Accounting Question

Outline:

Executive Summary & Overview

Problem Statement

Analysis: SWOT Analysis

Value Chain or Five Forces

Financial Section

Alternatives

Recommendations

Conclusion

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McDonald’s in 2022
CASE 29
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MCDONALD’S IN 2022*
Well into 2022, McDonald’s was recovering from its firing of former CEO Steve
Easterbrook over allegations of sexting with an employee. The issue drew a lot of
attention in a firm that was considered to be family friendly. He rattled franchisees and
employees by pushing back against a long-held tradition of the firm as a family. “It
rubbed a lot of people in the wrong way,” said James Floyd, a former vice president of
operations for the company.1 This was unfortunate, as Easterbrook had pushed hard to
improve performance, growing the firm’s market cap by over $50 billion over his fourand-a-half-year tenure. The company faced some fundamental challenges.
The leadership of McDonald’s was taken over by Chris Kempczinski who had been
brought in by Easterbrook to bring more outside talent into the insular organization.
Kempczinski had already been working on a Bigger Bolder Vision 2020 plan that was
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designed to rework various aspects of the firm’s operations. Shortly after he took
charge, Kempczinski had to deal with several disruptions, among them a deadly
pandemic. McDonald’s did benefit from the pandemic as customers turned to fast-food
restaurants as few other options were available. As people began to resume normal
operations in 2021, the fast-food giant saw a noticeable bounceback. But with
competitors returning to the scene as well, McDonald’s would be adapting to new
trends throughout the industry, such as an entrance into the “metaverse.” Plans include
a “virtual restaurant featuring actual and virtual goods” and “operating a virtual
restaurant featuring home delivery.”2
McDonald’s has long been trying to innovate the consumer experience, most notably
by offering healthier menu options for more health-conscious consumers. It has
removed highly processed ingredients including the use of high fructose corn syrup
from its buns, changed from the use of liquid margarine to real butter, and decided to
use chicken raised without antibiotics, and to use cage-free eggs. Mike Andres, former
president of McDonald’s USA, explained why the firm decided to make these changes:
“Why take a position to defend [highly processed ingredients] if consumers are saying
they don’t want them?”3
Such changes and others are expected to address some of challenges that McDonald’s
has been facing in many markets, including in the United States, where it has almost
15,000 of its 38,000 mostly franchised restaurants. It has lost a lot of ground with
consumers, especially millennials, who are defecting to traditional competitors like
Burger King and Wendy’s as well as to new designer burger outlets such as Five Guys
and Shake Shack. Changing tastes are also responsible for the loss of customers that
are lining up at fast-casual chains such as Chipotle Mexican Grill and Panera Bread,
which offer customized ordering and fresh ingredients (see
Exhibits 1 to
4).
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EXHIBIT 1 Balance Sheet ($ Millions)
December
In millions, except per share data
31
2021
2020
$ 4,709.2
$ 3,449.1
1,872.4
2,110.3
Inventories, at cost, not in excess of market
55.6
51.1
Prepaid expenses and other current assets
511.3
632.7
7,148.5
6,243.2
Investments in and advances to affiliates
1,201.2
1,297.2
Goodwill
2,782.5
2,773.1
Miscellaneous
4,449.5
3,527.4
8,433.2
7,597.7
13,552.0
13,827.7
Property and equipment, at cost
41,916.6
41,476.5
Accumulated depreciation and
(17,196.0)
(16,518.3)
24,720.6
24,958.2
$ 53,854.3
$ 52,626.8
$ 1,006.8
$
ASSETS
Current assets
Cash and equivalents
