Company of the Year: McDonald’s Canada Reinvents Itself for the 21st-Century Market

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Sometimes a company is more than a business; sometimes it becomes an icon that enters into the cultural psyche of its consumers in a way that transcends its function as a mere vendor of products. Think of the genius of Henry Ford, whose innovative assembly-line production process forever changed — for good and ill — the way people would work in factories.

In Canada, when T. Eaton Co. established mail-order shipping via its beloved catalogue to almost every community in the country, it became not just the country’s most successful dry-goods supplier, but almost a family friend. McDonald’s is one of these iconic companies. Everyone knows something about its founding story and Ray Kroc’s 1954 purchase of a small restaurant run by brothers Dick and Mac McDonald. Realizing that standardization of menu ingredients and production processes was the key to providing the best food at the lowest price in the shortest possible amount of time, Kroc had already sold his 100 millionth hamburger by 1958. Over the next two decades, the company grew to dominate the QSR sector in North America and globally — closing out 2015 with estimated Canadian gross sales of $3.8 million across its 1,443 locations.

McDonald’s has many familiar faces. For the commuter, it’s a convenient “drive-thru.” For students, it’s a comfortable, affordable hangout. And for parents, it’s a playroom and a Happy Meal. We can all hum the jingles; we all know what goes with “two all-beef patties;” we all recognize Ronald.

But the formula that guaranteed success in post-war America was not impervious to outside forces. Consumer tastes shift and by the turn of the millennium, the demand for standardized, meat-focused meals was shrinking, while a taste for variety, international flavours and “healthier” options was growing fast. Like all icons, the company reached a point where it had to evolve. McDonald’s Restaurants of Canada Limited has shown remarkable creativity and resourcefulness in meeting these new demands, which is why it has been chosen as the Pinnacle Awards’ Company of the Year for 2016.

By 1981, McDonald’s Restaurants of Canada Limited had become the largest foodservice organization in Canada. Today, it consists of close to 1,500 restaurants employing more than 85,000 people; about 80 per cent are independently owned and operated. The McDonald’s of the 1970s is not the McDonald’s of today. In 2008, the Angus Burger appeared on the menu to capitalize on the growing popularity of “gourmet-style” burgers. In 2011, McDonald’s Canada invested $1 billion into its largest-ever store-by-store makeover, which included the addition of free Wi-Fi at more than 1,000 restaurants.

In 2011, McDonald’s launched its McCafé concept (lattes, cappuccinos and mochas) and in the process, established itself as a major player in what has sometimes been dubbed the “coffee wars,” second only to beloved Canadian icon Tim Hortons and leading even Starbucks in this robust market. Since the arrival of McCafé, the brand’s coffee sales have tripled and its market share has doubled.

Last December, McDonald’s fired a shot across the bow of its caffeinated competitors with the opening of the first standalone McCafé in Toronto’s Union Station. The choice of venue made an especially big splash as the first permanent retail operation to open in the station’s refurbished York Concourse.

It was quickly followed by a second in the nearby Exchange Tower at First Canadian Place. Think of these outlets as Parisian chic in a New York minute: they’re a little smaller than the average McDonald’s (the First Canadian Place location boasts a total of 19 seats), and they cater to the rushed downtown consumer with self-ordering kiosks, mobile charging stations and free Wi-Fi.

On the other hand, the menu is comparatively lavish. It features pâtisserie — croissants, chocolatines and danishes — alongside quick sandwiches and salads, plus (of course) the one-handable Egg McMuffin. Some of the offerings sound distinctly un-fast-food-like: brie and apple on a croissant ($5.49), lentil-sweet potato hummus wrap with kale ($5.99), kale and Brussels sprouts salad ($6.99) and a quinoa-edamame-mandarin salad ($3.49).

“We’re putting the café in McCafé and making the brand a destination in its own right,” says John Betts, president and CEO of McDonald’s Restaurants of Canada. “The new standalone McCafé locations allow us to build on our strong coffee credentials and create even stronger connections with our brand by offering our guests the more complete café menu they’ve been asking us for.”

This year has seen another profound philosophical shift with the introduction of Create-Your-Taste burgers, which give diners an option to choose different buns (or a lettuce wrap) and customize their burger with a choice of five cheeses and extras such as chipotle aioli, sriracha, guacamole and sundried tomato pesto. The burgers are then delivered to the table.

“We want our guests to walk in and be wowed by an experience that’s modern and personalized, but still the McDonald’s they know and love,” says Betts. Building a custom burger is facilitated by the introduction of self-order kiosks, which are gradually popping up across the country. These brightly coloured touch-screen boards near the cash area are an intuitive choice for a customer base that’s increasingly adapted to interacting with the screen of a smartphone or tablet.

