Canada’s fast food industry is internationally recognized for its distinctiveness and unique characteristics. The nation has a longstanding tradition of indulgence without concern for the consequences, with around 23.1% of Canadians classified as overweight in 2004 according to Stats Canada. Obesity rates experienced a significant increase between 1978 and 1980. While the fast food industry originated in the 1950s, it was not until the 1980s that it truly thrived.
In the 1980s, intercom communication became popular for Drive-thru windows as obesity rates were on the rise. The fast food industry has grown considerably in recent years because more Canadians claim to lack time for cooking. The average time spent on meal preparation in Canada decreased from 44 minutes in 1996 to just 21 minutes in 2004. As our country becomes increasingly fast-paced, the demand for the fast food industry keeps increasing. With changing times, Canadians are looking for healthier choices that align with their fast-paced lifestyle.
According to the Ministry of Agriculture, Food & Rural Affairs, McDonalds, Tim Hortons, and Subway were Canada’s most popular restaurants in 2008. Subway’s popularity has been consistently growing because of its convenient and healthier food choices. In that same year, Canada had a total of 20,248.4 full-service restaurants and 10,525 limited-service restaurants. Including institutional food services, retail food services, and other food services as well, Canada had a total of 58,904.02 commercial food service establishments.
In 2001, the average weekly expenditure on food in Canada was $124, which included both store-bought and restaurant meals. Of this amount, 60% was allocated for table-service restaurants and 25% for fast-food establishments, including take-out options. The prevalence of dining out increased across all income groups, with single men spending the most on restaurant food compared to families or lone-parent families. Fast-food purchases accounted for 5.57% of total restaurant food purchases in Canada. The Atlantic Region had the highest proportion at 12.5%, while the Prairie Region had the lowest at 10.59%. Canadians primarily chose to have breakfasts when eating out, representing 16.46% in the Atlantic Region and 8.54% in the Prairie Region.
Canadian households spent an equivalent amount on food in 2001 as they did in 1996, with thirty cents per household’s expenses designated for restaurant meals (a rise from twenty-eight cents five years earlier). On average, Canadian households dedicated $38 per week to dining out compared to $86 spent on groceries from stores.
Weekly food expenses varied based on income levels, ranging from $66 for households earning less than $20,000 to $203 for those making $80,000 or more annually.
Furthermore, individuals with higher incomes typically visited restaurants twice a week on average whereas those in lower-income brackets did so only once a week.
Canada’s average weekly food spending varies across provinces, ranging from $109 in the Atlantic Provinces to $132 in British Columbia. The main focus of this text is McDonald’s, a well-known food service franchise that operates in Canada. According to data from www.NationMaster.com, McDonald’s ranks third globally for food statistics based on the sale of 0.352 units of food per capita per $GDP for every 10,000 population. In terms of per capita food statistics, Canada is surpassed only by the United States (ranked first) and New Zealand (ranked second).
Furthermore, Social bakers, a website that promotes Corporate Facebook Statistics, states that McDonald’s is currently placed at number 7 among all Canadian Brands in terms of fan growth. The growth speed is reported to be 42 per day, 287 per week, and 2,351 per month. This information is crucial as social capitalism is emerging as a new global currency (www.Socialbakers.com). Additionally, McDonald’s holds the second position in sales within Canada, with Tim Hortons claiming the top spot. In our analysis, we will explore new strategies to enhance our company’s value and gain a larger market share within our industry.
The story of McDonalds is one of opportunity and innovation. Ray Kroc, a 52-year-old man, used his life savings to invest in Multimixer, a company that distributed milkshake mixers. While visiting Dic & Mac McDonald’s hamburger stand in California, Kroc saw its potential and offered financial support to open additional franchises. Nowadays, starting a McDonalds franchise entails an initial fee of $45,000 along with equipment and pre-opening expenses ranging from $1,000,000 to $1,200,000.
