National Post (National Edition)
`We have a very Darwinian menu'
McDONALD'S CEO EATS AT THE CHAIN TWICE A DAY, BUT RUNS 80 KM A WEEK TO BURN IT OFF
WHATEVER SELLS, WE PUT ON THE MENU. WHATEVER DOESN'T SELL,
WE TAKE OFF, (BUT) THERE NEEDS TO BE A CERTAIN LEVEL OF DEMAND.
WE DON'T DO WELL SELLING ONE OR TWO ITEMS AN HOUR.
— CHRIS KEMPCZINSKI, McDONALD'S CEO
Idrive past the gas-flaring petrochemical plants and divorce lawyers' billboards of New Jersey with a mounting feeling of despair. It's not just that the evening traffic is making me late — it is that I have been handed one of the least appetizing assignments in Lunch with the Financial Times history.
I am heading to a McDonald's beside Route 1 in Rahway — home of the East Jersey State Prison — to meet Chris Kempczinski, the chain's chief executive.
If you judged such things by the 65 million customers his 39,000 outlets feed in a day, you could call Kempczinski the world's most successful restaurateur. But few gastronomes rhapsodize about his prix fixe and we will have no wine list to savour.
Knowing that, I have tucked a bottle in my bag, hoping it might loosen up an on-message executive who learned his marketing discipline at Procter & Gamble, Harvard Business School and Boston Consulting Group.
Kempczinski is a brand guy above all, and he has picked a sparkling new branch in which to show off his company to its best advantage. Even with most of its tables marked off-limits for social distancing, it is more cheerful than any McDonald's I can remember.
The dining room, scrubbed for the corporate equivalent of a state visit, is closed to the public and yet bustling: Kempczinski has flown in from headquarters to one of his first site inspections since the pandemic grounded him in Chicago. “I was having a reverse Midas touch: every place I was scheduled to go would end up having a COVID-19 outbreak,” he laments. He has already cancelled four trips, and now doesn't expect to get overseas until 2021.
As he poses with franchisees for a masked photograph it occurs to me that I have never seen so many suits in a burger joint. But then Kempczinski's company is still getting to know him.
He got the top job only a year ago when the board fired his predecessor, Steve Easterbrook, over a relationship with an employee that was consensual but forbidden by its policies. Kempczinski, abruptly elevated from his role as the company's U.S. president, was only just calming investors and starting to tour its global operations when COVID-19 hit. Governments' conflicting responses to the crisis presented a company that thrives on standardization with countless unknowns. Its same-store sales plunged 22 per cent in March, then 39 per cent in April. No McDonald's boss has been dealt a tougher hand.
“We should push the boat out,” I suggest, as we scan the bright digital menu screens, but I wonder how to do so. There are a couple of novelties (spicy Chicken McNuggets) but the menu hasn't changed much since Ray Kroc died in 1984, 30 years after he went to sell Dick and Mac McDonald a milkshake mixer, taking the first step in the establishment of a global franchise. Comforting conformity powers fast food's most unstoppable business model.
I had planned on a Big Mac but I am swayed by a poster advertising the “New! Hotter & Juicier” Quarter Pounder. I order it with a side of nuggets, accept the suggestion of a large fries and Coke and resolve to return for the hot caramel sundae.
“Chris K,” as his staff call him, asks for a Filet-O-Fish, medium fries, a more modestly proportioned Diet Coke and a plain vanilla sundae to be delivered later. It seems a little meagre, but this is not his first McDonald's of the day.
“I eat it every day,” he tells me brightly. (Twice a day, in fact, from Monday to Friday.) It sounds like a curse to me, but Kempczinski got used to an on-brand diet as he rose through America's consumer packaged goods sector. At PepsiCo he drank his way through gallons of Aquafina water and Lipton tea. At Kraft, he says, “I wasn't big on Miracle Whip. But I ate a ton of mac and cheese.”
The 52-year-old remains trim by running at least 80 kilometres a week and ordering his fish sandwiches without tartar sauce and his Egg McMuffins with no bacon. A year into this bland-sounding regimen, he says stoically: “You get to know your way around the menu.”
His customers are starting to do so again too. Enforced closures slashed McDonald's profits to a 13-year low in the second quarter, but fast food is proving to be one of the pandemic's more resilient businesses — especially in the U.S. By the third quarter, group sales were down just 2 per cent, and in its home market they were up 4.6 per cent, helped by the fact that 95 per cent of U.S. branches have drivethru kiosks.
The combination of comfort food with minimal contact with the people providing it has been a winning one, but Kempczinski and I get our brown bags delivered to our table. As I take out my Quarter Pounder, I discover I have forgotten the ketchup. A smartly uniformed “crew member” standing watchfully nearby swoops in to produce four sachets from a pocket. This is not the McDonald's experience I am used to.
Hovering waiters are not part of Kempczinski's plans, but the pandemic has sharpened his focus on what he needs to do: push the “three Ds” of drive-thru, digital ordering and delivery, which have all become far bigger sources of growth this year than he could have imagined. His strategy, branded with the nonsensical slogan of “accelerating the arches,” will entail more investment in its mobile app, a new U.S. loyalty program, and new menu items such as chicken sandwiches.
