McDonald’s is a fast food restaurant..It was formed in 1955 when an old milk shake seller saw a ham burger stand and started thinking to make a new fast food industry. It was first opened in Illinois. When it started work its first day sale was $316.12. Founder of McDonald’s is Ray Kroc and the other key person is James A Skinner chairman and CEO. Its head office is in Oak Brook United States. McDonald’s Corporation is the world’s largest chain of fast food restaurants, working worldwide in 117 countries with 400000 employees. Overall customers are round about 60Million with 32000 restaurants worldwide. Every McDonald’s restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporations’ revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. Its net operating income for the year ended 2009 is $6.8 Billion. The type of the company is public. Its website is www.mcdonalds.com.
1948: Dick and Mac McDonald’s opened the 1st drive thru restaurant in San Bernardino, California.
1954: Ray Kroc becomes the first agent of franchise for the McDonald’s brothers.
1955: Ray Kroc opens 1st McDonald’s in Illinois.
1957: McDonald’s started knowing for the motto “QSC”.
1959: McDonald’s started billboard advertising.
1961: Ray Kroc acquires McDonald brothers for $2.7Million.
1963: Ronald McDonald made his debut in a way to attract more children and families.
1965: Television network advertising begins.
1969: The new design for the restaurant’s roof introduced to replace the “red and white” design.
1984: Training started providing for every level of McDonald’s management worldwide for quality assurance.
1995: The new advertising theme “have you had your break today?” debuts.
2004: ISO 14000.
2005: 50th Anniversary.
2008: introduces the most comprehensive global packaging design in the brand’s industry.
KFC is the world’s most popular chicken restaurant which was originally founded in 1930 in North Corbin, Kentucky by Harland Sanders and the other key people are Roger Eaton (president), Harvey R. Brown lea (COO).KFC was named Kentucky Fried Chicken first then due to some issues they just shorten it to KFC only. KFC is world famous for its Original Recipe fried chicken made with the same secret blend of “11 herbs and spices”. Its head quarter is in Louisville, Kentucky, United States. KFC is wholly owned subsidiary company of Yum! Brands. KFC issued its first Franchise in 1952 in South Salt Lake, Utah. The world’s largest restaurant company in terms of system restaurants, with more than 36000 locations worldwide and 240000 employees. The company is ranked 239 on the Fortune 500 List. The number of its customers is 12Million and the profit as on year ended 2008 is 111 Billion. Its website is www.kfc.com.
1930-1940: Harland D. Sanders develops and perfects his famous chicken recipe of “11 spices and Herbs”.
1952: begins franchising by travelling from town to town, cooking up batches of chicken for restaurant owners.
1957: KFC first sold in buckets.
1960: 400 franchise units in the US and Canada.
1965: Sanders receives the Horatio award from the American School and colleges association.
1966: KFC goes public.
1969: KFC Corporation listed on the NYSE.
1980: Harland Sander, who came to symbolize a quality in the food industry, dies after being stricken with leukaemia.
1984: A long running court battle between the KFC Corporation and the Marion Kay Spice Company finally comes to an end.
1986: The Pepsi Company acquires KFC for the sum of $840 Million.
2002: Tricon Global Restaurants Inc. Changes its name to “Yum! Brands” and is still the owner of KFC to this day.
2007: In the US only the company starts using its original title, “Kentucky Fried Chicken” once again.
Main Arguments of Report:
Report is about the two Giant fast food Restaurants in the world named McDonald’s and KFC. This report is comprised of the quality procedures, innovation, changes and competitiveness of both the companies like how they innovate products, what is the quality philosophy of both the companies and how the are competing each others, what are their system and approaches of both the companies etc.
Secondly arguments will be made on 1 company which is KFC that how it is competing McDonald’s and what is the quality structure, system and approaches etc. arguments will be made for the betterment of KFC because McDonald’s is now capturing whole the market worldwide, although KFC is not less then it but some how they are back to McDonald’s.
Comparison and Contrast
11 spices and herbs
“How We Work Together” principle
“Q.S.C. & V.”.
discount functions & financing options are available
Layout of restaurants
Not as much attractive
Attractive & comfortable
Consistent product taste and quality across geographies
Some time lost its taste consistency across the world
More reliable brand
Less than KFC
Outstanding quality due to its recipe
Considerable quality as there is no specific recipe
Local and qualified
Top to bottom
Top to bottom
Co. Branding with Pepsi
Quality management in almost all the manufacturing companies revolves around understanding the expectations of the customers, defining product specifications depend on these expectations and in the end making sure that the product which is manufactured relates to the design specifications. The management at KFC uses two quality measuring programs which are as follow:
QSC (Quality service and cleanliness) for estimating the quality of outcomes of service from the point of view of customer.