According to the official website of McDonald’s, opening a new franchise requires providing 40% of the total cash cost as there are no financing options available. The Franchise Term lasts for at least 20 years and service fees are determined based on monthly gross sales. Additionally, rent is calculated monthly, taking into account a percentage of sales.
In Canada, there are currently 1,400 operational McDonald’s establishments that employ over 77,000 individuals. George A. founded the first Canadian McDonald’s.
According to the www.ask.com Encyclopedia, John Betts is the President of McDonald’s Canada and Dave J. Allen serves as the Chief Operating Officer. The first McDonald’s in Canada was established in Richmond, British Columbia in 1967, marking the brand’s expansion beyond the United States. Currently, McDonald’s Canada has its headquarters located in Don Mills, Ontario. The Eastern Canada franchise began operating in 1968 from London, Ontario and later expanded to New Brunswick in 1970 and Montreal in 1972 (with notable growth in Quebec). It reached a milestone of having 250 locations by opening one in St. John’s in 1977.
In 1981, McDonald’s achieved a significant milestone in Canada by becoming the largest foodservice organization in the country. In 1985, the first compact version of McDonald’s, known as McSnack, was established at Toronto’s Dundas West subway station. Since then, this concept has expanded throughout Canada to cater to smaller public spaces such as malls, subways, sky trains, and other transit areas. Furthermore, in 1994 McDonald’s reached an agreement to open franchises inside Wal-Mart stores, resulting in over 200 McDonald’s restaurants now serving Wal-Mart customers. Interestingly enough, that same year saw the implementation of a policy across all McDonald’s locations in creating smoke-free environments.
McDonald’s Canada was the first restaurant to offer free WIFI high-speed wireless access in 2003 (source: www.McDonaldsCanada). By 2011, McDonald’s had been present in Canada for 44 years. In terms of finances, last year McDonald’s revenue reached 24.07 billion with a share revenue of 22.29 and a gross profit of 8.79 billion (source: www.Yahoo.Finance). Notably, institutions hold the majority of shares (71.90%), indicating long-term security as an investment for the company. Around 70% of McDonald’s locations in Canada are owned and operated by Canadian entrepreneurs.
McDonalds Canada states that it supports the Canadian economy by purchasing $730 million worth of food and paper goods from Canadian Suppliers. It also collaborates with over 100 Canadian suppliers.
In terms of social responsibility, McDonalds has implemented various initiatives. In 1977, it organized its inaugural McHappy Day, which raised over $460,000 for local children’s charities. Moreover, in 1981, the first Ronald McDonald House was established in Toronto to offer accommodation for children and families who need to travel for cancer treatment. Additionally, in 2004, McDonalds introduced the 10 Cent Happy Meal Program which donates 10 cents from each Happy Meal sold to Ronald McDonald House Charities.
Since 1982, the Ronald McDonald’s House Charities has raised over $42 million to support children and families dealing with life-threatening illness and disabilities. According to McDonalds Canada, there are currently twelve operational Ronald McDonald Houses across Canada.
McDonalds is famous for its marketing strategies. It was the first restaurant to target children by offering toys with their meals called a ‘Happy Meal.’ They have also created distinctive and unforgettable marketing campaigns such as “You Deserve a Break Today” (1971), “We Do It All For You” (1975), “Two all beef patties special sauce lettuce cheese, pickles, onions, on a sesame seed bun” (1975), “Have You Had Your Break Today” (1991), “We Love To See You Smile” (2000), and “I’m Lovin’ it” (2003).
In addition to these campaigns, McDonalds is well-known for its contests including the Customer Service Survey Sweepstakes, Fanatic Contests, and an annual Monopoly prize contest. According to McDonalds Canada, McDonalds has become the benchmark for marketing among all fast food restaurants in Canada and worldwide. Their logo is considered the most recognizable in the world.
The aging workforce in Canada is a concern due to the increasing population and longer working lives. Although population growth is steady, it alone cannot support a high turnover rate of employees. Hence, it is vital to address this issue by considering strategies to reduce turnover. It is crucial to assess the cost-effectiveness of these measures and compare their benefits with expenses. Additionally, McDonald’s has potential in the Canadian market for cold cuts, as they are popular at Subway and have a significant consumer base.
