Tag: Burger King

OM in the News: The Changing Layout Landscape at McDonald’s

We open Chapter 9 (Layout Strategies) in our text with a Global Company Profile featuring McDonald’s and its continuous changes to achieve competitive advantage through innovative layout. Its most recent model a few years ago was an unprecedented redesign of the layout of all 30,000 stores to create a contemporary dining area (at an average renovation cost of $300,000-$400,000 per outlet).

McDonald’s last major layout change gave a fresh dining room appearance.

But Americans are eating their burgers, fries and nuggets at home, in their cars and at the office—increasingly anywhere but at the fast-food restaurants themselves. At McDonald’s and Burger King, booths are often empty. Customers pick up their orders and head out. People sitting at tables sometimes are workers on their breaks. Dine-in customers now represent less than 10% of visits in most U.S. McDonald’s restaurants, compared with around a quarter of domestic sales before the Covid pandemic, reports The Wall Street Journal (Aug. 8, 2023).

The pandemic accelerated a shift toward to-go that was already under way. Owners serving the bulk of their orders to-go found that they were more profitable and efficient to run, needing less maintenance work and staff. (It is often cheaper and less labor-intensive to pack food into bags to be eaten elsewhere than keep a dining room clean).

Some franchisees say the fast-food business is permanently shifting toward drive-through, delivery and to-go orders. They started speeding up investments in drive-throughs and online ordering. McDonald’s and other chains are developing new restaurants centered around drive-throughs and carryout, with very little or no dine-in option. “You don’t necessarily need the big dining rooms that you needed in our traditional restaurants,” said McDonald’s CEO last month.

A number of U.S. McDonald’s operators in 2018 formed an independent group to help advocate for franchisees’ interests. The group has pushed back at the burger chain on some of the remodeling requirements.  U.S. franchisees are expected to freshen up their dining rooms, front counters and bathrooms with approved designs every 10 years.

Classroom discussion questions:

  1. Why are most fast-food restaurants reluctant to give up on the dining room?
  2. What will be the design of the next generation McDonald’s?

OM in the News: Burger King–A Tale of Two Countries

Anthony Moore, at Tampa Burger King, calls his wage "very inadequate"
Anthony Moore, at Tampa Burger King, calls his wage “very inadequate”

Hampus Elofsson, ending his 40-hour workweek at Burger King, had paid his rent and all his bills, stashed away some savings, yet still had money for nights out. That is because he earns $20/hour — the base wage for fast-food workers throughout Denmark and 2.5 times what many fast-food workers earn in the U.S. “You can make a decent living here working in fast food,” he says. “You don’t have to struggle.”

In Denmark, fast-food workers are guaranteed benefits their American counterparts could only dream of, writes The New York Times (Oct.28, 2014). There are 5 weeks’ paid vacation, paid maternity and paternity leave and a pension plan. Workers must be paid overtime for working after 6 p.m. and on Sundays, and they often get their work schedules a month in advance.

In contrast, fast-food wages in the U.S. are so low that half of the nation’s fast-food workers rely on some form of public assistance: they earn an average of $8.90 an hour. As a shift manager at a Burger King near Tampa, Anthony Moore earns $9 an hour, typically working 35 hours a week and taking home around $300 weekly. Not surprisingly, turnover rates differ significantly: Danish estimates are that 70% of  Burger King and Starbucks workers stay for more than a year. By contrast, McDonald’s found its workers’ average tenure in the U.S. was 8 months.

So if Danish chains can pay $20 an hour, why can’t those in the U.S. pay the $15 an hour that many activists and fast-food workers have been clamoring for? Economists say the comparison is “apples to autos” because of fundamental differences between Denmark and the U.S., including Denmark’s high living costs and taxes and a generous social safety net. The Danish fast-food restaurants are also less profitable than their American counterparts. The higher wages and the higher menu prices help explain why there are 16 McDonald’s per million inhabitants in Denmark, but 45 McDonald’s per million in the U.S.

Classroom discussion questions:

1. Why does the U.S. restaurant industry predict “a wave of woe if pay were to jump toward Denmark’s levels?”

2. What are the advantages and disadvantages of each system?