I ask Kempczinski why one of the world's biggest buyers of beef has not embraced the trend for alternative proteins as Burger King has with its Impossible Whopper. “It's not a question of if; just a question of when,” he answers, holding up a ketchup-free fry. Soon after our meal, the company confirms that it has developed a meatless McPlant burger, which it will roll out “when customers are ready for it.” But Kempczinski seems to doubt that the hamburger's days are numbered.
“We have a very Darwinian menu. Whatever sells, we put on the menu. Whatever doesn't sell, we take off,” he says, but “there needs to be a certain level of demand. We don't do well selling one or two items an hour.”
Surely with a US$4 billion joint marketing budget, McDonald's and its franchisees can create demand, I suggest. He concedes the point but says plant-based foods are just not mainstream enough, for now at least.
And how about alcohol? Beer features on McDonald's menus from Germany to South Korea, but not the U.S. “It's much more complicated here,” he explains, talking me through the tangle of state regulations and his concerns about how lubricated diners might endanger staff.
But say I had brought wine with me, I venture, am I right in thinking that New Jersey's laws would let us drink it? He concurs that they would, so I push my bucket-sized Coke to one side and pull the bottle from my bag. “I'll join you,” he gamely agrees.
In the 2014 film Kingsman, Samuel L. Jackson tells Colin Firth that a McDonald's cheeseburger “goes great with this '45 Lafite.” The cheapest bottle of that vintage I could find is
US$2,999, so I grabbed a 2018 Josh Cellars Cabernet from home instead. I pour it into the two plastic cups I have brought, confirm that it helps the burger go down, and broach a more awkward subject.
Easterbrook recruited Kempczinski away from Kraft in 2015 and the two men became friends as they crafted a strategy that included all-day breakfasts, digital screens to help diners customize orders and deals with the likes of Uber Inc. to deliver to homes.
The first Kempczinski heard about his mentor's career-ending breach of fraternization policies was when he came home from a run to discover a missed call from McDonald's chairman and a text from its chief financial officer asking, in capital letters, where he was. The news that the board was sacking Easterbrook and making Kempczinski chief executive was “kind of a head spinner,” he admits, leaving him wondering about the impact on his friend, his own career and the organization he would have to get back on track.
Nine months later, it became more dizzying — and more of a headache — for Kempczinski when McDonald's sued Easterbrook, claiming that he had lied about three other liaisons and approved a grant of stock for one of the employees involved “in the midst of their sexual relationship.”
Its lawsuit, which Easterbrook is contesting, detailed the nude photos and videos investigators found on company servers as it laid out its case for recouping a severance package worth an estimated US$40 million. There have been few cases quite like it in U.S. corporate history.
“I mean, for me, I think what I was proud of was our board, in my experience, has always made the right but sometimes tough decision,” Kempczinski stammers, his speech pattern betraying his discomfort.
“I think it's safe to say that, you know, Steve was a supremely talented executive who behaved very badly,” he continues. “There was no flinching about it,” he says, but for a protégé who held Easterbrook in high regard, “it was disappointing, and it just hit.”
Kempczinski has achieved his success with more consistency than sizzle. With one wife, two kids and a golden doodle, the clean-cut Ohioan seems cast to preach an ethics message. In his first address as chief executive, he stressed his “very Catholic” upbringing, and told staff to “simply do the right thing.”
And yet, I point out, McDonald's is routinely accused of doing the wrong thing. It has faced a succession of lawsuits alleging that it has done too little to stop sexual harassment and racial discrimination in its restaurants. Has a company that dictates every detail of how franchisees must prepare its food been less rigorous in holding them to other standards?
Such cases attract disproportionate attention because they are so incongruous with people's regard for McDonald's, Kempczinski replies, picking through his fries with the care of a man who can pace himself through several Combo Meals a day. “I mean, if you just look at our crew here in the restaurant, we're a very diverse organization.”
He is determined not to “circle the wagons” against the company's critics, he states, but he also argues that persuading franchisees to embrace its values will be more effective than prescribing more rules. It may offer some protection against employees' attempts to unionize, too, he suggests: “The way we look at it is, so long as we're taking care of our people, then there would be no reason for (that) to change.”
That has not stopped McDonald's from becoming a prime target for U.S. labour organizers campaigning for a US$15 minimum hourly wage. The company is not lobbying against higher wages in the U.S., he insists, and operates successfully in other countries where hourly rates are as high as US$23. But he doubts that rivals would follow if it unilaterally raised wages.
Besides, he argues, “it's not McDonald's job to set societal policies around things like what's the right wage rate and stuff like that.”
I'm unsure how that squares with the mission he articulated a year ago: “to make this company an example for the world.” McDonald's market power gives Kempczinski a chance to change that world, from how much meat it consumes to how much it pays its service industry workers. But I am left wondering how far he will venture from McDonald's familiar and lucrative formula.
I am also full. I had meant to go back for the caramel sundae but I cannot imagine having the appetite for it now, and Kempczinski, whose own ice cream never arrived, has a jet waiting.