The NRN 50: Billions and billions served

The NRN 50: Billions and billions served

For more than 50 years, McDonald’s has rolled with its opponents’ punches and watched its fortunes grow, especially in the recent past. The hamburger chain’s sales have increased for 55 straight months, the longest string in 27 years, with global comparable-store sales increasing 8.2 percent in November, the company says.

During that span, McDonald’s faced criticism from the 2004 documentary “Super Size Me,” the 2006 movie “Fast Food Nation,” based on the book of the same name, and constant negative publicity from consumer health advocate groups such as the Center for Science in the Public Interest and the website McSpotlight.org .

Not many companies could have survived so much bad publicity, says Rhoda Weiss, chief executive officer of the Public Relations Society of America.

McDonald’s is almost invincible because it’s a “brand legend,” says Weiss, who added that the hamburger chain is as iconic as Disneyland or Disneyworld.

“I still have a dozen McDonald’s Camp Snoopy collection drinking glasses from the early 1980s,” she says. “McDonald’s has gone from being a product to a conversation.”

A “conversation” is the very thing Morgan Spurlock, the creator of “Super Size Me,” was trying to have with McDonald’s. Yet in his film, McDonald’s never responded to any of his calls, and the brand was painted as an evil monster making America fat. But when “Super Size Me” was released in May 2004 in Canada and eventually the United States, McDonald’s reported that May comparable same-store sales increased 10.2 percent.

“The message of the [Eric] Schlosser book [“Fast Food Nation”] and the Spurlock movie would tend to resonate with people that are not going to McDonald’s all that frequently in the first place, and in many cases, not at all,” says independent analyst Mark Kalinowski. “If you look at the highest-frequency customers, these are people who tend not to prioritize health issues perhaps as much as some other people. When I was a 22-year-old male, I felt invincible. Probably a lot of 22-year-old guys do, and it is just not a priority to avoid high-fat, high-protein foods at that point.”

There’s also the Ronald McDonald House. It’s hard to lump McDonald’s into such a negative perception with all the good the Ronald McDonald House is doing, Weiss says. For more than 30 years, the Ronald McDonald House has provided families a place to stay while their children receive treatments in nearby hospitals or medical facilities. There are 269 Ronald McDonald houses in 30 countries with more than 6,000 rooms per night.

“One of the biggest growth areas for public relations is corporate responsibility,” Weiss says. “The Ronald McDonald House has built up so much good will over the years that it adds to the positive thought about the McDonald’s brand.”

McDonald’s recent success can partly be attributed to its “i’m lovin’ it” campaign launched in 2003, which Kalinowski says broke all the conventional marketing rules.

“[McDonald’s] wanted this campaign to essentially be universal,” Kalinowski says. “Although conventional wisdom would say you want to tailor your message to the local market because of cultural differences and regional differences, McDonald’s did what they thought was right. [And today], the message resonates around the world.”

Other marketing campaigns of late have followed the i’m lovin’ it format. In May, McDonald’s offered high-tech Shrek Happy Meal toys created in eight languages and an innovative online community dedicated to kids. It also unveiled packaging featuring 24 consumers selected from its first online Global Casting Call, which received 13,000 entries from around the world.

Weiss says campaigns like these allow McDonald’s to reach people of all ages as well as different ethnic, multicultural and intergenerational groups. But even in the area of cultural and human diversity, McDonald’s has had its challenges.

In 2001, a group of Texas Hindus charged McDonald’s with deceptive trade practices in a class-action lawsuit over the company’s un-publicized practice of adding beef flavoring to French fries before they were frozen. The fries were later cooked in 100-percent vegetable oil and marketed as such. McDonald’s settled out of court with the plaintiffs for $10 million.

Combine that suit with the 2002 lawsuit filed by two obese girls, which was thrown out by a judge in 2003, as well as the infamous “hot coffee” suit in which a jury awarded the plaintiff $2.9 million, and McDonald’s has been responsible for fighting many high-profile legal battles that affect everyone in the restaurant business. Through it all, the company has continued to make operators and investors a lot of money.

That’s because McDonald’s focuses on customers, says spokesman Bill Whitman.

“If you stay focused on the customer and taking care of the customer, everything else pretty much takes care of itself,” he says. “The criticism comes with the territory, but we have to keep our eyes on the fries and make sure that we are taking care of our customers and meeting their needs.”

To address those needs, McDonald’s has launched some of its most successful products in recent years. Among them is the SnackWrap, which was hailed as one of the Top 10 Product Launches by the 2006 Schneider/Stagnito Communications/IRI Most Memorable New Product Launch. In addition, McDonald’s Premium Coffee sales increased 39 percent during the first nine months of 2007. Officials expect coffee and other hot drinks eventually to contribute about $1 billion in sales.

“We’re going to continue creating those menu items, food and beverages that our customers want,” Whitman says. “Today, we’re selling more premium-roast coffee, more premium chicken sandwiches, more premium salads than we ever have before.”

Whitman says McDonald’s also is working on a more contemporary decor, innovation at the drive-thru, cashless-payment options and Wi-Fi capability. The “things that will continue to drive relevance for our brand and our customers are only going to increase in the next few years,” he says.

Phil Wilkins, a four-unit McDonald’s owner-operator in Lexington, Ky., and the former president of the National Black McDonald’s Operators Association, believes McDonald’s diverse group of operators helps ground the company in communities. About 23 percent of franchise operators are minorities, including 12 percent African-American, and about 25 percent are female.

“[McDonald’s] is just a great case study for a lot of corporations, especially in the restaurant industry, on leveraging diversity,” says Wilkins, who is a certified diversity professional and author of “Own Your Business, Own Your Life.” “[McDonald’s founder] Ray Kroc always believed in connecting to the community. I think one of our competitive advantages is our relationships that we have with the local communities and diverse groups.”

Minority operators are not given a pass into the system for publicity’s sake. Wilkins says all operators must meet the same specifications and endure the same training.

For new operators, McDonald’s requires a minimum of nonborrowed $250,000 and 25 percent cash toward the purchase of a restaurant. As for the training, potential operators work in the stores and learn the operations from the ground up.

“If you’re willing to go in and work for someone else for free to learn the business, [McDonald’s] can determine pretty quickly whether you have a passion for this type of business,” Wilkins says. “I think that’s where they get a real good read on people.”

Kalinowski agrees. He says McDonald’s franchisee selection process helps it avoid the pitfalls many franchisors face.

Kalinowski adds that a large part of McDonald’s international success lies with the independent-minded franchise community. The operators, he says, work toward the same goals as corporate and are “arguably better than any other [franchisees].”