Accounts and notes receivable
Total current assets
Other assets
Total other assets
Lease right-of-use asset, net
Property and equipment
amortization
Net property and equipment
Total assets
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities
Accounts payable
Lease liability
705.5
741.3
701.5
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December
In millions, except per share data
31
2021
2020
Income taxes
360.7
741.1
Other taxes
236.7
227.0
Accrued interest
363.3
388.4
Accrued payroll and other liabilities
1,347.0
1,138.3
Current maturities of long-term debt
—
2,243.6
4,020.0
6,181.2
Long-term debt
35,622.7
35,196.8
Long-term lease liability
13,020.9
13,321.3
Long-term income taxes
1,896.8
1,970.7
Deferred revenues – initial franchise fees
738.3
702.0
Other long-term liabilities
1,081.0
1,054.1
Deferred income taxes
2,075.6
2,025.6
—
—
16.6
16.6
Additional paid-in capital
8,231.6
7,903.6
Retained earnings
57,534.7
53,908.1
Accumulated other comprehensive income
(2,573.7)
(2,586.8)
(67,810.2)
(67,066.4)
Total shareholders’ equity (deficit)
(4,601.0)
(7,824.9)
Total liabilities and shareholders’ equity
$ 53,854.3
$ 52,626.8
Total current liabilities
Shareholders’ equity (deficit)
Preferred stock, no par value; authorized –
165.0 million shares; issued – none
Common stock, $.01 par value; authorized
– 3.5 billion shares; issued – 1,660.6 million
shares
(loss)
Common stock in treasury, at cost; 915.8
and 915.2 million shares
(deficit)
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Source: Annual Report of McDonald’s Corporation.
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EXHIBIT 2 Income Statement
In millions, except per share data
2021
2020
$ 9,787.4
$ 8,139.2
2019
REVENUES
Sales by Company-operated restaurants
$
9,420.8
Revenues from franchised restaurants
13,085.4
10,726.1
11,655.7
350.1
342.5
287.9
23,222.9
19,207.8
21,364.4
Food & paper
3,096.8
2,564.2
2,980.3
Payroll & employee benefits
2,677.2
2,416.4
2,704.4
Occupancy & other operating expenses
2,273.3
2,000.6
2,075.9
Franchised restaurants-occupancy expenses
2,335.0
2,207.5
2,200.6
260.4
267.0
223.8
329.7
300.6
262.5
2,377.8
2,245.0
1,966.9
Other operating (income) expense, net
(483.3)
(117.5)
(119.8)
Total operating costs and expenses
12,866.9
11,883.8
12,294.6
10,356.0
7,324.0
9,069.8
1,185.8
1,218.1
1,121.9
42.3
(34.8)
(70.2)
Income before provision for income taxes
9,127.9
6,140.7
8,018.1
Provision for income taxes
1,582.7
1,410.2
1,992.7
Over revenues
Total revenues
OPERATING COSTS AND EXPENSES
Company-operated restaurant expenses
Other restaurant expenses
Selling, general & administrative expenses
Depreciation and amortization
Other
Operating income
Interest expense-net of capitalized interest of
$6.8, $6.0 and $7.4
Nonoperating (income) expense, net
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In millions, except per share data
Net income
2021
$ 7,545.2
Earnings per common share–basic
Earnings per common share–diluted
Dividends declared per common share
2020
$
2019
$
$
4,730.5
6,025.4
$
$
$
10.11
6.35
7.95
$
$
$
10.04
6.31
7.88
5.25
$
$
5.04
4.73
Weighted-average shares outstanding–basic
746.3
744.6
758.1
Weighted-average shares outstanding–diluted
751.8
750.1
764.9
Source: Annual Report of McDonald’s Corporation.
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EXHIBIT 3 Total Number of Worldwide Outlets
2021
39,160
2020
39,695
2019
39,198
2018
37,855
2017
37,241
2016
36,899
2015
36,525
2014
36,258
Source: Annual Report of McDonald’s Corporation.
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EXHIBIT 4 U.S. Sales of Fast-Food Burger Chains 2022 ($ in millions)
US
Average
Systemwide
Sales Per
Franchised/Licensed
Company
Sales
Unit
Units
Units
McDonald’s
40,158
3,037
13,025
657
Wendy’s
10,231
1,725
5,520
361
Burger King
9,657
1,414
7,029
52
Sonic
5,680
1,611
3,255
271
Jack In The
3,673
1,660
2,097
144
2,698
3,197
114
730
Box
Whataburger
Source: QSR and author estimates.
Over the years, McDonald’s response to growing competition was to expand its menu
with snacks, salads, and new drinks. From 33 basic items that the chain offered in
1990, the menu had grown by 2014 to 121 items. The greatly expanded menu led to a
significant increase in costs and longer preparation times. This forced the firm to
increase the prices of many of its items and to take more time to serve customers,
moving it away from some of the attributes (fast and inexpensive) that it had built its
reputation upon. “McDonalds stands for value, consistency, and convenience,” said
Darren Tristano, a restaurant industry consultant.4
The fast-food chain had been through a similar crisis in 2002 and 2003, when
McDonald’s experienced a decline in performance because of quality problems as a
result of rapid expansion. At that time, the firm brought James R. Cantalupo out of
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retirement to turn things around. He formulated a “Plan to Win,” which was the basis
of McDonald’s strategy over the next decade. The core of the plan was to increase
sales at existing locations by improving the menu, refurbishing the outlets, and
extending hours. In 2022, however, such incremental steps might not be enough.
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Pulling out of a Downward Spiral
Since it was founded more than 50 years ago, McDonald’s has defined the fast-food
business. It has provided millions of Americans their first jobs even as it changed their
eating habits. It rose from a single outlet in a nondescript San Bernardino, California,
neighborhood to become one of the largest fast-food chains around the globe. But it
gradually ran into various problems that began to slow its sales growth (see
Exhibit 5).
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EXHIBIT 5 McDonald’s Milestones
1948
Brothers Richard and Maurice McDonald open the first restaurant in San
Bernadino, California, that sells hamburgers, fries, and milkshakes.
1955
Ray A. Kroc, 52, opens his first McDonald’s in Des Plaines, Illinois. Kroc, a
distributor of milkshake mixers, figures he can sell a bundle of them if he
franchises the McDonald’s business and install his mixers in the new stores.
1961
Six years later, Kroc buys out the McDonald brothers for $2.7 million.
1963
Ronald McDonald makes his debut as corporate spokesclown using future NBCTV weatherman Willard Scott. During the year, the company also sells its 1
billionth burger.
1965
McDonald’s stock goes public at $22.50 a share. It will split 12 times in the next
35 years.
1967
The first McDonald’s restaurant outside the U.S. opens in Richmond, British
Columbia. Today there are 31,108 McDonald’s in 118 countries.
1968
The Big Mac, the first extension of McDonald’s basic burger, makes its debut and
is an immediate hit.
1972
McDonald’s switches to the frozen variety for its successful French fries.
1974
Fred L. Turner succeeds Kroc as CEO. In the midst of a recession, the minimum
wage rises to $2 per hour, a big cost increase for McDonald’s, which is built
around a model of young, low-wage workers.
1975
The first drive-through window is opened in Sierra Vista, Arizona.
1979
McDonald’s responds to the needs of working women by introducing Happy
Meals. A burger, some fries, a soda, and a toy give working moms a break.
1987
Michael R. Quinlan becomes chief executive.
1991
Responding to the public’s desire for healthier foods, McDonald’s introduces the
low-fat McLean Deluxe burger. It flops and is withdrawn from the market. Over
the next few years, the chain will stumble several times trying to spruce up its
menu.
1992
The company sells its 90 billionth burger and stops counting.
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1996
McDonald’s in 2022
In order to attract more adult customers, the company launches its Arch Deluxe,
a “grown-up” burger with an idiosyncratic taste. Like the low-fat burger, it also
falls flat.
1997
McDonald’s launches Campaign 55, which cuts the cost of a Big Mac to $0.55. It
is a response to discounting by Burger King and Taco Bell. The move, which
prefigures similar price wars in 2002, is widely considered a failure.
1998
Jack M. Greenberg becomes McDonald’s fourth chief executive. A 16-year
company veteran, he vows to spruce up the restaurants and their menu.
1999
For the first time, sales from international operations outstrip domestic revenues.
In search of other concepts, the company acquires Aroma Cafe, Chipotle,
Donatos, and, later, Boston Market.
2000
McDonald’s sales in the U.S. peak at an average of $1.6 million annually per
restaurant. It is, however, still more than at any other fast-food chain.
2001
Subway surpasses McDonald’s as the fast-food chain with the most U.S. outlets.
At the end of the year it had 13,247 stores, 148 more than McDonald’s.
2002
McDonald’s posts its first-ever quarterly loss, of $343.8 million. The stock drops
to around $13.50, down 40% from five years ago.
2003
James R. Cantalupo returns to McDonald’s in January as CEO. He immediately
pulls back from the company’s 10–15% forecast for per-share earnings growth.
2004
Charles H. Bell takes over the firm after the sudden death of Cantalupo. He
states he will continue with the strategies that have been developed by his
predecessor.
2005
Jim Skinner takes over as CEO after Bell announces retirement for health
reasons.
2006
McDonald’s launches specialty beverages, including coffee-based drinks.
2008
McDonald’s plans to add McCafés to each of its outlets.
2012
Don Thompson succeeds Skinner as CEO of Iain.
2015
Thompson resigns because of declining performance and is replaced by Steve
Easterbrook, the firm’s chief branding officer.
2016
McDonald’s opens restaurant in the 120th country; the first McDonald’s
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restaurant opens in Astana, Kazakhstan, on March 8, 2016.
2017
Global McDelivery Day is celebrated on July 26 to support the global launch of
McDelivery with UberEATS.
2019
Steve Easterbrook is replaced due to poor judgement in a personal relationship
with an employee and Chris Kempczinski, president of the USA business unit, is
named CEO.
2020
McDonald’s opens its first net zero-designed restaurant at Walt Disney World
Resort, which creates enough renewable energy on-site to cover 100% of its
energy needs on a net annual basis.
2022
McDonald’s uses mobile app to bring back rare menu items, such as the
Szechuan sauce and the Spicy Chicken McNuggets.
Source: McDonald’s.
The decline could be attributed in large part to a drop in McDonald’s once-vaunted
service and quality since its expansion in the 1990s, when headquarters stopped
grading franchises for cleanliness, speed, and service. By the end of the decade, the
chain ran into staffing problems because of the tighter labor market. McDonald’s
began to cut back on training as it struggled to find enough new recruits, leading to a
dramatic falloff in the skills of its employees. According to a 2002 survey by market
researcher Global Growth Group, McDonald’s came in third in average service time
behind Wendy’s and sandwich shop Chick-fil-A Inc.
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By the beginning of 2003, consumer surveys were indicating that
McDonald’s was headed for serious trouble. Measures for the service and quality of
the chain were continuing to fall, dropping far behind those of its rivals. In order to
deal with its deteriorating performance, the firm decided to bring back retired vice
chairman James R. Cantalupo, 59, who had overseen McDonald’s successful
international expansion in the 1980s and 1990s. Cantalupo, who had retired only a
year earlier, was perceived to be the only candidate with the necessary qualifications,
despite shareholder sentiment for an outsider. The board had felt that it needed
someone who knew the company well and could move quickly to turn things around.
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Cantalupo now took the view that McDonald’s missed the mark on the basics. It
needed to refocus on delivering the critical aspects of consistent, fast, and friendly
service and an all-around enjoyable experience for the whole family. Its franchisees and
employees alike needed to be inspired as well as retrained on their role in putting the
smile back into the McDonald’s experience. When Cantalupo and his team laid out
their turnaround plan in 2003, they stressed getting the basics of service and quality
right, in part by reinstituting a tough “up or out” grading system that would kick out
underperforming franchisees. “We have to rebuild the foundation. It’s fruitless to add
growth if the foundation is weak,” said Cantalupo.5
In his effort to focus on its core business, Cantalupo sold off the nonburger chains that
the firm had recently acquired. He also cut back on the opening of new outlets,
focusing instead on generating more sales from existing outlets. Cantalupo pushed
McDonald’s to draw more customers through the introduction of new products. The
chain had a positive response to its increased emphasis on healthier foods, led by a
revamped line of fancier salads. The revamped menu was promoted through a new
worldwide ad slogan, “I’m loving it,” which was delivered by pop idol Justin
Timberlake through a set of MTV-style commercials.
