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A McDonald’s Veteran Assesses Menu Clutter

Barry Klein knows the McDonald’s brand from the inside and outside, having served as an executive as well as an operator. As a member of the chain’s marketing department in the 1970s, he created the Ronald McDonald character and led the “You Deserve A Break Today” advertising campaign. Klein also spent five years as a McDonald’s franchisee in New York City before returning to marketing as a senior VP at the Wells Rich Greene agency in Los Angeles. There he worked on campaigns for Jack in the Box (including blowing up the clown), Hills Bros. Coffee, Chex Cereals, Midas, Continental Airlines and other well-known brands. He currently works in Chicago as a marketing consultant and can be reached at [email protected].

Barry Klein

That résumé makes him the ideal person to address questions about how big is too big for a restaurant menu. A recent survey of  28 McDonald’s operators by Janney Montgomery Scott analyst Mark Kalinowsi found that a majority of them said they believe the McDonald’s menu is too large to execute efficiently and profitably. BurgerBusiness.com invited Barry Klein to join the discussion and posed him some questions. His answers: 

 By my count, McDonald’s menu now has more than 80 food items, not including McCafé and other beverages. Is that too many?
While operational complexity is certainly a concern for operators, it conflicts with my conviction that restaurant traffic and sales are fundamentally dependent on what I call “News About Food.” The news can be a new item, another food category added to the menu, a new location opening, a deal or coupon or an entirely new concept. If the news is sufficiently interesting to motivate a purchase, consumers have little or no concern about what effect it has on the overall menu. They simply don’t care how many items are offered.
     People have never been more interested in news about food, and that interest continues to grow, as shown by the growth in TV audiences for cooking shows, cooking classes and recipe exposure through social media. American tastes have broadened considerably, and consumers are actively seeking new and bolder flavors.
      McDonald’s has been making “News About Food” for a long time now, and it’s my opinion that along with operational excellence, the company’s great success is rooted in that strategy.  Look at the history: Reaching out to kids with Happy Meals; the introduction of Filet-O-Fish, Double Burgers, Big Mac, and the other early menu additions; breakfast; the massive store expansion, both domestically and globally; McRib; the Dollar Menu; the recent focus on coffee and drinks, plus the proliferation of new sandwiches. All of that news has been absorbed operationally, despite the objections of some operators.

But the menu has broadened far beyond burgers to include more chicken and salads and wraps, etc. Is it fair to criticize it as a “something for everyone” strategy?
What McDonald’s is doing has no connection to a “something for everyone” strategy, in my opinion. The news being created is closely related to the brand, and makes their existing customers visit more often.
     Can anyone believe that McDonald’s is not thoroughly testing any innovation before it’s introduced, and making sure that customers say they will buy it? I sat behind the glass at a large number of focus groups so I know that respondents will reject anything if it doesn’t fit with the brand for which it’s proposed. They’ll tell you, “Why would I go to Brand X for pizza when that’s a burger place? I can get it at lots of pizza places.”
     It’s just not credible that McDonald’s would add an item simply for diversification. An item advances in the testing process when consumers tell the company that it’s interesting enough for another visit. In fact, the company might be quite courageous with the new items by introducing them in the face of the operators’ objections. That is especially true of the McCafé initiative, given the investment required.

Is adding new menu items the best way to attract and keep customers in this QSR marketplace?
Attract customers? Absolutely. It’s the best way to make “News About Food.” Keep customers? Yes again if the delivery of the new items is as promised in marketing. Once the news gets old, there should be more news to replace it. The tricky part is determining when the news has faded and something new is needed.
     McDonald’s has a tremendous advantage because its marketing clout allows them to communicate news more often, to a very broad audience. In addition, every-day store traffic at McDonald’s is a huge audience that can see a new product message and decide to try it in an extra visit.
     The other important issue is the potential for new traffic during hours that otherwise might be slow. With the McCafé rollout, there’s presumably increased traffic between breakfast and lunch, in the afternoon, and late night.

Has the expanded Dollar Menu been a major contributor to McDonald’s item growth? If so, is that good?
Definitely. The Dollar Menu concept has brought traffic to every brand that has introduced and advertised it. Probably the most interesting thing is that just about every time it is promoted the Dollar Menu produces a traffic bump for a chain.  But if Wendy’s, Burger King and McDonald’s were all promoting dollar menu at the same time, it might not be as effective.
   There are many reasons why it seems to perform better at McDonald’s: more stores and hours, more marketing, better execution, etc. But the News About Food momentum that McDonald’s has built lately could have helped develop more consumer attention to the Dollar Menu message.

