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McDonalds McWrap trying to compete with Subway | blog.bodellconsulting.com

Chicken McWrap picture

New Chicken McWrap from McDonalds

It looks as if McDonalds is making a move to try and keep up with Subway which has outpaced McDonald’s growth by a large margin in the last few year and surpassed McDonalds to become the largest restaurant chain, measured by number of stores, sometime in 2010.McDonald’s latest attempt to defend it’s position as a market leader manifests itself with a new menu item, the McWrap, that is aimed at millenials who gravitate toward higher quality, healthier menu items.

Their thought is that they want to give millenials a reason not to go somewhere else if they are trying to eat better.

Here’s my take:

The goodIt’s always a good idea to consider where the market is going. Staying ahead of menu trends can help a restaurant remain a market leader. Making intelligent changes based emerging trends may also prevent the concept from getting stale and protect it from competition from newer, trendier restaurants.

The risk – Rolling out new menu items to compete with other chains can hurt the market position of a restaurant brand. A well established brand like McDonalds means particular things to people. Screwing not just with menu items, but with menu direction can adversely affect a restaurant’s ability to deliver on the preconceived notions that diners already have about a restaurant. Not delivering on your customer’s expectations will hurt any brand, even one as big as McDonalds. A great example is the Angus burger line for McDonalds. They rolled out this line to compete with the emerging high quality “quick casual” concepts that have been dominating new growth in the quick service segment the last decade. The effort has been widely seen as a failure and the Angus burgers maybe on their way out of the McDonalds menu lineup.

McDonalds needs to make sure that any new menu items take advantage of their current market position. They will never be able to rebrand themselves as a “healthy” concept. They will never be an “upscale” quick casual concept. That just isn’t why McDonald’s existing customers go there, and trying to be those things can alienate those existing customers and confuse new customers who relate to McDonalds one way through their existing customers and another way through McDonald’s own branding efforts.

The verdict – It’s up to history how the McWrap will do at McDonalds. I predict a big, fat flop. First, the McWrap is being rolled out to chase health conscious millenials who are simply never going to see McDonald’s as a healthy place to eat, despite the fact that McDonalds does in fact have healthy menu items. The Angus burgers failed to help McDonalds position itself as a quick casual or high quality option like it’s “quick casual” competitors. It was a waste of time and resources.

The advice – McDonalds would make more money realizing that what it’s customers want most is speed and consistency. People don’t expect the best hamburger from McDonalds and frozen 1/4 lb Angus patty doesn’t deliver it anyways. It’s great to try new menu items to keep your existing market demographic happy. It’s not great to sacrifice your existing market position to chase a completely different market. McDonalds should refocus on who it is most likely to come to their restaurant, trim the fat from extra menu items that don’t speak to that market, then focus on innovative ways to reach new customers that have the same sensibilities and desires as their existing market base.

Brandon O’Dell of O’Dell Restaurant Consulting offers operations and marketing consulting for restaurants and food services of all types. Visit www.bodellconsulting.com for more information and find downloadable spreadsheets and management tools in the webstore at www.bodellconsulting.com/webstore.html.

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Should an Applebees server who posted a customer receipt online be fired?

A recent story from my area of the country brings up an important question that will inevitably come up many more times. What should a restaurant owner do if an employee posts a customer’s receipt online? Does it make any difference that the receipt has something rude written on it?

Here is a link to the original story I’m referencing on the Consumerist. In short, the media is reporting that a church pastor stiffed a waitress because they didn’t like the 18% auto-gratuity on their check, the waitress posted the receipt online and then was fired by Applebees. One media outlet, the Huffington Post, is circulating a petition to get the server her job back.

Here is the USA Today version:

There are some major mistakes in most, if not all the news stories I’ve seen about this situation other than the original. Since the Consumerist’s original story had the facts right, it begs the question of intent of the other media outlets in misstating them. Here are the important facts being left out:

  • The waitress who posted the receipt online was not the waitress who waited on the pastor. She was not the one purportedly “stiffed”.
  • While the pastor crossed out the auto-gratuity and added up the tab without the tip, she did leave the server a $6 cash tip on a $34.93 tab, equating to a 17% tip. The server was not “stiffed” at all.
  • Applebees, where the incident took place, charged the 18% auto-gratuity to the pastor anyways, because it is their policy to charge 18% automatically on tables of 8 or more. This is standard in many full service restaurants. The waitress actually made a 35% tip on the table, though that certainly wasn’t the intent of the pastor.