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Striving for a Healthier Image
When Jim Skinner took over from Cantalupo in 2004, he continued to push for
McDonald’s to improve its image. Skinner felt that one of his top priorities was to deal
with the growing concerns about the unhealthy image of McDonald’s, given the rise of
obesity in the United States. These concerns were highlighted in the popular
documentary, Super Size Me, made by Morgan Spurlock. Spurlock vividly displayed the
health risks that were posed by a steady diet of food from the fast-food chain. With a
rise in awareness of the high fat content of most of the products offered by
McDonald’s, the firm was also beginning to face lawsuits from some of its loyal
customers.
In response to health concerns, one of the first steps taken by McDonald’s was to
phase out supersizing by the end of 2004. The supersizing option allowed customers to
get a larger order of French fries and a bigger soft drink by paying a little extra.
McDonald’s also announced that it intended to start providing nutritional information
on the packaging of its products. The information was easy to read and would tell
customers about the calories, fat, protein, carbohydrates, and sodium in each item.
Finally, McDonald’s also began to remove the artery-clogging trans fatty acids from
the oil that it used to make its French fries and subsequently announced plans to
reduce the sodium content in all of its products by 15 percent.
McDonald’s has continued to build upon its chicken offerings using white meat with
products such as Chicken Selects. It has also placed a great deal of emphasis upon its
new salad offerings. McDonald’s has carried out extensive experiments and tests with
these, deciding to use higher quality ingredients, from a variety of lettuces and tasty
cherry tomatoes to sharper cheeses and better cuts of meat. It offered a choice of
Newman’s Own dressings, a well-known higher-end brand. “Salads have changed the
way people think of our brand,” said Wade Thoma, vice president for menu
development in the U.S. “It tells people that we are very serious about offering things
people feel comfortable eating.”6
McDonald’s has also been trying to include more fruits and vegetables in its wellknown and popular Happy Meals. It announced in 2011 that it would reduce the
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amount of French fries and phase out the caramel dipping sauce that accompanied the
apple slices in these meals. The addition of fruits and vegetables has raised the firm’s
operating costs, as these are more expensive to ship and store because of their more
perishable nature. “We are doing what we can,” said Danya Proud, a spokesperson for
the firm. “We have to evolve with the times.”7
The rollout of new beverages, highlighted by new coffee-based drinks, represented the
chain’s biggest menu expansion in almost three decades. Under a plan to add a
McCafé section to all of its nearly 14,000 U.S. outlets, McDonald’s has been offering
lattes, cappuccinos, ice-blended frappes, and fruit-based smoothies to its customers.
“In many cases, they’re now coming for the beverage, whereas before they were coming
for the meal,” said Lee Renz, an executive who was responsible for the rollout.8
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Refurbishing the Outlets
As part of its turnaround strategy, McDonald’s has also been selling off outlets. More
than 80 percent of its outlets are now in the hands of franchisees and other affiliates.
Skinner began working with the franchisees to address the look and feel of many of the
chain’s aging stores. Without any changes to their décor, the firm was likely to be left
behind by other savvier fast-food-and-drink retailers. The firm is pushing to refurbish or
re-image all of its outlets around the world. “People eat with their eyes first,” said Don
Thompson, who succeeded Skinner as CEO of the chain in 2012. “If you have a
restaurant that is appealing, contemporary, and relevant both from the street and
interior, the food tastes better.”9
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The re-imaging concept was first tried in France in 1996 by Dennis
Hennequin, an executive in charge of the chain’s European operations, who felt that
the effort was essential to revive the firm’s sagging sales. “We were hip 15 years ago,
but I think we lost that,” he said.10 McDonald’s has been applying the re-imaging
concept around the world with a budget of more than half of its total annual capital
expenditures. In the United States, the changes cost as much as $650,000 per
restaurant, a cost that is shared with the franchisees when the outlet is not company
owned.
