficult to implement programs that will really impact the customer,Ã.‚¬ adds Sappington. Ã.‚¬Å"You need that breadth of involvement. You need the leadership to be able to drive initiatives so that it is an integrated part of the business plan. That has made a huge difference for McDonald's. Our customers expect consistency. Whatever we do, we have to do it at over 13,000 restaurants.Ã.‚¬

Just as importantly, the technology also needs to fit into the larger strategic effort to update and reshape the customer experience. Ã.‚¬Å"We have been re-imagining many of our restaurants,Ã.‚¬ says Pfeifer. Ã.‚¬Å"We want to be contemporary and relevant to our customers. Not only in terms of technology, but also menu. Whether it is salads, chicken or apple dippers, McDonald's provides more of what today's customers want.Ã.‚¬

Staying relevant
Naturally, determining what customers want carries over to technology. As noted last month in Hospitality Technology (see Ã.‚¬Å"Generation NextÃ.‚¬ April 2006), Gen-X and Gen-Y are playing increasingly important roles as consumers and come with drastically different approaches to technology than their parents and grand- parents. Ã.‚¬Å"Customers are getting more and more comfortable with technology,Ã.‚¬ insists Pfeifer. Ã.‚¬Å"And they expect it,Ã.‚¬ interjects Sappington.

The goal, Sappington and Pfeifer insist, is keeping McDonald's youthful and relevant. Ã.‚¬Å"We believe in the concept of Ã.‚¬Ëœforever young' and that speaks to this restaurant and the type of feeling we are trying to have in our restaurants,Ã.‚¬ Sappington continues. Ã.‚¬Å"It means something unique and different to everyone, but the key is that it is relevant. We all remember back at some point in our lives to visiting a McDonald'sÃ.‚¬"it is an experience McDonald's is trying to recapture; a social experience.Ã.‚¬

A great example of the new approach McDonald's takes towards customer-facing technology is the roll out of its Arch Card program. While other restaurants were quicker to market with gift cards, for McDonald's it was critical to ensure that they had a consistent experience at every location.
Without a common POS system, for example, the rapid roll out of credit card, gift card and RFID payment solutions would not have been possible. As McDonald's USA continues it's migration from its proprietary POS system and adopts the NewPOS standard already in place for many international restaurants, that process will only be strengthened.

Ã.‚¬Å"It was very clear that an easy to use and consistent gift card program was something our customers wanted and expected,Ã.‚¬ says Sappington. Ã.‚¬Å"It was a daunting task to get it in quickly for the holiday season and we could only accept a very tightly integrated solution. It was not acceptable to have separate card swipe devices that were not integrated with the POS and the back office. The system was rolled out on top of the cashless system and tied into operations with a great marketing program around it.Ã.‚¬

Guiding principles
Bringing together Finance, Marketing, Franchisees and the suppliers, Pfeifer led the Program Management Office at McDonald's, bringing it from idea to completed roll out in 18 months. In February 2005, 450 restaurants had the program in place with more than 12,000 units installed nine months later.

Clearly everything is clicking right now for McDonald's. The troubles of 2003 are a distant memory, while the accolades and celebration of the company's 50th anniversary are closer at hand.

In fact, these days McDonald's hardly seems like a mature company. Moving quickly and decisively to implement technologies not yet established in the QSR industry--like Wi-Fi and RFID payment--McDonald's is displaying the brashness and risk-taking one might expect to see in a start-up.
Partnering with other companies to offer new opportunities for customers, whether it is DVD rentals through Redbox or free wireless access for Nintendo DS gamers, the company seems to realize something that few other restaurants get: technology is not just a tool, but also an opportunity. Ã.‚¬Å"Technology at McDonald's has gone from being a true enabler to being a driver,Ã.‚¬ Pfeifer concludes. Ã.‚¬Å"It is a very exciting time to be in the technology world.Ã.‚¬

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