FT: Burger, fries and a shake-up

Burger, fries and a shake-up

By Jenny Wiggins

Published: February 27 2007 02:00 | Last updated: February 27 2007 02:00

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 Mr 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," Mr Hennequin says. "We've got to be loyal to ourroots, 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 ofannual 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 imageof 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 $4.4bn (£2.3bn).

But it is developments in the European business that may provide the best guide to where the McDonald's brand will go in future.

Mr 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 torun Europe after making a series of successful changes to its French outlets in the late 1990s.

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 andin 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 Mr 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, Mr 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.

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 tablesand poufs.

"When Starbucks is charging you £2.50 for the coffee, it's not because of thecoffee; 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 MrHennequin introduced the "McPassport", which contains details of training and language skills and enables the holder to work in any branch in Europe.

The passport is designed to appeal to Europe's mobile young. "One of the biggest aspirations of kids is to travel around," says Mr Hennequin, who expects the passport to get a lot of use in countries such as Greece and Italy during summer.

Mr 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. "We're not the United States of Europe," he says. "We've got 41 countries at very different stages of development and we've got to respect that."

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 Mr 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."

Restaurants' healthy outlook

McDonald's, having for so long served as global shorthand for junk food, has had to grapple with society's increasing distaste for unhealthy eating.

After introducing salads and sandwiches to its menus, the chain is still trying to make its food healthier. Late last year it announced plans to cut back on unhealthy trans fats.

In a bid to create greater transparency, McDonald's has been running an "open doors" programme in which customers are invited to go behind the scenes at restaurants and suppliers. In Poland, 50,000 people have taken up the offer. The chain is also putting more nutritional information on packaging and sourcing foods from sustainable sources.

A new three-tier pricing strategy sells products at a range of prices for people on different budgets.

Another initiative involves introducing more McCafés - counters selling coffee and pastries inside McDonald's restaurants.

Mr Hennequin says the group has more work to do in addressing consumers' environmental and ethical concerns. He wants outlets to use less plastic and recycle more. "I'm going to redesign packaging for Europe," he says.

The group is also sourcing more foods from sustainable sources and Mr Hennequin plans to extend the use of Rainforest Alliance coffee beans throughout Europe. The beans, which are certified by a non-profit group that monitors environmental standards and workers' welfare, are currently used only in the UK.

In the long term, Mr Hennequin hopes his changes will transform McDonald's image from a "fast food" restaurant chain into one known for serving "good food fast".

Copyright The Financial Times Limited 2007

Comments

[Sean]

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[Sean]

Hello,

I'd appreciate if you can give me some feedback on our site: www.regencyshop.com and our item hanging Egg Chair.

I realize that you are home decor-modern design connoisseur :) I'd like to hear your opinion/feedback on our products. Also, it'd be swell if you can place our link on your blog.

Thank you,

Sean