McDonald’s Turkey on the rebound

MMcDonald’s Turkey is finally emerging from its years-long downward spiral after posting a 15 percent increase in customers in 2017. The turnaround, which ranked number one out of the global fast-food chain’s 119 markets, was achieved by transferring cost savings to its prices. Entering Turkey 32 years ago under Anadolu Group, McDonald’s posted TRY 840 million in revenue last year and this year plans o break the TRY 1 billion barrier.

Oguz Ucanlar, general manager for Anadolu Restoran Isletme- leri, which represents the chain in Turkey and owns most of the restaurants, said it had been losing customers since 2009 when he took on the position in 2016. “We found that 92 percent of customers thought the Big Mac price was too high,“he said in a statement. „We had to reset the price-quality balance and lower prices. Of course it was not possible to lower prices overnight. We sat down with our vendors to discuss taking down the costs.”

Most of the savings came from McDonald‘s supply chain and rental costs, Ucanlar added. For 32 years, the company had been purchasing meat patties and chicken from Pinar and Banvit respectively. After signing second-tier supplier contracts with Namet and Haciinci for red meat and Abalioglu of chicken, the cost of meat was lowered without sacrificing quality. The company then negotiated with the owners of restaurants for rents and reduced costs by half.

Smarter expansion plans also played a role. Ucanlar pointed out that in the past, restaurants were opened because it was felt the chain needed a presence on a certain high profile street or shopping mall. “Now we are looking at how long the restaurant can generate returns on investment,” he said. “We have reduced the return on investment period from 7-8 years to 4-5 years. We close unprofitable restaurants no matter where they are and open new ones in profitable places.”

The drop in prices have been significant. Big Macs in Turkey are now the second cheapest in the world, after Mexico. Affordable prices, combined with the recovery in tourism, played a key role in boosting McDonald‘s Turkey‘s 2017 bottom line and pushed it 5th place in terms of its increase in turnover. It will will receive awards for this achievement in the US in April.