I’m not posting this information to defend the pastor in any way. The pastor wrote “I give God 10%, why do you get 18%?” on the check. Even if she intended it for the restaurant and not the waitress, this sort of activity by a customer is inexcusable. The restaurant should “fire” the pastor as a customer for leaving such a comment on the tab in my opinion, or at a minimum give them a warning, and the church should fire the pastor for disgracing the church as its primary representative in the public. Using God as an excuse to make a negative statement about tipping an individual person is never okay, even if she did leave the server a 17% cash tip.

The real question being raised here is, “Should the server who posted the receipt be fired?”

My opinion is that yes, the employee was rightfully fired by the Applebees where she worked. Customer receipts are private property of both the customer and the business, not the server. As such, the server has no right to post that information online, regardless of what was written on it. Had the server only shared what was written on the receipt, without posting a picture of the receipt, I might have a different opinion. It’s possible there might even be some sort of criminal law broken by the server. The server’s defense is that there is nothing in the employee manual forbidding her from copying and posting receipts online.

I’d like to get the input of restaurant owners and managers out there that could face the same situation in the future. What do you think is the right thing to do as a restaurant owner?

One piece of advice I do have to offer restaurant owners on this type of incident is that you should have a policy in your manual forbidding employees from posting pictures of guests, their personal property, or the property of the restaurant online. I also believe it would be good to expressly allow the posting of food and drink pictures online for the purpose of promoting the restaurant.

Brandon O’Dell with O’Dell Restaurant Consulting is an independent restaurant consultant who offers operations and concept strategy consulting for independent restaurants and small chains. You can learn more about their services at www.bodellconsulting.com.

What restaurant operators need to know about QR codes | Marketing content from Restaurant Hospitality

Everything you need to know about QR codesBrandon O’Dell with O’Dell Restaurant Consulting offers operations consulting and brand strategy advice for small to medium sized restaurants, food services and private clubs.

Are daily deal sites like Groupon good for restaurants?

With most of these sites, you offer a gift certificate that is sold on the site for 50% off. That’s a pretty big hit already, and by itself would turn one of these deals into a money loser. To make it really expensive though, these deal sites demand 50% of the money that is collected, and expect you to pay for the processing cost of the transactions for your gift certificates.

In numbers, here is how the “deal” looks.

  • You offer a $50 gift certificate for $25.
  • Groupon keeps $12.50, you keep $12.50.
  • You pay a 3.5% processing charge on the full $50 sale, which is $1.75.
  • You net $10.75 for $50 worth of your product.
  • The customer comes in and spends $10 over the gift certificate with a net tab of $60 (if you’re lucky).
  • You run a food cost of 33% on your product meaning that the food you sold cost you $20 to sell.
  • You normally run a 30% labor cost. You think it will go down when these deals get redeemed since you are busier, but you forget to factor in your loss of revenue so your labor cost actually goes up to 40%, not down, costing you $24 in labor.

Without calculating in other costs like laundry, chemicals, wear and tear on furniture, fixtures and equipment, and every other cost of you doing business outside of the 10% of your budget that is fixed, this daily deal that netted you $20.75 in sales (thanks to the extra $10 they spent) cost you $44 to sell. That’s a net loss of $23.25 for every deal that you sell. Since most deals sell 1000+ gift certificates, you could be looking at your Groupon, Restaurant.com or LivingSocial “advertising” campaign costing you $23,000 or more.

In contrast, that amount of money could buy you a premium billboard location ad for a year, two years worth of cable TV ads or 6 months of prime network television ads, two to four years of radio advertising, two years of service from a professional public relations specialist or full page color ads in two premium magazine circulations for an entire year.

One of the “selling points” for the daily deal is that the cost is spread out so you don’t have to pay for it all at once. In truth though, all advertisers will do this for you. The daily deal sites are doing you any favors or offering you anything you can’t get from another advertising medium. What they ARE very effective at is getting customers through your door, who will likely be loyal to the daily deal site instead of your restaurant, who will tip your servers low because of their low check averages, and who you will likely never see again.

There are a few businesses that daily deal sites could be good for, but restaurants are not one of them. For some great analysis on other problems created by these sites, for both business owners and buyers of these deals, check out the following article from USA Today, based on a study by Applied Predictive Technologies…

Daily coupon deals may not work for buyers, sellers | USAToday.com

Brandon O’Dell and O’Dell Restaurant Consulting offer operations and marketing consulting for independent restaurants, private clubs and food services. Learn more at www.bodellconsulting.com.

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