Does McD’s have a breakfast (civil) war on its hands?

You might have thought that when McDonald’s announced that it would offer all-day breakfast at its restaurants around the U.S. that it might set off a battle for the market with its fast food rivals. Instead, the move may be the reason behind an uprising, of sorts, as franchisees claim it is complicating kitchen operations, slowing service, trading profits down and, ultimately, costing them customers.

According to a survey of 29 franchisees operating 226 McDonald’s in the U.S., by Mark Kalinowski, an analyst with Nomura, the move to all-day breakfast on Oct. 6 has been a source of friction between McDonald’s and its franchisees.

Survey respondents complained about more complicated kitchen operations, particularly in smaller locations, resulting in reduced service levels.

One survey respondent, as reported by Business Insider and the New York Post, warned of unintended consequences. "All-day breakfast is a non-starter. We are trading customers down from regular menu to lower-priced breakfast items. Not generating new traffic."

McDonald's all day breakfast

Source: McDonald’s Facebook page

Not all of the respondents to the survey were negative, even though they had issues with McDonald’s. One, according to Nation’s Restaurant News, who argued the move to nationwide breakfast should have been pushed back to January said, "We would be doing a better job if we had not rushed into it. Not going to be a big deal long term."

For its part, McDonald’s management maintains the decision to move to all-day breakfast was correct.

"The successful launch of All Day Breakfast proves that when we listen to and respond to our customers and align around a great execution plan, we will grow our business and take share," wrote Mike Andres, president of McDonald’s U.S. business, in an e-mail to franchisees obtained by Bloomberg. The e-mail, according to the report, did not offer specifics on the results of the rollout to date.

BrainTrust

"McDonald’s franchisees hate change, so it’s natural that they would complain about all-day breakfast. This program was designed to give consumers more reasons to visit the restaurants at a time when consumers are turning away from the fast-food giant."

Max Goldberg

President, Max Goldberg & Associates


"Give CEO Steve Easterbrook some credit for trying to light a fire under this stagnant organization, and give McDonald’s a chance to report the results before writing off a customer-centric initiative. "We’ve never done it this way" is usually not a winning philosophy."

Dick Seesel

Principal, Retailing In Focus LLC


Discussion Questions

Do you see reports of franchisee unhappiness at McDonald’s part of the normal grumbling that comes with most changes or a sign of serious problem with the strategy? Ultimately, will all-day breakfast be a success or failure for McDonald’s in its quest for greater share of Americans’ food dollars?

Poll

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Max Goldberg
Max Goldberg
8 years ago

McDonald’s franchisees hate change, so it’s natural that they would complain about all-day breakfast. This program was designed to give consumers more reasons to visit the restaurants at a time when consumers are turning away from the fast-food giant. Ultimately, consumers will decide if the program is a success.

Dick Seesel
Dick Seesel
8 years ago

Part of what we’re seeing is the longstanding pattern of public sniping between McDonald’s franchisees and “headquarters.” The same operators who probably complained for years about menu complexity and declining traffic are now complaining about all-day breakfast — one week into the launch. McDonald’s has been dogged by slow service and menu complexity for years, but there are probably tech-oriented solutions to the issues.

Give CEO Steve Easterbrook some credit for trying to light a fire under this stagnant organization, and give McDonald’s a chance to report the results (comp sales, traffic, average transaction, etc.) before writing off a customer-centric initiative. “We’ve never done it this way” is usually not a winning philosophy.

Ryan Mathews
Ryan Mathews
8 years ago

It may be a bit of both. As a rule any change makes franchisees nervous, but in this case they may have a reason.

From a corporate point of view the move to all-day breakfasts is a solid one, encouraging people to visit McDonald’s for one of its more popular offerings. But many franchisees really aren’t set up to handle much more complexity. I don’t know enough about the margin implications or demand cycles to know how the economics will work, but from a labor/inventory point of view it does seem to make the franchisees’ lives a little harder.

As to whether or not it will be a success I guess the critical question is, a success for whom? The consumer? The answer seems to be a resounding yes. For corporate and the brand? Ditto. For the franchisees? That remains to be seen.

Steve Montgomery
Steve Montgomery
8 years ago

Having been a franchisee and then part of that franchisor’s management I have seen both sides of similar issues. Changes such as this one cost money and are disruptive to current operations. This is especially true when the physical plant was not designed for the required added equipment.

Based on the articles I have read, McDonald’s needed to stem the tide of customers headed for alternative formats. This seemed like a natural fix, but as Max indicated the customer’s actions will ultimately determine whether this was a great move or not.

Ed Rosenbaum
Ed Rosenbaum
8 years ago

Most people do not like change. Businesses are no different. Franchises and franchisees are no different. This did not seem to be a major change at first glance. But I guess it was from the inside where the work is actually done. Those taking the orders don’t care what you order. Those preparing it do. Yes, today it is change. Tomorrow it will be business as usual.

Gordon Arnold
Gordon Arnold
8 years ago

There is no doubt that McDonald’s franchisees are in a place where the company’s attempts to revitalize the business have become chronically irksome to them. While tempting, it may be ill advised to dismiss these responses as representative of the loyal opposition to the corporation’s progressive response aimed at the malignant economic depression now projected to serve us into a second decade.

Any decision to address market needs with a goal of delivering more product and/or services for less investment must be supported with a means to provide these upgrades with increased productivity. This will protect profit margins against system change and allow for more accurate readings of consumer response(s). I am not seeing these attempts coming from the new plans in place or those being proposed. Perhaps this might be seen as a reason for the corporate political unrest we are hearing so much about from only one side of the issues.

Carlos Arámbula
Carlos Arámbula
8 years ago

Regardless of the franchisee grumblings, all-day breakfast has been a success. McDonald’s became relevant again. No doubt there are operational issues. However, the franchisee community needs to consider the alternative of declining sales in all day-parts with the exception of breakfast and embrace the publicity.

Li McClelland
Li McClelland
8 years ago

I do think that for both the company and the franchisees the issue of breakfast menu foods generally being priced less than regular salads, sandwiches and drinks may be a bottom line problem if they end up replacing too many higher priced orders throughout the day. Since we don’t know the profit margins to the company for the various products, I guess we’ll find out if this was a good idea or not when earnings are reported.

David Leavitt
David Leavitt
8 years ago

Change is always difficult, but added complexity that impacts customer service is the bane of profits. If the complexity is addressed by other menu simplification and employee training, consumers will return, and franchisees will reap benefits. On the other hand, a McMuffin is lower in price (and profit) than a grilled chicken sandwich, so profit per transaction will have to be managed. Don’t want to trade down margin.

Chris Cooling
Chris Cooling
8 years ago

How is it shocking that, now given a choice after 10:30 am, a significant number of people will opt for the less expensive breakfast sandwich and hash browns over a hamburger or salad?

Kai Clarke
Kai Clarke
8 years ago

Yes, this is a representation of franchisees who are simply not that happy with McD’s for other reasons. All day breakfast is a proven winner at other chains, and will be so at McD’s. Everything is already in place to offer this option, so why not offer it to consumers who have been asking for this for a long time?