Barry Klein knows the McDonald’s brand from the inside and outside, having served as an executive as well as an operator. As a member of the chain’s marketing department in the 1970s, he created the Ronald McDonald character and led the “You Deserve A Break Today” advertising campaign. Klein also spent five years as a McDonald’s franchisee in New York City before returning to marketing as a senior VP at the Wells Rich Greene agency in Los Angeles. There he worked on campaigns for Jack in the Box (including blowing up the clown), Hills Bros. Coffee, Chex Cereals, Midas, Continental Airlines and other well-known brands. He currently works in Chicago as a marketing consultant and can be reached at firstname.lastname@example.org.
That résumé makes him the ideal person to address questions about how big is too big for a restaurant menu. A recent survey of 28 McDonald’s operators by Janney Montgomery Scott analyst Mark Kalinowsi found that a majority of them said they believe the McDonald’s menu is too large to execute efficiently and profitably. BurgerBusiness.com invited Barry Klein to join the discussion and posed him some questions. His answers:
By my count, McDonald’s menu now has more than 80 food items, not including McCafé and other beverages. Is that too many?
While operational complexity is certainly a concern for operators, it conflicts with my conviction that restaurant traffic and sales are fundamentally dependent on what I call “News About Food.” The news can be a new item, another food category added to the menu, a new location opening, a deal or coupon or an entirely new concept. If the news is sufficiently interesting to motivate a purchase, consumers have little or no concern about what effect it has on the overall menu. They simply don’t care how many items are offered.
People have never been more interested in news about food, and that interest continues to grow, as shown by the growth in TV audiences for cooking shows, cooking classes and recipe exposure through social media. American tastes have broadened considerably, and consumers are actively seeking new and bolder flavors.
McDonald’s has been making “News About Food” for a long time now, and it’s my opinion that along with operational excellence, the company’s great success is rooted in that strategy. Look at the history: Reaching out to kids with Happy Meals; the introduction of Filet-O-Fish, Double Burgers, Big Mac, and the other early menu additions; breakfast; the massive store expansion, both domestically and globally; McRib; the Dollar Menu; the recent focus on coffee and drinks, plus the proliferation of new sandwiches. All of that news has been absorbed operationally, despite the objections of some operators.
But the menu has broadened far beyond burgers to include more chicken and salads and wraps, etc. Is it fair to criticize it as a “something for everyone” strategy?
What McDonald’s is doing has no connection to a “something for everyone” strategy, in my opinion. The news being created is closely related to the brand, and makes their existing customers visit more often.
Can anyone believe that McDonald’s is not thoroughly testing any innovation before it’s introduced, and making sure that customers say they will buy it? I sat behind the glass at a large number of focus groups so I know that respondents will reject anything if it doesn’t fit with the brand for which it’s proposed. They’ll tell you, “Why would I go to Brand X for pizza when that’s a burger place? I can get it at lots of pizza places.”
It’s just not credible that McDonald’s would add an item simply for diversification. An item advances in the testing process when consumers tell the company that it’s interesting enough for another visit. In fact, the company might be quite courageous with the new items by introducing them in the face of the operators’ objections. That is especially true of the McCafé initiative, given the investment required.
Is adding new menu items the best way to attract and keep customers in this QSR marketplace?
Attract customers? Absolutely. It’s the best way to make “News About Food.” Keep customers? Yes again if the delivery of the new items is as promised in marketing. Once the news gets old, there should be more news to replace it. The tricky part is determining when the news has faded and something new is needed.
McDonald’s has a tremendous advantage because its marketing clout allows them to communicate news more often, to a very broad audience. In addition, every-day store traffic at McDonald’s is a huge audience that can see a new product message and decide to try it in an extra visit.
The other important issue is the potential for new traffic during hours that otherwise might be slow. With the McCafé rollout, there’s presumably increased traffic between breakfast and lunch, in the afternoon, and late night.
Has the expanded Dollar Menu been a major contributor to McDonald’s item growth? If so, is that good?
Definitely. The Dollar Menu concept has brought traffic to every brand that has introduced and advertised it. Probably the most interesting thing is that just about every time it is promoted the Dollar Menu produces a traffic bump for a chain. But if Wendy’s, Burger King and McDonald’s were all promoting dollar menu at the same time, it might not be as effective.
There are many reasons why it seems to perform better at McDonald’s: more stores and hours, more marketing, better execution, etc. But the News About Food momentum that McDonald’s has built lately could have helped develop more consumer attention to the Dollar Menu message.
Are there too many premium-price items on McDonald’s menu, or do you see pricing as balanced?
Again, I don’t think that the number of items at various pricing levels is an issue. With a News About Food strategy, the important consideration is target audience and occasion segmentation. By communicating news that motivates a segment of the audience—for example, adults who are willing to pay more for a better-tasting burger—the brand often induces those people to buy a couple of extra times. And if they like the product, they keep buying it.
But yes, there could be too many items on the menu in certain categories. For some of those categories, it might not matter because the extra items have little or no effect on operations, service or profitability. If a product is 1% of sales, it might be considered for elimination. But most of the people who are buying it now might like it enough to go somewhere else to get it. Or, if it were promoted again, would more visits and a higher sales ratio result? Until analysis is done, the number of items on the menu, categories, price levels, and so on, is irrelevant.
Should new items only be limited-time offers (LTOs), cycled onto and off the menu?
That is a distinct possibility. Look at the success of McRib, and plenty of other product LTOs that have been promoted throughout the industry. Since making news is the objective, LTOs make sense, but only if there’s the discipline to take a hot-selling item off of the menu at the designated time. Other than McRib, that doesn’t happen too often.
Most product introductions will be news for a short time, then become yesterday’s news, except in cases where the end date is communicated. The advantage of a well-received LTO is that it can become news once again next year. However, if it’s not an LTO, there’s a chance that the product can be a sales builder for a long time. The possibilities should be assessed in test markets in order to make a judgment for the rollout. Again, a product that is not introduced as an LTO can always be dropped at some point once it has been properly analyzed.
Five Guys and some of the other new and successful chains have more limited menus. Has that made McDonald’s menu look even more overstuffed?
Do consumers compare menus by number of items? I doubt that anyone avoids McDonald’s because of the size of the menu, or goes to Five Guys because they have a smaller menu. I may be a lone voice on this issue, but I think that the proliferation of fast casual, “better burger” places will have little effect on McDonald’s business in the near term, maybe even long term.
The large portion of McDonald’s business that goes through the drive-thru, speed of service, and the limited menu at the other places, makes the visits reasonably separate occasions. The people who want a beer with their burger and are willing to spend a couple of dollars more would not be McDonald’s customers for that occasion.
My theory is that fast-food burgers and fast-casual burgers are only partially competitive, but there’s a customer base and a large market for both.