One of the prototype interiors that was tested out by McDonald’s has curved counters
with surfaces painted in bright colors. In one corner, a touch-activated screen allows
customers to punch in orders without queuing. The interiors can feature armchairs and
sofas, modern lighting, large television screens, and wireless internet access. The firm
is also trying to develop new features for its drive-through customers, who account for
65 percent of all transactions in the United States. They include music aimed at
queuing vehicles and a wall of windows on the drive-through side of the restaurant
allowing customers to see meals being prepared from their cars.
The McCafé concept originated in Australia in 1993 and has been rolled out in many
restaurants around the world. The chain has been developing McCafés inside its
outlets next to the usual fast-food counter as part of the refurbishment of its outlets.
Part of the refurbishment has focused on the installation of a specialty beverage
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platform across all U.S. outlets. The cost of installing this equipment is running at
about $100,000 per outlet, with McDonald’s subsidizing part of this expense. The plan
for all McCafés is to offer espresso-based coffee, gourmet coffee blends, fresh baked
muffins, and high-end desserts. Customers will be able to consume these while they
relax in soft leather chairs listening to jazz, big band, or blues music. Commenting on
this significant expansion of offerings, Marty Brochstein, executive editor of The
Licensing Letter, said: “McDonald’s wants to be seen as a lifestyle brand, not just a
place to go to have a burger.”11
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Rethinking the Business Model
Another new concept is a kiosk in some locations that allows customers to skip the
counter, and instead head to tablet-like kiosks where they can customize everything
about their burger, from the type of bun to the variety of cheese to the many glossy
toppings and sauces that can go on it. The firm has plans to gradually expand the
concept to more locations, but franchises are concerned about the costs, which can
run up to $125,000 per restaurant to make the required changes. “Customization is not
McDonald’s historic strength,” said Mark Kalinowski, an analyst at Janney
Montgomery Scott.12 Dubbed the “Create Your Taste” platform, McDonald’s was
hoping to attract more younger customers, but it realized that there were considerable
risks involved with making such a change. The burgers would be priced higher at
$5.49, could take seven minutes to prepare, and could only be ordered from inside the
store and eventually brought to your table. Franchises complained that this could not
be offered to drive-through customers that make up about 70 percent of the chain’s
business.
Such changes ran counter to the image of inexpensive and fast food that McDonald’s
had built over the years. Compromising, Easterbrook had shifted to a more efficient
and less expensive format called “Signature Crafted Recipes” that would allow both instore and drive-through customers to choose a bun and one of four sandwich types.
McDonald’s was hoping that such a push toward more customization would bring
more customers into their outlets, bringing the U.S. counter/drive-through customer
ratio closer to 50/50, up from the current 30/70.
McDonald’s has also been working to simplify its menu, reducing the number of “value
meal” promotions, groups of items that together cost less than ordering items
individually. It has tweaked its “dollar menu” replacing it with “dollar value and more,”
raising the prices for many items as part of a bid to get each customer to spend more.
But McDonald’s had introduced these bargain menus because its prices had risen over
the years, driving away customers to cheaper outlets. Consequently, as much as 15
percent of the chain’s sales had been coming from its “dollar menu” where everything
cost a dollar.
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Over the past year, McDonald’s saw a slight jump in U.S. sales after launching an allday breakfast at most of its locations. The franchises had to be convinced to invest
about $5,000 to add food preparation space in order to offer breakfast along with the
regular lunch or dinner items. However, sales from the all-day breakfast have begun to
flatten out, too, with a gradual decline in sales from customers who were coming in
throughout the day to order breakfast, as the novelty wore off.
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More Gold in These Arches?
