The benefits of flexing your offer

8. March 2013 05:11

It goes without saying that McDonalds has built a formidable leadership position in global foodservice. In European terms, this translates into sales that are an astonishing eight times greater than its nearest competitor – its European turnover is in excess of £18bn Euros within the 39 European countries where it currently operates. It next nearest non-contract caterer competitor is Yum! Brands, which has sales just below three billion Euros in Europe (Mitchells & Butlers currently stands in eighth position in terms of total European sales with turnover of 2,069 Euros from the UK and its tiny German operation).

Its success in France, which has a particularly strong home-grown food culture, is an instructive example of how deftly McDonald’s adapts to different cultural environments. Currently, France is McDonald’s second most profitable territory – and it was embroiled in a row at the end of last year over how much additional profit it had made since VAT was reduced in the sector.

McDonald’s entered the French market in 1979 and has grown its estate to more than 800 franchised sites. Its rival Burger King entered the French market in 1981 and grew to 39 sites in 1997 and then withdrew from the market completely. The difference in fortunes can be directly linked by the decision by McDonald’s to flex its French offer based on a firm understanding of the local market vagaries - while Burger King parachuted its US trading format unmodified into France.

The first smart move by McDonald’s was to tailor its offer to the structural challenges of the market. French consumers eat only 10% of their meals outside of the home – around 25% of the US figure and several times smaller than UK frequency. The French also tend not to snack between meals. However, the counterpoint is that they take longer to eat main meals and spend more. McDonald’s channelled staff hours towards main meal occasions and installed electronic ordering kiosks for other occasions – they are used by one in three customers that visit its restaurants. It pushed labour that was saved into table service that focused on up-selling of coffee and desserts. The outcome is that French customers spend an average of $15 per McDonald’s visit, which is four times the equivalent US spend.

McDonald’s has also pushed hard to bolster its quieter day-part periods by offering high quality coffee and pastries, supplied by the Holder Group which operates Paul and Laduree sites. It was clever positioning that further softened the hard edges of its otherwise Formica-topped offer in a way that played to French tastes. In 2011, McDonald’s took another smart step by applying some of the success that Panera Bread has enjoyed around fresh-baked bread in the US. The company introduced baguettes supplied again by Holder but baked on the premises. The French consume nine times more traditional sandwiches than hamburgers – and more than 70% of all sandwiches consumed in France are baguettes. A McDonald’s executive has described the adoption of baguettes as a response to “natural demand” within the market. Even more radical was the opening of a McSalad concept store at La Defense, a giant Paris office park where burgers, fries and shakes are banished. The site is aimed at the tens of thousands of local office workers whose taste is upscale and want to maximise their lunch breaks by ordering from their desks.

More subtle is the wholesale adoption of different design standards among French franchisees. They have used subdued signage and created comfier, coffee shop-style interiors to encourage patrons to stay longer. McDonald’s restaurants in France vary a lot in terms of finer design touches to cater for local demographics. Overarching McDonald’s adaptations has been a push to ensure its supply chain is French – it’s the biggest buyer of beef in France and 95% of its produce is sourced within the country. As UK companies expand abroad, there will be a host of adaptations that will be required for local markets; it’s interesting to see how much YO! Sushi has tweaked its menu at the first opening in Washington DC. But it seems to me that McDonald’s success in France shows how much success can be achieved by a company willing to really study the local market carefully.

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About the author

Phil Mellows

Former Group Editor of the Publican’s Morning Advertiser, Paul has a wealth of experience in the licensed retail and drinks industry. During his career Paul has helped to establish licensed retail trade publications.

His commercial awareness and communication skills have led Paul to develop his own PR agency, Propel, and he is now the CPL Group’s Public Relations Advisor. Paul is responsible for producing high quality news stories and external newsletters as well as building media relations and helping to develop business strategies by launching the CPL Group in the casual dining arena.

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