Key development: Stayed on course with a successful turnaround plan.
What's next: Drive long-term profitability.
Jim Skinner is staying the course -- the same course he helped map out.
As chief executive officer of the world's largest restaurant chain, Skinner knows the food and food-service industries are watching his company closely.
McDonald's "Plan to Win," crafted in 2003 by Jim Cantalupo, Charlie Bell and other members of McDonald's top management, including Skinner, who was vice chairman at the time, is a massive blueprint that puts a sharpened focus on McDonald's stores and customers. The revitalization plan has many pieces that will take time to execute properly. That job falls to Skinner in the aftermath of Cantalupo's and Bell's untimely deaths. Skinner took over as CEO when Bell, in ill health, stepped down in November.
Even as personal tragedy hovered over the company with the loss of two CEOs within two years, the business continued to grow healthier under the Plan to Win program, which de-emphasized expansion and focused on improving existing stores and systems. Skinner said the plan is working as it was intended to work. Customer counts and sales throughout the company's system are both up.
"Our customers have directly rewarded us for being better," Skinner told SN. "In 2004, the business in the United States had the best results in 30 years. [Overall, worldwide] we had the best results in 17 years. We had two more million customers each day in 2004 over what we had in 2002 and record revenues of $19 billion."
Some financial analysts credit the new salads for sales increases -- comparable domestic sales were up 4.2% in May over the same year-ago period. McDonald's insists the increases were achieved by a combination of efforts, including better customer service, more attention to lifestyles and the addition of new menu items.
The past year's initiatives included store redesigns, extended hours of operation, the addition of healthful and premium menu items, improved breakfast offerings, more attention to employee training, the use of mystery shoppers and surveys to monitor customer service, the implementation of cashless payment systems and double-lane drive-throughs.
Not surprisingly, Skinner said his top priority for the coming year is to drive profitable long-term growth and increased shareholder value by following the financial discipline in the Plan to Win. Spotlighting active lifestyles also is a priority, Skinner said.
"This is an area in which we can have great impact," he said. "We made progress last year through greater menu choice, providing education and information on food, and encouraging activity through various programs and partnerships."
In March, the company unveiled an education campaign to help consumers understand the keys to living balanced, active lives. The campaign ties in with the company's "I'm lovin' it" advertising theme with its own theme: "It's what I eat and what I do. I'm lovin' it."
Toasted deli sandwiches are being tested in 400 McDonald's stores in the United States and more premium items a la Chicken Select are on the drawing board.
The diversity of menu choices could pose a huge challenge, one observer said.
"How do you keep adding to the complexity without getting away a little from the core items, the hamburgers and french fries, and without compromising good, quick service?" one source said. "Doing so many things at a time, it will be difficult."
Keeping on top of things when you're leading a company with more than 30,000 stores in 118 countries is no easy feat. One observer gave Skinner and his team high marks.
"They've effectively straightened out operational problems, and they've updated their offerings to meet consumers' needs without losing the mass market," said Tom Miner, principal, Technomic, a Chicago-based consulting firm to the food-service industry. "For example, they've introduced different chicken sandwiches, premium items and fruit salads, but they have not walked away from the hamburger meals that initially brought them success."