PUBLISHER'S VIEWPOINT
January 2003
I Bet on McDonald's

Back in 1980, Dick Mayer explained to me that running fast-food restaurants was “the most difficult business in the world.” Mayer was helping fix KFC at the time. “You take a million-dollar asset (land, building, equipment; now more like $2.5 million) that is part warehouse, part manufacturing facility, part retail outlet. You pay a 19-year-old $25,000 a year to manage it. He or she has 30 to 40 employees, most of them part-time. And they turn over three times a year. And whether this entire enterprise succeeds or fails can come down to how a 16-year-old treats a customer at the counter. Now, you tell me how to manage that. And then let me explain that I’ve got 4,700 of them.”

I was reminded of this story when McDonald’s announced its first quarterly loss in history a few weeks ago. McDonald’s has its share of challenges, yes, and they bit a bullet in 2002. But the reality is, no one has ever run restaurants better for longer. So, I have been absolutely flabbergasted by the amount of consumer press this announcement has generated. Oh sure, I expect the daily story in the Chicago Tribune and the Chicago Sun-Times. But when I spotted an editorial in the Sunday edition of the New York Times on Dec. 29, I knew this was a cultural phenomenon of the first order.

While some of this reportage and opinion has been reasoned and insightful, a lot of it was hooey. Reading many of these stories, you’d think the sky was falling. I think most of it was very unfair to McDonald’s, and I’ll bet most of its competitors agree with me.

Building and running more than 30,000 restaurants around this wide world is one hell of a job. I have absolutely no illusions that McDonald’s hasn’t stumbled here or there. But every day on the streets of Morton Grove and Irvine and Secaucus, not to mention Hong Kong, Cairo and Hamburg, they win more than they lose.

And yes, there are market issues. We baby boomers like a beer with our burger and fries, so we end up at Applebee’s or Chili’s or Max & Erma’s. They know that in Oak Brook. That’s why they bought into Chipotle and Donatos, not to mention Boston Market and Pret A Manger, and shifted some of their capital spending this year.

But even on the core brand, I’ll bet on McDonald’s. After all, they have thousands of the best retail sites in the world, a collection of operators who are the most sophisticated quick-service restaurant operators anywhere, and systems that remain the envy of the restaurant universe. It’s not a long shot, by any means.

Cheers,

Robin Ashton
Publisher