Steve Easterbrook, the recently appointed CEO at McDonald’s Corp., is not opting for the status quo as he searches for ways to lift the company out of its two-year sales slump.
Take this week, for example. On Monday, the Oak Brook, Ill.-based burger giant said it would test all-day breakfast starting this month at some restaurants in San Diego. And on Wednesday, McDonald’s said it would raise wages for workers at all company-owned restaurants.
Both announcements generated huge news for McDonald’s and, taken together, they demonstrate that new management under Easterbrook is testing previously erected barriers in an effort to lift sales and improve the company’s image. The chain has long been known for being averse to risk, but Easterbrook and the new management are clearly working to shed that label.
This week’s actions also mean that other potential changes pushed by activists, but long resisted by the company, could be on the table, too. That includes a real estate spinoff and more refranchising, as McDonald’s seeks to assuage investors worried about its future.
All-day breakfast is a prime example of an offering that the company long avoided, despite consumer demand.
Customers have been pushing McDonald’s to make breakfast available after 10:30 a.m. almost from the day that Herb Peterson created the Egg McMuffin in 1971.
McDonald’s executives have long known about consumer demand for its popular breakfast items later in the day. But the company resisted the idea, largely for operational reasons.
That resistance was steadfast as recently as February, when McDonald’s tweeted that its grills “just aren’t big enough for breakfast and lunch.”
Why don’t we serve breakfast all day? Our grills just aren’t big enough for breakfast and lunch. pic.twitter.com/Oyser4lnbw
— McDonald's (@McDonalds) February 23, 2015
McDonald’s followers responded: Get bigger grills.
Reaction to McDonald’s announcement that it would test all-day breakfast was swift, massive and overwhelmingly positive to the point of overstating its potential impact.
Slate said: “McDonald’s is finally making the one big menu change that could save its business,” as if a two-year sales slump at the world’s biggest restaurant chain equates to a dying business.
Other reactions included double exclamation points and proclamations of “McWonderful!”
As NRN wrote earlier this week, customers want restaurants to serve breakfast all day. Nearly three-quarters of adults say so, according to the National Restaurant Association. And McDonald’s breakfast items are some of the chain’s most craveable offerings.
Those factors could make a test of all-day breakfast a no-brainer for a company in need of ideas to boost revenue. And if McDonald’s can make it work operationally, it’s cheap. A franchisee told me that all-day breakfast would cost zero to $3,000 per unit. By contrast, the Create Your Taste customization platform would cost $100,000 to $150,000.
McDonald’s pay hike was not received as well. The company’s decision to raise pay for workers at its company-owned restaurants to $1 above the local minimum wage was met with derision by labor activists pushing for a $15 wage. Workers even protested the idea on Thursday, complaining that the wage increase wouldn’t be available to workers at franchise units.
Some critics even complained that the raise “exposes the shame of franchising,” noting that the company can’t, or won’t, force its franchisees to make the same pay hike.
But while the pay hike may not seem big, it still demonstrates that the company is responding to demands for higher pay. Its decision to give paid time off even to part-time workers could be even more significant. Only 39 percent of workers in the bottom 10 percent of income groups receive any vacation pay, according to FiveThirtyEight.com.
These aren’t McDonald’s only recent actions. It’s giving regions in the U.S. more autonomy. It had a huge presence at South by Southwest, and is making a huge move into technology. And the Create Your Taste customization platform could prove to be a massive change to operations.
How any of these efforts works remains to be seen. But it’s clear that McDonald’s — and Easterbrook — are not fooling around.
Contact Jonathan Maze at [email protected].
Follow him on Twitter: @jonathanmaze