We will examine the advantages and disadvantages of McDonald’s implementation of this strategy, while also highlighting the significance of social responsibility in a business’s existence. McDonald’s prioritizes its corporate responsibility and integrates it into its corporate structure. By upholding proper corporate governance and demonstrating commitment to corporate responsibility, McDonald’s ensures business growth and profitability. Moreover, maintaining employee morale and establishing trust with customers, suppliers, and shareholders are essential for achieving both immediate and long-term goals.
Approximately 9% of McDonald’s wage expenses are dedicated to training new employees, a figure that could potentially be higher. The cost of wages remains the most substantial expenditure in business operations. However, by offering incentives for our esteemed staff members to remain with us for extended periods, we have the opportunity to enhance our overall financial performance. As employee morale and productivity rise, customer satisfaction also increases. A study carried out by McDonald’s in 1999 revealed that when employees expedited the processing line and reduced customer wait times, it resulted in a $200,000 boost in annual sales for the store.
Through the implementation of incentives for top performers, the processing line was improved. It is crucial to adopt this strategy and also implement a benefits package. This will lead to decreased costs and increased annual sales, as well as improved employee morale and performance at the restaurant. To execute this plan, surveys will be conducted among those affected by the change, inquiring about their preferred incentives for motivation. The projected timeline for completion of this project is six months to one year.
Implementing this strategy may not have immediate results, but it has the potential to significantly impact our business costs. Our decisions should prioritize our employees’ well-being as they will greatly influence our operations. Luckily, we have the resources needed to achieve this objective and can allocate funds now to minimize future expenses. However, it is important to note that the money spent today may not directly generate positive outcomes. Additionally, implementing this strategy would require minimal human resources, mainly involving extra hours for our current management employees. Lastly, let’s consider the financial aspect of this initiative.
To successfully implement this, a comprehensive benefits package must be offered to all 77,000 employees in Canada. The cost of the package will be split evenly between the employer and employee. Families will pay $58 per month and individuals will pay $29 per month through Canada’s Blue Cross. It is important to note that Tim Hortons’ current utilization rate is 87%. This percentage can also be projected for McDonald’s Canadian employees, meaning that 87% of them will use the employee package. Furthermore, McDonald’s will cover half of the cost.
Assuming that only 50% of the employees have families, we can calculate that 33,495 employees will be charged $58 while the remaining 33,495 employees will be charged $29. This results in an estimated annual cost of $17,484,390 which is considered low given the company’s value. By reducing the current employee turnover rate by half (which is currently at 9%), it is reasonable to expect lower training costs and increased productivity in each store.
To capitalize on an untapped opportunity for McDonald’s, a proposal has been made to introduce a new product line called Cold Cuts. This approach mirrors Subway’s successful sale of cold cuts which are highly popular among Canadian consumers who consume them daily. However, there are pros and cons associated with adopting this strategy for McDonald’s.
Advantages
- More Variety for customers
- More profit from sales
- Competition with others
- More customers
- Addresses problem of obesity Disadvantages
- Higher inventory
- More cost in making this cold cuts
- Might not taste as good as the competitors
The assessment of options reveals that an essential aspect of a fast-food chain’s branding is its menu, which is also subject to constant modifications throughout the year, encompassing the introduction of new items, seasonal offerings, and promotional deals. Successfully executing these changes necessitates agility, as winners are distinguished by their centralized responses, dependable implementation, and speed. It is worth noting that Canadians commonly opt for cold cuts for breakfast from fast food establishments like Subway and Quiznos, which McDonald’s fails to provide. In my opinion, McDonald’s should capitalize on this trend and incorporate cold cuts into its menu.
Adding cold cuts to McDonald’s breakfast menu can attract customers who desire these options on a daily basis, providing more variety. McDonald’s has historically ignored the breakfast menu, but incorporating these cold cuts could expand its customer base in Canada. This addition not only attracts more customers but also enhances sales and profits.
