McDonald's & the ghost of Christmas

How would you recognize signs of a troubled business?  Often the key indicator is when leadership clearly takes "more of the same" to excess.

This week McDonald's leadership began encouraging franchisees to open on Christmas Day.  Their primary objective, clearly stated, was to produce more revenue and hopefully show a strong December.

I nominate McDonald's action for the 2012 Dickens' Award as the most Scrooge-est business behaviour this season.

"Christmas is but an excuse for workers to pick their employer's pockets every 25th December" is I believe how Charles Dickens put it in "A Christmas Carol."  Poor Jacob Marley couldn't even have 1 day off per year.  And in McDonald's case, the company founder actually made it corporate policy to never be open on Thanksgiving or Christmas days so employees could be with family.

Bah! Humbug!

Now, there are a lot of trends McDonald's could legitimately cite when making a case for being open on Christmas -- a case that could actually shed a positive light on the company:

• The number of single people has risen over the last decade.  This trend means that many more people now have a need for at least one meal not in a family setting on December 25.
• America has a large and storied Jewish community for whom  December 25 does not have a special religious meaning.  For these people enjoying their habitual norms such as eating at McDonald's would indicate an open-minded company supports all faiths.
• America is a nation of immigrants.  While the founders were European Christians, today, America has a very diverse group of immigrants, especially from Asia and the Indian sub-continent, who follow Islam and other faiths for which December 25 has, again, no particular meaning.  Offering them a place to eat on their day off could show a connection with their growing importance to America's future.  An act of understanding to their impact on the country.

These are just three, and there are likely more and better ones (please offer your thoughts in the comments section.)  But truthfully, this is not why McDonald's is urging franchisees to toil on this national holiday.  Instead, it is just to make a buck.

But then again, what trend has McDonald's successfully leveraged in the last... let's say two decades?  Despite the rapid growth of high end coffee, the "McCafe" concept was a decade late, and so missed the mark that it has made no impact when competing against Caribou Coffee, Peet's or Starbucks.  And it has had minimal benefit for McDonald's.

To understand the dearth of new products just go to McDonald's web site where you'll see an animated ad for the "101 reasons to eat a McRib" - that mystery meat product which is at least 30 years old and rotated on and off the menu in the guise of "something new."

McDonald's had a very rough last quarter.  Its sales per store declined versus a year ago.  The number of stores has stagnated, sales are stagnant, new products are non-existent.  EvenRonald McDonald has aged, and apparently moved on to the nursing home.  What can you think about that is exciting about McDonald's?

Desperate to do something, McDonald's fired the head of North America.  But that doesn't fix the growth problem at McDonald's, it just demonstrates the company is internally fixated on blame rather understanding external market shifts and taking action.  McDonald's keeps doing more of the same, year after year; such as opening more stores in emerging markets, staying open longer hours at existing locations and even opening on Thanksgiving and Christmas in the US.

McDonald's Ghost of Christmas past was its great strength, from its origin, of consistency.  In the 1960s when people travelled away from home they could never be quite sure what a restaurant offered.  McDonald's offered a consistent product, that people liked, at a consistent (and affordable) price.  This success formula launched tremendous growth, and a revolution in America's restaurant industry, creating a great string of joyous past Christmases.

But the Ghost of Christmas present is far more bleak.  Fifty years have passed, and now people have a lot more options - and much higher expectations -- regarding dining.  But McDonald's really has failed to adapt.  So now it is struggling to grow, struggling to meet goals, struggling to be a kind and gentle employer.  Now asking its employees to work on Christmas -- and ostensibly eat Big Macs.

What is the Ghost of Christmas Future for McDonald's?  Not surprisingly, if it cannot adapt to changing markets things are likely to worsen.  No company can hope to succeed by simply doing more of the same forever.  Constantly focusing on efficiency, and beating on franchisees and employees to stay open longer, is a downward spiral.  Eventually every business HAS to innovate;  adapt to changing market conditions, or it will die.  Just look at the tombstones - Kodak, Hostess, Circuit City, Bennigan's ....

Take time between now and 2013 to ask yourself, what is your Ghost of Christmas past upon which your business was built?  How does that compare to the Ghost of Christmas present?  If there's a negative gap, what should you expect your Ghost of Christmas Future to look like?  Are you adapting to changing markets, or just hoping things will improve while you resist putting enough coal on the fire to keep everyone warm?

(Adam hartung is the managing director at Spark Partners.)

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