Are there too many premium-price items on McDonald’s menu, or do you see pricing as balanced?
Again, I don’t think that the number of items at various pricing levels is an issue. With a News About Food strategy, the important consideration is target audience and occasion segmentation. By communicating news that motivates a segment of the audience—for example, adults who are willing to pay more for a better-tasting burger—the brand often induces those people to buy a couple of extra times. And if they like the product, they keep buying it.
     But yes, there could be too many items on the menu in certain categories. For some of those categories, it might not matter because the extra items have little or no effect on operations, service or profitability. If a product is 1% of sales, it might be considered for elimination. But most of the people who are buying it now might like it enough to go somewhere else to get it. Or, if it were promoted again, would more visits and a higher sales ratio result? Until analysis is done, the number of items on the menu, categories, price levels, and so on, is irrelevant.

Should new items only be limited-time offers (LTOs), cycled onto and off the menu?
That is a distinct possibility. Look at the success of McRib, and plenty of other product LTOs that have been promoted throughout the industry. Since making news is the objective, LTOs make sense, but only if there’s the discipline to take a hot-selling item off of the menu at the designated time. Other than McRib, that doesn’t happen too often.
     Most product introductions will be news for a short time, then become yesterday’s news, except in cases where the end date is communicated. The advantage of a well-received LTO is that it can become news once again next year. However, if it’s not an LTO, there’s a chance that the product can be a sales builder for a long time. The possibilities should be assessed in test markets in order to make a judgment for the rollout. Again, a product that is not introduced as an LTO can always be dropped at some point once it has been properly analyzed.

Five Guys and some of the other new and successful chains have more limited menus. Has that made McDonald’s menu look even more overstuffed?
Do consumers compare menus by number of items? I doubt that anyone avoids McDonald’s because of the size of the menu, or goes to Five Guys because they have a smaller menu. I may be a lone voice on this issue, but I think that the proliferation of fast casual, “better burger” places will have little effect on McDonald’s business in the near term, maybe even long term.
     The large portion of McDonald’s business that goes through the drive-thru, speed of service, and the limited menu at the other places, makes the visits reasonably separate occasions. The people who want a beer with their burger and are willing to spend a couple of dollars more would not be McDonald’s customers for that occasion.
     My theory is that fast-food burgers and fast-casual burgers are only partially competitive, but there’s a customer base and a large market for both.

6 comments to A McDonald’s Veteran Assesses Menu Clutter

  • Who is Barry Klein to disagree with contemporary McDonald’s Operators?

    His observations are purely theoretical. A “McDonald’s Veteran” only has to stand at the counter in their
    local McDonald’s to observe the stress and confusion in the operation. It’s obvious there are too many products, choices, sauces, and questions to ask the customer.

    I would agree that customers don’t judge a restaurant on the size of the menu but in this case it’s not
    about customer opinions, it’s about good operations. The operational experts in McDonald’s (and most chains) are the Operators. Operators know customers want fast service, not a 90 second dialogue with the counter person about cream/no cream, crispy/grilled, tortilla or bun.

    Customers don’t care why they waited too long in line, they just won’t be back (or they won’t get in
    that line in the first place).

    McDonald’s management admits the lunch period peaked five years ago and McDonald’s Operators know this is the result of a dysfunctional cooking system installed ten years ago and the increasing complexity
    of the menu.

    Note to management: When your restaurant Operators tell you the burger machine is broken – you need to listen.

    .

  • admin

    Barry Klein responds to Richard Adams’ comment:

    Are those the same operators who are depositing more profit dollars because they are adding sales to the top line from the new items, many of which are more profitable… especially those that prompt the “cream/no cream” question? Am I so out-of date that McDonald’s operators are no longer the people that company management rely on to make operational recommendations that smooth the road for preparation and service issues? I always agreed with Fred Turner when he expressed the opinion that most problems would be fixed in the field. McDonald’s operators have always been the best in the business, and I can’t believe that has changed very much. In my opinion, the “News About Food” is growing the business, and the operators should welcome the innovations by working with the company to create methods for overcoming the operational issues.. That’s been the McDonald’s way since the early days.

    Although I know nothing about a “dysfunctional cooking system”, I’m pretty sure that McDonald’s stores still achieve the highest hourly sales volumes in the business by far. If the “burger machine is broken,” the results certainly don’t show it.

  • BurgerBunsBurritos

    It would also be appreciated if Mr. Adams disclosed that he is a former McDonald’s franchisee. Recently reporter: 62 million customers a day, up from 60 million just a year ago. $24 billion in revenues. Seven years of positive comparable sales. Average unit volumes of $2.4 million. When restaurant companies stop innovating or adding new products to the menu, they die. Look at the restaurant landscape today. Burger King is for sale. Wendy’s/Arby’s is spinning off Arby’s. And YUM is selling Long John Silver and A&W. Who remains unchanged in that field? McDonald’s. Because McDonald’s continues to give customers what they want. And isn’t this about the customer?

  • Fred Turner was right for the first 40 years of McDonald’s history but these days McDonald’s is pretty much a top down operation. McDonald’s Operators are by far the best in the business and have been enjoying increased sales but with the highest rents, royalties, and discounting costs in the industry that does not always translate to increased profits. While I won’t cry the blues for them I can tell you that the information dispensed by management about Operator cash flow is incorrect since they report pre-debt cash flow that does not reflect true results.