Implementation
We conduct market research to determine the cost of these cold cuts, identify customer preferences, and find ways to meet their needs. McDonald’s should prioritize reducing costs during times of economic downturn in order to be more competitive. Lower prices are appealing to customers, so I believe McDonald’s should analyze their entire value chain and identify areas where costs can be reduced. Additionally, McDonald’s must address the challenges of higher production costs for these cold cuts, introducing them to the market, as well as addressing concerns about calories and obesity.
The cold cuts have gained popularity in Canada and are regarded as a healthy food choice. However, studies indicate that these cold cuts are high in calories. If McDonald’s can enter the market of cold cuts and successfully reduce the calorie content while making them healthier, they will have an advantage in attracting a large customer base and boosting sales. Therefore, addressing the calorie-related issues is crucial.
I recommend a nine-month time frame for the introduction of this product. This allows for thorough research on costs and logistics. Attached are the nutritional information for Subway and Quiznos as well as operational issues that McDonald’s may face in implementing this new idea of cold cuts and attracting new customers.
We need to ensure that our ideas and decisions will be valuable to both the company and our customers. Here are a few ways we can address our operational issues. We should summarize the potential obstacles in implementing this new idea, analyze the issue, and develop a procedure to address the issue based on facts and data from customer interviews and product observations. The procedure should be based on facts and visual evidence. We need to remove any obstacles that hinder the implementation of the newly established procedure.
The research teams need to communicate their findings and surveys to McDonalds, along with their proposed implementation procedure. Any issues involving suppliers or external establishments should be addressed through official channels with the full backing of McDonalds. The newly established operating procedure will be put into effect and the research members will oversee its implementation.
After a period of six to nine months, the team will assess the established procedure and make any necessary changes to ensure the successful implementation of the standardized procedure for resolving operational issues. If McDonald’s were to introduce this new concept of cold cuts to their menu, it would enhance the company’s reputation. This addition would be perceived as a healthier option compared to home-cooked meals, and it would reduce the calorie content of McDonald’s products in comparison to those of its competitors. The level of human resources required for this implementation to be effective would be significant.
McDonalds’ future growth plan includes renovations for each individual restaurant and an increase in net working capital. Paying attention to the financial aspect, there are approximately 1,400 McDonald’s restaurants in Canada. Each store would require approximately 900 square feet of space for the project. Along with this, an increase in net working capital and a vigorous marketing campaign would be necessary. In Canada, the average construction cost for 900 square feet of restaurant space ranges from $45,000 to $70,000, depending on the location.
McDonald’s hosts an annual fundraiser called McHappy day, where funds are raised from sales proceeds on that day. The purpose of this event is to support children causes, with 75% of the raised funds going toward local communities and 25% toward global charities and causes. Since 2004, McDonalds has managed to raise over $20 million by donating 10 cents from each happy meal sold in Canada. The main objective of the Ronald McDonald House Charities (RMHC) is to provide support for families with children who suffer from disabilities and critical illnesses.
Ronald McDonald’s House provides families of children with a comfortable alternative home accommodation near their Children’s hospital for a nominal fee. It offers amenities such as a kitchen, quiet room, and shared bedrooms with other families of ill children. Another successful program is the Ronald McDonald Family Rooms Program, which offers a living room, lounge, and playroom within the hospital to provide a relaxing and rejuvenating space away from the hospital atmosphere.
The Ronald McDonald’s Room Program is a collaboration between Hospitals and RMHC, which includes partnerships and sponsorships with local leagues. McDonald’s has been a major sponsor for sporting events like the FIFA World Cup and Olympic games. The restaurant chain is also a long-time supporter of programs that involve kids in sports, helping them develop the necessary skills and abilities to work in teams and achieve common or individual goals in life.
