Business | Features
I'm changin' it
McDonald's adapts several new innovations in its European restaurants, which seem to be paying off in revenue terms.
- By Jenny Wiggins, Financial Times
- Published: 00:00 March 2, 2007
The lime green "egg" chairs designed by Arne Jacobsen, the eminent Danish architect, would look more at home in a modish coffee shop than in a London branch of McDonald's. But that is exactly the impression Denis Hennequin, who is in charge of all the chain's restaurants in Europe, wants to create.
"It's very modern and contemporary," the 49-year-old Frenchman says. "Much better than Starbucks." With Howard Schultz, chairman of Starbucks, this month expressing concern over the encroachment of fast-food operations on his business, the timing is apt.
The chairs (called egg for the way they cocoon the body) can be spotted near the windows of McDonald's branches on British high streets. They are part of Hennequin's grand plan for redefining the brand, which entails other changes in interior and exterior design and additions to the menu.
"I'm changing the story," Hennequin says. "We've got to be loyal to our roots, we have to be affordable, we have to be convenient... but we have to add new dimensions."
These dimensions include putting iPods in restaurants in France so that people can sit and listen to music; making better coffee from fair trade-style beans; and introducing a "McDonald's passport" so young staff members can work at any restaurant in Europe.
The changes seem to be working. Sales at McDonald's European franchises are growing faster than in other regions. Last month, Europe (which accounts for about 36 per cent of annual profits) reported quarterly comparable sales growth of 7.3 per cent against 5.9 per cent in the US.
And a survey in Consumer Reports magazine this month gave McDonald's coffee a higher rating than that of Starbucks.
Worldwide, McDonald's managers - who were lambasted in the late 1990s and early 2000s for their restaurants' poor food, bad service and tacky decor - have been trying to update the image of their brand. The success of coffee chains such as Starbucks, which appeal as much to workers on the move as to students, has forced companies like McDonald's to create a more sophisticated eating environment.
While its focus on costs sets limits on the quality of McDonald's ingredients, healthier foods have appeared on menus and restaurants have been refurbished, leading to better global sales. Last month, the restaurant chain reported record annual profits of $4.4 billion. But it is developments in the European business that may provide the best guide to where the McDonald's brand will go in future.
Hennequin, a graduate of one of Paris's top law schools who joined McDonald's after deciding it would be more "fun" than being a lawyer, was appointed to run Europe after making a series of successful changes to its French outlets in the late 1990s.
Brand freak
He does not look like a typical McDonald's executive. Unlike many of the chain's American managers, who dress in white shirts and suits, he wears no tie and lets his blue shirt hang out over corduroy trousers. He carries a small backpack containing a black Apple Macintosh laptop computer. A self-confessed "brand freak", he includes Apple among his favourites.
Nor does he act like most executives. In the 1990s, he established a design studio in Paris and started spending money creating more congenial environments in French McDonald's. Visitors would be served by hosts in ties and jackets, and offered free chocolates with their coffee. The changes were risky, given that US management was trying to cut costs. "At the time, I was swimming against the current. But our chairman at the time came over here and wanted to understand and in the end he said: 'If it works for you, just do it'."
The investment paid off. Comparable sales in France rose consistently between 1997 and 2005. Now Hennequin wants to emulate those changes elsewhere in Europe.
Asked if he thinks the McDonald's brand has suffered because of its slowness to adapt to changing consumer tastes, Hennequin smiles and looks up at the ceiling. "No comment."
He argues that it is hard for large corporations such as McDonald's to change. "It's been such a successful business model that you're always bouncing between 'let's do it because it works' and 'if it's not broken, don't fix it'," he says.
He has a three-pronged strategy: improve the experience of customers and employees, make sure restaurants adapt to local communities, and be more transparent about how McDonald's does business. Getting rid of fixed plastic seating and replacing it with more comfortable furniture, including upholstered seating and imitation leather banquettes, have been the first steps in improving customer experience.
Casualness
McDonald's design studio has developed 11 designs that franchisees can choose from (64 per cent of its European restaurants are franchised). The most popular designs use low-hanging lampshades, wooden tables or long communal tables and poufs.
"When Starbucks is charging you £2.50 for the coffee, it's not because of the coffee; it's because of that casualness that you can build around your restaurant," he says. "I think we can do that very easily."
For his employees Hennequin introduced the "McPassport", which contains details of training and language skills and enables the holder to work in any branch in Europe.
Hennequin came up with the idea after friends in France asked him to help their children get work at McDonald's restaurants in London. He realised the attraction the city held for young people. "Working in London was suddenly something cool," he says. But while he may be happy to see his employees shift countries, he wants the restaurants to retain local customs.
He wants to bring in more franchise partners to help stimulate new ideas. "I strongly believe that new ideas and innovation come from the field," he says. And he encourages restaurants to serve foods that locals like.
In Portugal, soup is on the menu and when Hennequin is in London he eats the porridge that McDonald's serves for breakfast along with McBacon rolls and sausage and egg McMuffins. "I don't think it would work in France but why not, I'm trying it!" he says. Then he confides: "To be honest, I'm not too excited by it. Every time I come to the same conclusion: the bagel and cream cheese is more my thing."
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