McDonalds - a Story of Service Recovery

McDonalds: A Story of Service Recovery

Background Note:

The McDonald brothers, Richard and Maurice opened a drive-in restaurant in San Bernardino, California, in 1937. By the late 1990s, after years of declining earnings and poor customer ratings, McDonalds Corp., the largest fast food chain in the world, seemed to have lost its claim to providing the Great American Meal. The company, which was once the favorite destination of fast food lovers around the world, had been receiving low ratings on quality and customer satisfaction since the early1990s. However, under the leadership of Jim Cantalupo, who was made CEO in early 2003, and Charlie Bell, the President, McDonalds managed a relatively quick turnaround. Under the turnaround plan, McDonalds introduced substantial system wide changes that overhauled the company's products, operations and marketing. The new plan eliminated the negative elements in the system, while retaining and building on the positive aspects. No

Longer the µGreat American Meal: Through the decades, McDonald had promoted itself as the provider of the µGreat American Meal. However, by the1990s, it was clear that the company has lost its claim to that title. Changing customer eating habits, increased competition and complacence on the part of the company and its franchises, were the main reasons for the difficulties experienced by it. The 1990s saw an increasing interest in healthy living and physical fitness in the US. People realized that regular consumption of fast food could play havoc with their health by increasing their intake of Cholesterol and fat, and lead to a spate of problems related to obesity and heart disease. Instead of fast food, which comprised mainly of burgers, fries and soda, people switched to sandwiches and salads, which were perceived as healthier foods. Consequently, company's like Subway and Panera Bread, which offered sandwiches and salads in a casual dining atmosphere, began to take over the customer base of fast food chains like McDonalds. These restaurants created a new subcategory in the industry and were called µfast casual outlets. In an attempt to recover their lost customers, McDonald Start including healthier items likes salad and sandwiches in their menu. For instance, McDonald introduced the McLean Deluxe Burger in the early 1990s a 91% fat free patty, as a substitute for the Big Mac. However, people hated its taste and McDonalds was forced to phase out the product a couple of years after it was launched. Mc Donald also attempted to shift to low fat frying oil in2002, but it was not able to give the trademark McDonalds taste, and customers rejected the change. Considering people's perception of fast food, it did not take long for the industry to become the target of lawsuits filed by people who blamed the fast food industry for their obesity. Activists published statistics showing