Monday, May 09, 2011

McDonald's and Beverages

McDonald's reported a remarkable 6% rise in same-store sales growth in the United States in April.  What drove the rise in revenue?  Drinks... smoothies and McCafe beverages not only appear to be selling briskly, but they are attracting customers, who also purchase food at McDonald's during those visits.

While the news appears very good for McDonald's, they will have to keep an eye on service within their restaurants.  As the drink business booms, McDonald's will have to focus on keeping wait times as low as possible.  With the introduction of smoothies and McCafe beverages, the menu becomes more complex.  McDonald's must avoid the downside of that complexity, which could be longer wait times, if the firm doesn't manage its operational processes effectively. 

That point brings us to a fascinating new article in Business Week about the operational processes at fast-food restaurants.  According to the article, "The big brands spend hundreds of millions and devote as much time to finding ways to shave seconds in the kitchen and drive-thru as they do coming up with new menu items. 'The majority of the business now happens around the back of the building,' says Blair Chancey, editor of QSR magazine. 'So much money and R&D go into perfecting the production system because there is so much money to be had.'"

That type of focus on operational efficiency has always been a hallmark of McDonald's.  It will only become more important as the drinks business continues to grow.   For a cautionary tale, McDonald's need look no further than their competitor in the coffee business, Starbucks, which suffered when complexity and process inefficiency began to harm customer service quality a few years back.

No comments: