Why McDonald’s Is Focusing on Speed of Service Over Service With a SmileJanuary 9, 2014 by Ashley Verrill
After posting its largest quarterly margin decline in more than 10 years, McDonald’s Business Research Vice President Steve Levigne said the company’s “service is broken.” He cited stats during a November investor meeting that showed one in five customer complaints are related to friendliness issues, “and it’s increasing.”
Yet in the months following that announcement (as earnings continued to fall short of expectations), the company has primarily talked publicly about addressing issues with its speed of service, rather than its friendliness. These efforts include investing $3 billion in installing new preparation tables, drive-thru windows, a “runner” position and an ordering system.
This article investigates potential reasons why McDonald’s is focusing its efforts in this way, rather than tackling customers’ top complaint of employees being “rude or unprofessional.”
Friendliness Doesn’t Really Impact the Decision to Buy
Last year, I conducted an experiment where I installed a customer feedback system in three retail chains: an ice cream shop, a bicycle seller and a burger joint. My goal was to produce insights the companies could use to improve their businesses. But after discussing the results with Larry Freed, president and CEO of customer experience analytics company ForeSee, I realized I should have first determined what factors primarily influence a customer’s decision to buy.
“The end result should be to find out what will change the customer’s view of the experience, what is driving their satisfaction with their experience and what is driving the changes in their behavior,” Freed explains. In other words, smart companies will determine the causal relationships behind what leads customers to buy from them, then make changes around those drivers.
In the case of McDonald’s, even if customers say that friendliness of service is just as important as speed of service, their actions might speak otherwise. Consider, for example, that over the same months the company experienced earnings below expectations, they clocked their slowest average speed of service in the study’s 15-year history, at 189.49 seconds.
Achieving Friendlier Service Could Be Cost Prohibitive
Studies have clearly proven the relationship between employee pay and performance. Take Chick-fil-A, for example, which is often rated as having the friendliest customer service in the business. The company pays restaurant operators double the industry average and frontline employees up to $2 more than the minimum wage, on top of as much as $2,000 in scholarship funds.
McDonald’s, on the other hand, pays most frontline employees the federal minimum wage of $7.25 (or the state minimum, if it varies)—an amount even McDonald’s has proved is nearly impossible to live on without a second job. So why don’t they simply pay employees more?
According to a recent Bloomberg BusinessWeek analysis, McDonald’s profit margins currently sit at about 10 percent. If they were to suddenly raise pay from the minimum wage to $15 per hour (the amount employees who recently went on strike asked for), their menu prices would have to increase by about 25 percent to maintain current profit levels.
Price is likely a much more significant factor in a customer’s decision to purchase from McDonald’s. In fact, investors said in October they underestimated the importance of “value” offerings, and more items have since been added to the Dollar Menu. For this reason, it makes sense that the company would value keeping prices low over achieving friendlier service.
Employees Will ‘Appear Friendlier’ if Speed is Improved
In a memo sent to some franchises (reported in the Wall Street Journal), McDonald’s made one statement that came as close as I’ve seen to talking about how to address friendliness issues. The company said the new ordering system it’s implementing this year “provides personalized one-on-one service, which directly improves order accuracy. To the customer, we appear friendlier and better organized.”
Rice University Professor Dr. Robert Westbrook, who has researched customer loyalty and satisfaction extensively, says this logic checks out. While there are many factors that impact a customer’s perception of service friendliness, order accuracy is a significant contributor because it prevents the employee from having to deal with a negative issue.
“If the order is wrong, the employee must sincerely apologize and appear as though they genuinely want to fix the problem. This is really difficult to train well,” he says. “Order accuracy essentially improves friendliness because it eliminates negative instances.”
Faster Service Could Help Drive McDonald’s Core Strategy
In 2003, McDonald’s adopted a growth strategy that centered around adding new menu items. This strategy led their shares to jump more than 63 percent in value between 2008-2011.
The company has said that many of the issues with order speed are the result of adding too many new menu items too quickly. As Levigne stated in the November investor meeting, “The pace of product introduction in my opinion: too fast,” referring to the chain’s decision to introduce several new products and limited-time offers at once. Similarly, industry reports have blamed complex menus for the recent slow-downs in drive-thru times.
Since adding new menu items is core to McDonald’s growth strategy, it stands to reason the company would focus its efforts on eliminating obstacles that inhibit the ability to do so. The new “high-density preparation tables” it plans to introduce, for example, can house dozens of ingredients to accommodate added menu items (instead of having the ingredients spread out across different locations), effectively increasing efficiency and speed of service.
Not All Customer Feedback Is Created Equal
The key takeaway I learned from my research for this article is that companies shouldn’t treat all customer feedback equally, or be pressured into adopting the same customer service strategy as others.
McDonald’s has chosen (wisely, in my opinion) to focus its efforts on those drivers that have the greatest impact on the customer’s decision to buy from them. In the coming months, I suspect we will see an increase in earnings growth as the company’s speed-of-service improvements are enacted.
Disclaimer: The communications team for McDonald’s was sent a draft of this article, but elected not to review its contents. They could not confirm the sources of this information (though attribution is indicated with links), nor could they substantiate the conclusions drawn. As such, the statements in this article are exclusively opinions of my own, and the experts I interviewed, based on research that is publicly available. They may or may not represent where McDonald’s actual business focus lies.