OFR (Operations facility review) for the measurement of restaurants process implementation of performance against KFC’s process specifications.
KFC uses the customer and market oriented surveys to manage the quality of service on regular basis.
In McDonald’s “Q.S.C. & V.” Provide good quality, services to customer. Uses a cleanliness environment when customer enjoys their meal. The value of food product makes every customer is smiling.
KFC uses a price recovery strategy so that its prices are less than McDonald’s. So far
McDonald’s came up with very high prices. But in some countries in Middle East price offers are also announced to attract the customers. McDonald’s has certain value pricing and bundling strategies such as happy meal, combo meal family meal etc to increase overall sales volumes.
McDonald’s doesn’t offer just burgers their well diversified menu is also one of the key success factors while KFC is specialized in chicken only.
Layout of restaurants:
Many McDonald’s restaurants have included a playground for children and advertising geared toward children and some have been redesigned in a more “natural” style with a particular emphasis on comfort introducing lounge areas and fireplaces and eliminating hard plastic chairs and tables This has given a new outlook to the McDonald’s as a quick service restaurant that is still not be seen on other fast food restaurants like KFC.
McDonalds and Coca Cola are official global partners and KFC has the co branding with Pepsi Co.
The requirements of customers change over time and thus the product offering has to be changed accordingly. Thus continuous innovation is required. To counter these changes McDonalds has continuously introduced new products. The introduction is timed such that the new product does not cannibalize the product already in the maturity or growth stage.
A perfect example of renewing a product in decline phase French Fries have been an important part of the McDonalds menu worldwide. But now it was in the stage of decline and was actually not generating proper return. In an attempt to revitalize it, a new variant was introduced namely Shake Shake Fries. This is being served with spicy spice mix which has resulted in increase in the sales of French Fries and has elevated it from to the decline stage. This is used to delay the decline of a well established product which has the potential of generating further revenue.
KFC innovation testing New Grilled Chicken For over 65 years, KFC has served up Colonel Sanders’ famous Original Recipe fried chicken. Now KFC is market testing a revolutionary finger lickin’ new menu addition Kentucky Grilled Chicken.
“This great tasting product will help KFC continue to evolve and increase their relevance among consumers looking for non fried menu options. It’s the latest and most exciting of many recent menu innovations at KFC. The new product is designed to appeal to KFC lovers who say they want non fried options while staying true to the great taste and quality of KFC’s traditional menu. KFC’s Grilled Chicken has between 60 to 180 calories and 3 to 9 grams of fat. Original Recipe chicken has between 130 to 360 calories and 8 to 24 grams of fat. Kentucky Grilled Chicken prices will be on par with KFC’s fried menu items.
KFC takes great pride and care to provide the best food and dining experience in the quick service restaurant business. They believe eating sensibly, combined with appropriate exercise, is the best solution for a healthy life style.
Philosophy of McDonalds:
McDonalds consider People its philosophy. They provide the best employment experience for our employees to achieve their goals of providing our valued customers with the world’s best quick-service restaurant experience. They strive to recruit the best, hire the best, and provide the best place to work.
McDonald’s is the well aware of value of both its employees and customers. It knows the reality that a happy employee can work well with conclude as a happy customer. McDonald’s is continuously doing Internal Marketing. This is very essential as it must precede external marketing. This includes hiring, training and motivating employees. The level of importance has changed to be in the following order as top to bottom employees
2. Front line employees
3. Middle level managers
4. Front line managers
The Motto line “I’m loving it” is an attempt to show that the employees are loving their work at McDonalds and will love to serve the customers and customers are also loving it.
Philosophy of KFC:
Philosophy of KFC stands for “CHAMPS”, belief that the most important thing that they can do is to focus on the customer. It stands for our commitment to provide the best food and best experience for the best value. CHAMPS stand for the six universal areas of the customer expectation common to all cultures and all restaurant concepts which are:
M aintanance of Facilities
P roduct Quality
S peed of Service
Training programs for management
Strong supply chain
Strong global presence & performance
Low depth and width of product
Legal actions related to health issue, use of trans fat and beef oil
Expand into different countries
Capture the market of fast food as it is growing constantly
Entry to breakfast meal
Joint ventures with retailers(e.g. supermarkets)
Strengthen its value proposition and offering, to encourage the customer who visits coffee shops into McDonald.
Diversification & acquisition of other quick service restaurants.
Changing customer life style and taste.
Increased competition from local fast food restaurants
High cost in less developed countries
Relationship between corporate level McDonald’s and its franchise dealer
Public purchasing power is less .