McDonald’s has been an official sponsor of FIFA World Cup games since 1994. The FIFA World Cup McDonald’s Player Escort Program, which started in 2002, allows children aged 6-10 from various countries around the world to escort renowned soccer players onto the field before millions of spectators at the start of each FIFA World Cup game. In 1976, McDonald’s also became an official sponsor of the Montreal Olympics Games.
In 2008, McDonald’s identified an opportunity to support sports and introduced the McDonald’s Champion Kids program. This program allows children from various countries to engage with athletes, witness the Olympic Games, and explore local tourist spots, thereby gaining a deeper understanding of the host country’s culture.
In addition, McDonald’s Corporation recognizes the importance of involving owner operators and business-operated franchise locations in communicating their social responsibility. The company believes that local community participation is crucial for fostering a positive corporate image and a stronger brand.
Many Franchise locations participate in sponsoring local leagues and the corporate office encourages participating in local community sports, such as football activities, including club sponsorships and youth sports tournaments. Some Franchises also share the social responsibility by providing student grants and scholarships for colleges and universities in the local communities.
Regarding nutrition and well-being, the documentary film “Supersize Me” released in 2004 serves as an independent exploration of the effects of consuming fast food. The film, conducted as a non-scientific experiment, aims to demonstrate how the Fast Food industry is contributing to the obesity level in the United States of America due to their lack of healthy and nutritious meal options. The star and director of the documentary, Morgan Spurlock, chose McDonald’s Franchise for the experiment. He committed to eating 3 McDonald’s meals a day for 30 days, trying as many menu items as possible during this period.
Before starting the Experiment, Morgan Spurlock had to visit three doctors – a gastroenterologist, a general practitioner, and a cardiologist – to ensure his health and monitor it throughout the experiment. After three weeks, the experiment showed that Morgan gained weight and his health worsened, highlighting the unhealthy nature of fast food consumption. Additionally, it revealed that fast food chains do not provide sufficient information about their nutritional facts. This led to negative publicity for McDonald’s, prompting a response from the company.
After the documentary film was aired, McDonalds faced numerous lawsuits and a negative image highlighting the unhealthiness of their products, resulting in bad publicity. In order to address this negative publicity, McDonald’s took steps to develop healthier options within their product line. They first removed the supersized menu, and then introduced nutritional information in a consumer-friendly format at their restaurants. The goal was to implement a healthier menu for customers.
With the increasing demand for healthier options, McDonald’s has conducted extensive research to develop new, healthier menu items for its consumers. One of the proposed solutions by McDonald’s to counteract the decline in their customer base is the introduction of a Cold Cuts menu, which provides better nutritional value for consumers. In conclusion, McDonald’s is a well-managed and socially responsible corporation.
Although McDonald’s has been widely criticized for its high employee turnover and the negative perception of its high fat and high cholesterol foods, it has managed to maintain a positive image with minimal negative publicity, apart from the documentary film Supersize Me. In order to address these issues, we have investigated several alternatives and concluded that improving employee turnover would be a necessary and immediate expense. However, it is important to note that this change would not yield immediate results and would likely take at least six months to see any noticeable improvements. Nonetheless, implementing this change would not only enhance McDonald’s image but also lead to reduced future training costs and increased productivity.
The Employee benefits package should be introduced and accessible to all employees who have been with the company for over 6 months. The cost will be shared equally between employees, and it will be up to them to decide whether to utilize it. During our evaluation of the corporate image and social responsibility, we found that the only negative perception of McDonald’s is regarding its food menu. To tackle this issue, we explored the idea of introducing a new and innovative cold cuts line in our restaurants.
Despite initial high costs, the investment in a cold cuts line for McDonald’s can yield a positive net present value (NPV) within five years. Due to the high risk associated with the restaurant industry, the rate of return is calculated at 18%. Introducing a cold cuts line would significantly enhance McDonald’s appeal to large groups, increasing the likelihood of them choosing McDonald’s over other fast food options. While there may be some negative impact on existing food menu items, the overall effect on total cash flows would be positive. Therefore, aggressive implementation and marketing of this initiative throughout Canada is highly recommended.
