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For now, McDonald's seems to be devoting most of its time and energy to improving its service, not its food. A company memo sent to franchisees in North Carolina in July bluntly summed up the situation: "We are meeting our speed of service standard only 46% of the time, and 3 out of 10 customers are waiting more than four minutes to complete their order. Our 800 number has confirmed that...the number of complaints...for rude service, unprofessional employees and inaccurate service has risen steadily."
Spearheaded by U.S. division president Mike Roberts, the company is embarking on a crash program to clean up its act. It's keeping much closer tabs on its employees by sending what it calls "mystery shoppers," who have made 121,000 visits so far this year, to spy on restaurants' operations. In addition to the usual tutorials on how to pile on the ingredients for a Big Mac, McDonald's is for the first time giving its employees thorough hospitality training. The company is also offering cash incentives to more visible, effective store managers. "We're making progress but not fast enough," says Roberts.
The breakneck pace of new-store construction--which only a few years ago had franchisees fuming about nearby newcomers cannibalizing their sales--has eased. Only about 300 new stores are expected to open in the U.S. this year, compared with 1,100 in 1995. But there are critics who say that even that is too many and that McDonald's needs to weed out the worst franchisees and shut down some of the underperforming restaurants. "They've stretched the store managers. There are 1,000 of them that are marginal at best," says Howard Penney, an analyst at SunTrust Robinson Humphrey, who thinks McDonald's should close 500 to 1,000 branches. "They have to stop growing."
Some franchisees agree that slackers should get the boot. "They're dragging the brand through the mud," says Edward Bailey, who owns 44 stores in Dallas and has helped keep his business booming by decorating some of them with Ralph Lauren wallpaper and marble bathrooms. Others disagree, claiming that McDonald's is simply making scapegoats out of franchisees and that discounting helps the corporation at the franchisees' expense, since McDonald's takes in royalties on total sales, even as individual owners are stuck with shrinking profit margins. Though stressing that McDonald's will no longer shy away from forcing out bad owner-operators, Roberts dismisses the notion of scaling back McDonald's presence in the U.S. Says he: "We've got to be accessible to customers."
But for McDonald's to get cooking again, its marketing also has to be accessible. For the past several years, a virtual revolving door of corporate executives and an overreliance on regional campaigns have resulted in a diffuse, largely ineffective message. "Our marketing has become too democratic," says Irwin Kruger, a New York City franchisee, who this week will open his massive McDonald's in Times Square, complete with a video-laced menu board, flat-panel displays with subway maps and movie schedules, and his own creation, Mini McDonuts.