Religious Concerns (i.e. McDonalds are not providing Halal meat)
KFC had refocused international strategies to grow its company and franchise restaurant base all over the world.
Competitive marketing strategy: developed three types of chicken: original recipe (pressure cooked) extra crispy (fried) tender roast(roasted)
Distribution strategy: first focused on building smaller restaurants in non-traditional outlets like airports.
KFC secret recipe of 11 herbs and species
Very strong internationally
Strong franchises all over the world
Interactive relationship marketing
Strong trademarks recipes
Ranks highest among all chicken restaurants
Chains for its convenience and menu variety
Largest multi-branded restaurant in the world
Lack on R&D
KFC desserts portion is not as better as it should be
They only focus high income people
Sweet product expansion
More outlets to capture more market
Temporary seasonal outlets in every country
Decreasing the price they can capture more customers
Rated 83 out of 100 in terms of competiveness
Increasing inflation rates directly affect menu prices in some developing countries
Super markets and new competitors
Health issue due to oily products
KFC Corporation is a member of quick service restaurant industry. It uses a sophisticated program for the management of quality of services for the customers it offers. In 1989 the south central division of KFC launched at test program in four Oklahoma City restaurants to improve the speed of service at its drive-through-window operation. It proved very successful. The restaurants cut service time by more than half while improving labour productivity. The improved processes in the test restaurants have served as benchmarks for other KFC restaurants aiming for continuous process improvement, while the reduced service time now serves as the revised specification in KFC’s quality measurement and management program.
Problem and Issues:
In 1977 to 1983 KFC faced lot of problems and issues like opening new restaurants, service quality decline, quality control, restaurant cleanliness etc. KFC branch opening came to 20 restaurants a year which was a huge decline with KFC is not supposed to act like this. They didn’t take care of their philosophy CHAMPS and their cleanliness of restaurants affected a lot.
After that in 1990 to 1995 conflict aroused between corporate cultures of Pepsi Co and KFC. Arrogance of Pepsi Co executives headed towards loss of employess loyalty, high employee turnover etc. KFC had fewer opportunities to expand in the US market as its leader ship in that market was good.
After that KFC kept its share losing to competitors like Popeyes, Chick-Fil-A, Boston Market etc. In that tenure KFC share of chicken segment sales fell from 71% to 56%. Employees aged between 16 to 24 were very low in numbers. Labour cost was also high but due to competition it did not allow to raise its prices. Some other problems are as follow:
Long distance between main office and franchises
Controlling the quality of every restaurant was difficult
Service and support problems
High cost of transportation
Limited menu and late innovation of new products
Huge competitor like McDonald’s affected KFC’s products badly
Short term: based on the analysis we can conclude that they should start by solving their internal issues such as management and restaurant menu before thinking about expanding. They should work on the management issues to develop a good atmosphere where stakeholders like employees will be happy to work in.
Secondly they should also make sure that their restaurants offer a different menu, provide their customers with quality food, brilliant service and there motto CHAMPS. If they don’t act upon their quality philosophy people will not trust them and mainly the competitors like McDonald’s will take a huge advantage for this. Although KFC have a great attachment to its recipe which made them do a huge business, they should innovate something new relating to their quality and standard. Boston and Popeye’s are stealing customers away from KFC because they have come to know what the customer wants. KFC should develop effective operational strategies to ensure and execution of the new business model.
KFC should need to state a clear vision, they should solve the internal matters to prove that they are strong as a company and always there for competition internationally. Some other recommendations are as follow:
Deliver a healthier menu
Creating a best working atmosphere
Keep Control over franchises
Come up with new items regularly
Be aware of new technology
Stick to mission, quality and excellent services
Keeping a sharp eye on what the CHAMPS contains
Long term: They need to relate their activities with their mission which is CHAMPS and ensuring to know how to get their long term objectives. They should keep innovating new products with best quality regularly. In American market KFC has also kept an eye on their competitors like wise they should also perform internationally. McDonald’s has been very sharp than KFC when they acquired Boston, which could have really helped KFC regain its loss, reducing competition and market share.
KFC should be aware of new technology in order to improve their productivity and to compete more efficiently and effectively.
It is a very strong chain of fast food restaurants all over the world. Being in “maturity stage” it has high opportunities of introducing its new products and deals. In future it will be expanding its chain by introducing more outlets in more countries. Although in McDonald’s there may be more problems than KFC but the fact is there cannot be a perfect one in the world. Every organization has its internal problems but KFC is what it should not be. Because people rely on it hugely. KFC should serve people with high class vision.
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