And if someone’s feeling flummoxed by the device, there’s a brand-new type of employee to ease the transition: the Guest Experience Leader is a sort of greeter who can help guide customers through the new McDonald’s experience. Thus, although the kiosks would seem like a way to cut down on staff, they actually mesh with McDonald’s Canada’s plan to grow to 100,000 employees before the end of 2017.

In April, the company hit a hiring record by bringing on 8,920 new employees in a single day during its sixth annual National Hiring Day, exceeding its own goal by 1,920 people, or almost 30 per cent. Of these, 650 were brought into the new Guest Experience Leader positions.

“For McDonald’s Canada, 2016 has been our year of transformation,” says Betts. “We have introduced a lot of changes — new products, new service models, new levels of hospitality and new ways of thinking about our business. The magnitude of these changes can’t be ignored and they haven’t been easy either. Transformation takes time and patience.” Another dramatic shift has been the chain’s bold moves to bring its menu in line with the burgeoning appetite for “cleaner” food: more local sourcing and ingredients that are healthier, more sustainable and more humane. McDonald’s Canada has been edging in this direction for many years. In fact, back in 2008, they moved to trans-fat-free cooking oil, and in 2012, the “Our Food. Your Questions” campaign challenged consumers to ask the toughest questions about ingredients. But in the past 18 months alone, McDonald’s has upped the stakes considerably.
In September of 2015, the company announced that it would be moving to sourcing only 100-per-cent Canadian cage-free eggs (known as free-run in Canada) for its restaurants over the next 10 years. This step was followed in October 2015 by a second initiative — sourcing only chicken raised “without antibiotics that are important to human medicine” by the end of 2018.

“We’re doing this because we know our guests want good food that they feel great about eating — all the way from the farm to the restaurant,” says Betts. “McDonald’s is on a journey to improve. We’re working to get better in every aspect of our business and as a restaurant company, it starts with our food. If it matters to our guests, it matters to us. That’s why we have been on this food journey — and, we’re not done.” This was also a chance for the company to show off its considerable impact on the Canadian farming economy with its “Not-Without-Canadian-Farmers” campaign. McDonald’s buys approximately 120 million eggs from Canadian farms across the country every year, as well as nearly 143 million lbs of potatoes, 52 million lbs of chicken, 24 million litres of milk and cream and 67 million lbs of ground beef (which incidentally makes it the largest purchaser of ground beef in the Canadian restaurant industry).

“We are absolutely committed to sourcing our food in Canada,” says Betts. “Of the almost $1 billion we spend on food, more than 85 per cent is purchased from suppliers in Canada — a Canadian feat we’re very proud of. “

In a LinkedIn post from September 1, 2016 titled “Why Canada Matters: The ‘Not-Without-Canadian-Farmers’ Story,” McDonald’s Canada senior vice-president of Marketing Antoinette Benoit wrote “To further our commitment to Canadian beef, this past June, we announced the successful conclusion of the Verified Sustainable Beef Pilot, an industry-first. This marks a major milestone of our leadership and partnership with the Canadian beef industry over the past 30 months, dedicated to advancing more sustainable beef practices.” The Beef Pilot tracked 8,967 head of Canadian cattle from “birth to burger” through 121 ranches, 34 backgrounding operations, 24 feedlots, two beef processors and one patty plant. It was designed to show it is possible to verify sustainable practices and outcomes through the entire Canadian beef supply chain.

“The Canadian beef industry is one of the best in the world and McDonald’s Canada remains committed to serving our guests only 100-per-cent Canadian beef,” Betts says. “The Pilot has demonstrated the remarkable progress and success that can come when industry and ranchers work together towards a more sustainable future.”

The future does indeed look sustainable — not only for farmers, but for McDonald’s Canada, a remarkable example of a company that has succeeded in reinventing itself entirely while still maintaining the best of its brand identity.

Heading into its 50th anniversary, Betts says McDonald’s is “building on everything we’ve accomplished together by creating a brand experience that’s unmatched in Canada. We will continue to be known for quality food from sustainable, Canadian sources. Food that’s freshly prepared, tastes great and is served with pride.”

Betts is confident that McDonald’s will continue setting a new standard for the guest experience — one that’s innovative, personalized, easy and enjoyable — shifting from transactional to emotional connections on both sides of the counter. “In short, together with our franchisees and more than 90,000 crew from coast-to-coast, we will differentiate and we will lead.”

Volume 49, Number 9 
Written by Sarah B. Hood 

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