    Expanding on our previous points: The dysfunctional cooking system is “Made For You” and was installed in nearly every McDonald’s USA restaurant in late 1999.
    MFY created service problems, many of which are still not fixed. Poor service speed caused sales decreases for several years and cost Jack Greenberg his job.

    MFY works pretty well in the drive-thru which is why today, the typical domestic McDonald’s does a much larger percentage of its business in the drive-thru than 10 years ago. The service at the inside counter is still substandard and the home office is not addressing the real problems.

    Another big change at McDonald’s is new product testing. Gone are the days when new ideas had to pass a business case test. The espresso based drinks introduced in early 2009 failed every criteria in every test market for 3 years and yet they still went national because someone had a “vision”. In reality the average McDonald’s sells 35 or 40 espresso based drinks per day. Last summer the national daily average was 15 drinks per day per restaurant. The WSJ recently quoted a McDonald’s Operator’s comment from our survey saying they don’t sell enough espresso drinks to pay for the electricity to run the machine. This after a hundreds of millions spent in advertising against the drinks

    McDonald’s espresso drinks are this generation’s New Coke.

    The non-espresso drinks such as smoothies and frappes did very well in 2010 and should be a long term winner but I predict espresso will disappear from McDonald’s USA in the summer of 2013, or sooner.

    But let’s put menu complexity in the context of the times – no one wants to see unemployment at nine or ten percent but it has an upside for QSR Operators in that the quality of available new hires improves (or it should if you’re doing it right). Because the unemployment has been high for a protracted period these quality people have stayed in their QSR jobs. So visit you local QSR soon because those might be the best, most experienced people you’ll ever see working that drive-thru window.

    When and if unemployment drops to mid-single digits the QSR labor pool will change. If menu complexity is addressed simply by making crew people work harder and
    faster future workers may not be up to the challenge.

  • “Disclose”? – Of course I was a McDonald’s Operator. That’s why I’m knowledgeable.

    My part of this discussion has been about listening to the QSR Operators. One of the main reasons McDonald’s dominates the industry is that early in McDonald’s history Ray Kroc and Fred Turner focused on franchising to one store, shirt sleeve Operators. The major competitors franchised huge territories and ended up with franchisees trying to run dozens or hundreds of locations. A 60 store Wendy’s franchisee cannot prosper surrounded by hard working McDonald’s Operators running a few well supervised restaurants.

  • Barry nailed it with his final comment to question #5 above: “Until analysis is done, the number of items on the menu, categories, price levels, and so on, is irrelevant.”

    What I find so interesting about the questions and comments above is that they primary focus on absolutes (80), alternative strategies (limited menu), and comparisons to competitors (McD vs 5Guys) that may also be irrelevant to McDonald’s. These questions and comments miss the key point that only McDonald’s is McDonalds, and although all QSR’s must fight for market share from the same pool of consumers, many (or most) consumers have developed considerable affinity/loyalty toward specific companies/products/experiences already, at QSR’s who have been most able to meet their consumer needs over time. In effect the consumer and McDonald’s have grown closer over time, and created a somewhat unique relationship where the impact of a business decision will likely be markedly different from the impact at an alternative restaurant because the customer/business relationship is different in meaningful ways.

    To m, the key question on the menu topic is not: “Would McDonalds would be better off with the 5-Guy’s menu size?” but rather: “What changes to McDonald’s menu can be made to optimize McDonald’s performance (profit, margin, or revenue)?” All businesses operate at some level of sub-optimal performance (perfection is fleeting at best) and the challenge every day should be figuring out how to get one step closer toward optimality, all the while keeping in mind that “optimality” is a moving target. So companies do need to constantly change, adjust, and evolve whether it’s the menu size/items, pricing, staffing, promotion etc. The trick is taking the time to measure impact of potential changes in a rigorous and reliable way to protect the company improve the company’s overall “batting average” for strategic decision making.

    On top of all that, I wonder why the discussion above does not apend time on market basket concepts that help businesses understand the total contribution of individual products and categories to the total business. Restaurants more so than many other businesses drive multiple item purchase transactions, and serve multiple person purchase groups with high frequency. Both of these factors imply high affinity potential value for individual items beyond their single item economics. 80 items could be too many items I suppose, but if it is too many, what items should be eliminated? But maybe 80 items is not excessive and a different question should be asked: “what items can I replace with new items to drive greater total purchase and profitabilty?”

    So “Does McDonald’s have too large a menu?” I guess I’d have to say I don’t really know (empirically). But if I had to guess one way or the other, I’d say probably “no” because the “proof is in the pudding” and McDonald’s has continued to drive strong growth, revenue, and profit. Sure the operators have greater challenge to deliver good service given the complexity of the menu, but doesn’t big performance usually come from being smarter and working hard?

    Finally, I’ll just reiterate that if McDonald’s really wants to know the answer to the menu size question they should just follow Barry’s advice, (mine too), and do the testing and analysis to get the answer….which, by the way, I think McDonald’s has probably already done…

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