In spite of all the changes made by Easterbrook, sales growth for McDonald’s
continued to be sluggish. The firm continued to believe that sales would rebound in the
United States as well as in foreign markets. In order to provide a boost to its operations
in China and Hong Kong, McDonald’s announced a deal with Citic, a state-owned
conglomerate, and the Carlyle Group, a private equity firm. “China and Hong Kong
represent an enormous growth opportunity for McDonald’s,” Easterbrook said in a
news release. “The new partnership will combine one of the world’s most powerful
brands and our unparalleled quality standards with partners who have an unmatched
understanding of the local markets.”13
McDonald’s has also been trying to grow by reaching out to different customer
segments with different products at different times of the day. It has tried to target
young adults for breakfast with its gourmet coffee, egg sandwiches, and fat-free muffins.
It attracts working adults for lunch, particularly those who are squeezed for time, with
its burgers and fries. And its introduction of wraps has drawn in teenagers late in the
evening after they have been partying. Restaurant analyst Bryan Elliott commented:
“They’ve tried to be all things to all people who walk in their door.”14
McDonald’s is concerned about the findings of a recent survey that showed Page C274
only 20 percent of millennials had even tried a Big Mac. It is also aware that despite its
efforts to diversify its menu, 30 percent of sales come from just five items: Big Macs,
hamburgers, cheeseburgers, McNuggets, and fries. It has managed to increase traffic
during the late-night hours, but this may be hurt by their recent announcement that
they would offer a more limited sample of their full menu between midnight and 5 a.m.
The expansion of the menu beyond the staple of burgers and fries raised some
fundamental questions. Most significantly, it is not clear just how far McDonald’s can
stretch its brand while keeping all of its outlets under the traditional symbol of its
golden arches. In fact, industry experts believe that the long-term success of the firm
may well depend on its ability to compete with rival burger chains. “The burger
category has great strength,” added David C. Novak, former chairman and CEO of
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Yum! Brands, parent of KFC and Taco Bell. “That’s America’s food. People love
hamburgers.”15
As the new leader of McDonald’s, Chris Kempczinski will be responsible for
navigating the company through the changing environment. Above all, listening to
trends in consumers’ tastes will continue to propel the burger and fast-food business.
New trends in the “better burger” business and increased transparency regarding
socially conscious preparation processes have shifted how big-time burger joints make
and cater their products. Relatively new entrants into the market such as Five Guys
and Shake Shack have completely revamped the take on the modern burger and forced
the hand of players such as McDonald’s to up the quality of their basic business,
burgers. “What’s fascinating,” said Paul Reynish, former CEO of Five Guys
International, “is the complete fundamental change that has taken place with people
prepared to pay more and wait longer for a more upmarket burger.”16
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ENDNOTES
1. Kowitt, Beth. 2021. McFamily feud. April-May, Fortune, p. 69.
https://fortune.com/longform/mcdonalds-ceos-chris-kempczinski-steve-easterbrookmcfamily-feud-scandal-lawsuits/
2. Mesisenzahl, M. 2022. See inside the virtual worlds created by Wendy’s, Chipotle
and McDonald’s as the metaverse becomes the latest battleground for fast food.
Businessinsider.com, April 9. https://www.businessinsider.com/chipotle-mcdonaldswendys-metaverse-virtual-worlds-photos-2022-4
3. Strom, S. 2016. In a shift, McMuffins with real butter. New York Times, August 3, p.
B2.
4. The Economist. 2015. When the chips are down. January 10, p. 53.
5. Pallavi, G., and M. Arndt. 2003. Hamburger hell. BusinessWeek, March 3, p. 105.
6. Warner, M. 2005. You want any fruit with that Big Mac? New York Times, February
20, p. 8.
7. Strom, S. 2011. McDonald’s trims its Happy Meal. New York Times, July 26, p. B7.
8. Adamy, J. 2008. McDonald’s coffee strategy is tough sell. Wall Street Journal,
October 27, p. B3.
9. Paynter, B. 2010. Super style me. Fast Company, October, p. 107.
0. Grant, J. 2006. McDonald’s to revamp UK outlets. Financial Times, February 2, p.
14.
