24/7 Wall St. TV: McDonald’s (MCD) Consumer Service Lesson: Seconds Count

McDonald’s (NYSE:MCD) spends a great deal of its test kitchen time trying to beat the clock. It has occurred to the fast food chain that a customer who expects to wait 30 seconds for a meal may leave after a minute if his food is not ready.  The world’s largest restaurant operator has its own Innovation Center where management works out the kinks of serving food hot and on time.

Some of the research effort done at the center is to get humans to move more quickly and easily. The other major work is to improve software that cuts customers waiting time. According to Bloomberg, “New software would update the complicated abbreviations of the touch-screen register with simply labeled, icon-like pictures of food. The system, which is in about 5,000 restaurants out of the company’s 32,000 locations, is easy to learn and may cut as many as 10 seconds off workflow, said Laurie Gilbert, the center’s director.”

McDonald’s has regained its place as one of the world’s best run and most successful companies after several years wandering in the wilderness of fast food trying to figure out how to compete with Starbucks, Burger King, and the Four Seasons (where the average menu item is $75) at the same time. McDonald’s recent global same-store sales and earnings show that it has been successful in finding a formula which trumps most of its competition. McDonald’s sales are up to $25 billion a year. In the second spot is also-ran Burger King (NYSE:BKC), which has sales of $2.5 billion, which hardly justifies being in business at all.

There was a period of time not so long ago when the habit of benchmarking the best companies and adopting their standards was fairly popular. Disney (NYSE:DIS) even had an operation that charged other firms to learn Disney’s skills for making customers feel welcome. GE (NYSE:GE) spent years reviewing Motorola’s (NYSE:MOT) Six Sigma manufacturing excellence system. GE learned the system extremely well, based on its results. Based on its results, Motorola seems to have forgotten what it used to teach.

It seems that every month either Consumer Reports or JDPower comes out with a new customer satisfaction survey.  A recent JDPower poll showed that among appliance retailers, Best Buy (NYSE:BBY) ranked first and Home Depot (NYSE:HD) dead last. Another JDPower survey ranked Amica Mutual first among over 30 car insurance companies and Travelers tied for last. Consumer Reports does not list a single Kellogg’s (NYSE:K) cereal in its rankings of best breakfast food. It has several in the bottom tier. General Mills (NYSE:GIS) does extremely well in the same ratings. It has to be recognized that some people like cereal made up largely of sugar which is likely to cause tooth decay and increase belly fat causing diseases like diabetes and arterial disease, so the ranking in the direction of healthy eating.

The companies whose products are always in last place in these polls, whether it is Chrysler cars or Samsung cell phones, never say that they are going to make their products or services as good as those of the industry leaders. Inertia is dragging them down and they probably believe that falling on the bottom of these polls is their fate. This turns out to be the cause of death of many once-successful organizations.

Someone at the McDonald’s Innovation Center is probably trying to cook a Big Mac and get it to a mock customer in less than 20 seconds. The current record is 22. The Big Mac may not be good for consumers. It may be too full of fat and calories. McDonald’s isn’t terribly concerned about the issue of people’s heart health. It wants to get the milk shake into the consumer’s hand before he steps out of line to go to Taco Bell, and that is as it should be.  In a recession, service matters.

Douglas A. McIntyre

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Executive Producer: Philip MacDonald