In 2015, McDonald’s was congratulating themselves on the success of their brand-new All-Day Breakfast because same-store sales had risen 5.7%. They deliberately avoided mentioning how the confluence of more than a dozen things contributed to that small increase. Only three factors could be tied to the new All-Day Breakfast: the novelty of the offering, more media coverage, and heavier than usual advertising and promotion, each of which would lessen after the initial burst of interest. The rest were conditions that lifted sales across all fast-food outlets, not just McDonald’s (unseasonably warm weather, cheap gasoline, strong demand in China, etc).
All-Day Breakfast was not the overwhelming success story the McDonald’s president wanted to tell. So he instructed his public relations people to shine a flattering spotlight on his pet project.
Pet projects have nothing to do with pets.
They are programs pursued as personal favorites over what’s best for the company. Usually forced on employees by high-ranking officers, they are frequently a waste of company resources. They rarely add enough value to justify their expense but almost always advance executives’ personal agendas. It is common among business leaders to praise their own brilliance by over-claiming success and suppressing facts that prove otherwise.
Steve Easterbrook was president and chief executive of McDonald’s from 2015 to 2019.
McDonald’s paid him $15 million a year until firing him for what they said was “demonstrating poor judgment involving a recent consensual relationship with an employee.” Easterbrook was also accused of using his corporate email account to send and receive sexually explicit photos and videos of women. In a statement announcing the firing, McDonald’s said the company’s board had determined that Mr. Easterbrook “demonstrated poor judgment.”
When Easterbrook first took over, he emphasized the need for efficiency.
In a video presentation of his plans for the future, Easterbrook said “Our existing organization is inefficient – we need to execute fewer things better.” His focus on improving efficiency took a wrong turn when his pet project, All-Day Breakfast, angered franchisees who were forced to deal with overcrowded kitchens, increased payrolls, and lost revenue.
Easterbrook was a major headache for franchise holders.
When asked in an interview about his relationship with franchisees, Easterbrook told the New York Times “We’ve had such open conversation, such robust dialogue, and the alignment really is becoming strong.” CNN said the opposite was true. Angered by Easterbrook’s command-and-control mentality, McDonald’s franchise owners banded together in open rebellion and formed a National Owners Association. Easterbrook’s eventual replacement Chris Kempczinski tactfully characterized relationships with franchisees as “A place where there is always lively debate.” The Wall Street Journal reported that prior to working at McDonald’s, Mr Kempczinski spent much of his career selling bottled water and macaroni and cheese.
McDonald’s franchisees hated having to serve breakfast all day long.
Owners and operators were angry with All-Day Breakfasts because they cannibalized higher-priced lunch and dinner items, worsened congestion and confusion in already-crowded kitchens, and resulted in higher payrolls. Many franchisees saw their entire operations slowed by the inefficiencies built into Easterbrook’s strategy.
A survey of franchisees revealed three common complaints:
- McDonald’s claims to be focused on efficiency – the new All-Day Breakfast is anything but.
- The operational problems are vast, with equipment jammed in everywhere and people falling over each other.
- We are trading customers down from regular menu items to lower-priced breakfast items – losing money and generating no new traffic.
Who are you going to believe? Store operators or a McDonald’s spokesperson?
Reuters reported that a survey of franchisees showed All-Day-Breakfast was an inefficiency nightmare because “it is slowing down service, reducing average ticket costs, and causing chaos in the kitchens.” In response, a McDonald’s spokeswoman said, “We’re hearing from the overwhelming majority of our franchisees that All-Day Breakfast is a hit!” Restaurant Business sided with the franchisees, saying “For McDonald’s, it’s a major crisis that is ramping up pressure on executives to produce results from a costly and complicated plan that was supposed to take the brand into the future.”
History repeats itself.
While researching background for this article, I was surprised to learn that before Easterbrook’s arrival, McDonald’s had examined the idea of serving breakfast all day and rejected it as a bad one. Whenever the company was asked why it did not serve all-day breakfast, they directed people to the McDonald’s FAQ page that said “Our grills don’t have room for all menu options at the same time.” More than once, McDonald’s executives concluded all-day breakfast would crowd kitchens and slow service.
In 2020, drive-thru business increased dramatically for fast-food outlets, or what the industry likes to call Quick-Serve Restaurants (QSR). The increase in drive-thru traffic caused longer lines and increased wait times, further decreasing stores’ efficiency.
The short-term solution?
McDonald’s removed All-Day Breakfast from its menus in March 2020, saying it was only a temporary move. Their plan is to bring it back, but they don’t say when. The board of the National Owners Association, the group representing three out of four U.S. franchisees, voted to drop all-day breakfast for good.
Streamlining menus to make operations easier makes sense.
Most fast-food companies removed poor-selling items from their menus as Covid-19 upended operations. Offering fewer menu items increases efficiency by reducing cost and complexity. McDonald’s said the company removed All-Day Breakfast from the menu to simplify operations in our kitchens, which we saw provided better speed of service and order accuracy.
Wait just a minute.
If eliminating All-Day Breakfast simplified operations and provided faster and better service, won’t bringing it back complicate operations, slow speed of service, and reduce order accuracy? You know, the same things that happened last time? Joe Ehrlinger, president of McDonald’s USA, said if all-day breakfast does come back, it may not offer as many items or be served at all times as it did before. I can hardly wait to see how they handle the dramatic rollout of Some-of-the-Day-Some-of-the-Menu-Breakfast. When the final decision is announced, don’t be surprised if you see it in a Saturday Night Live skit or an article at The Onion.
Long lines at drive-thrus are the fast-food industry’s biggest headache.
Year after year, wait times continue to increase in spite of moves towards digital menu boards, wireless headsets, mobile payments, and the like. Store owners blame preparation and service time delays on more complex menus and greater kitchen congestion. With the 2020 pandemic, tens of millions more Americans overwhelmed drive-thru windows.
The long-term solution is radical redesign.
Burger King and KFC are taking this route. New fast-food outlets will reduce the size of sit-down areas or eliminate them entirely. In their place will be more ordering lanes and more drive-thru windows to increase efficiency and reduce wait times.
The majority of square footage in QSRs has long been devoted to seating.
Another of Easterbrook’s pet projects was to spend hundreds of millions of dollars on what he called “a visual facelift and rebranding strategy.” Modernizing McDonald’s dining rooms with new furniture and new décor was another Easterbrook pet project that he said would lure more people inside. The costs of implementing Easterbrook’s plan were dumped on the restaurant owners.
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