11. Horovitz, B. 2003. McDonald’s ventures beyond burgers to duds, toys. USA Today,
November 14, p. 6B.
2. Tabuchi, H. 2015. McDonald’s chief promises turnaround in a restructuring. New
York Times, May 4.
3. Tsang, A., and W. Sui-Lee. 2017. McDonald’s China operations to be sold to locally
led consortium. New York Times, January 9, p. B1.
4. Kowitt, B. 2014. Fallen arches: Can McDonald’s get its mojo back? Fortune,
December 1, p. 110.
5. Jargon, J. 2012. McDonald’s is feeling fried. Wall Street Journal, November 9, p. B2.
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6. Hope, K. 2017. How the “better burger” is taking over the world. BBC News, June 14.
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Content Rubric MGMT 495 Case Analysis
Content Area
Executive Summary/
Overview
Issue Statement
(Problem Statement)
Analysis
Alternatives
Recommendations
Conclusion
Meets
Expectations
Effective summary of
the case analysis
paper (not the case itself).
Information is relevant.
Includes
recommendations for the
company. Overview of the
facts of the case.
Focuses on a strategic
issue within the scope of
the guiding question. Does
recognize nuances of the
issue such as filling in
important information,
stating assumptions, or
assigning responsibilities.
Effective analysis helping
to identify causes of the
strategic issue or helping
to formulate effective
solutions. Use of concepts
(such as SWOT), theories,
or research covered in the
course.
Provides strategic
solutions that address the
strategic issue. This should
be a subset of your
recommendations. These
alternatives must address
the issues presented in
your problem statement.
Strategic solution is
recommended. Effective
course of action is
provided describing
implementation. May be
divided in short-term
“quick wins” and longterm actions.
Dedicated Summary
Conclusion of the case
study. With forward
looking statements.
Approaches
Expectations
Simple outline of the case
analysis paper. No
recommendations
included.
Does not
Meet Expectations
Simple overview of the
case itself and/or
overview of company
history.
Focuses on strategic issues
mentioned in the case but
may be outside of the
scope of guiding question.
May identify too many
strategic issues.
Focuses on strategic issues
not mentioned in the case
or provides a “laundry list”
of strategic issues.
Critical examination of the
strategic issue is evident.
Some significant but not
major errors in analysis.
No critical examination of
the strategic issue. No use
of course concepts,
theories, and research as
covered in class.
Solutions may be less
strategic or do not address
the strategic issue
effectively. Evaluation of
strategic solutions may be
incomplete or omit
important aspects.
Solutions do not address
the strategic issue. No
evaluation of solutions.
Course of action is
provided but may not be
effective.
No solution is
recommended and/or no
course of action is
included.
Summary is incomplete
No conclusion section is
and does not capture what given in the case study.
your recommendations
will do for the company.
Format Guidelines
• Please write a paper in essay format: 12 size Times New Roman (1-inch margins)
• 4-5 pages of content (excluding cover page, references, and visual elements such as figures, graphs, and tables).
• Submit a well-organized paper with headings.
• Check grammar and spelling carefully.
• Submit the paper to Blackboard as a Word document with your full name on the cover page.
• Zero tolerance for plagiarism (this includes extensive copying from the case into your paper without including
quotation marks ” “).
Common Issues to Avoid
• The analysis part may be disconnected from the rest of the paper. This usually happens when you see the issue and
jump right to solutions, and then add an analysis part later. Instead, look at the case and ask yourself: What is the
issue here that led the firm to hire a consultant (that is you!). The issue articulated by the firm is typically a superficial
or incomplete understanding of the situation. Try to think about the issue in more detail by conducting an analysis.
Then provide me with your key insights from this exercise in your paper.
• Students often focus on too many issues. Try to solve a limited set of issues effectively, rather than two or three issues
ineffectively. In other words, the client typically sets the scope of a project to widely–it is your job as a consultant to
set an appropriate project scope!