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1 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
In 2015, McDonald’s reached a reputation low-point, ranking last in a study that measured the reputations of 32 US restaurant chains. The fast-food giant has been the target of strikes, protests and social media campaigns criticizing its labor policies and product offerings. McDonald’s must earn back consumer trust in order to reverse its deteriorating public image.
2015 RepTrak® Pulse Score: McDonald’s
he RepTrak® Pulse score is a measure of the
emotional bond between a company and its
stakeholders. Figure 1 depicts the 2015 US
RepTrak® Pulse Score for McDonald’s:
Figure 1: McDonald’s reputation dips in 2015
McDonald’s has a Weak reputation score for the first time
since 2008. Figure 2 depicts McDonald’s score relative to
the industry’s most reputable companies in 2015:
Figure 2: Panera Bread claims industry lead in 2015
In the aftermath of the 2008 financial crisis, reputation
scores have trended up in the last three years,
particularly in the consumer and hospitality industries.
Given the brightened landscape, McDonald’s sharp
reputation decline in 2015 is alarming. Figure 3 depicts
McDonald’s US reputation scores from 2012-2015:
Figure 3: McDonald’s hits reputation low-point
55.34
73.92
74.15
75.60
75.76
76.62
77.06
77.21
77.38
78.44
80.00
40 50 60 70 80 90
McDonald's
Mrs. Fields
Chipotle Mexican Grill
Wendy's
Texas Roadhouse
Pizza Hut
Baskin-Robbins
Krispy Kreme
Subway
Dunkin' Brands, Inc.
Panera Bread
2015 REPUTATION REPORT McDonald’s at a Reputation Crossroads
August 2015
T
55.34 Weak
65.50
61.2963.96
55.34
50
55
60
65
70
75
80
2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5
M C D O N A L D ' S R E P U T A T I O N S C O R E S : 2 0 1 2 - 2 0 1 5
McDonald's RepTrak® Score
Significant Difference: > 3.1
After six straight years with an Average reputation,
McDonald’s received a Weak reputation score in
2015. McDonald’s RepTrak® Pulse Score fell 8.62
points in 2015, the largest decline of any US
restaurant chain. Companies with strong or
excellent reputation scores are the most effective
at communicating their activities and core values
with stakeholders in ways that resonate and leave a
lasting positive emotional bond. McDonald’s has
lacked the transparency necessary to build this
emotional bond with consumers. In the next section
we will explore the biggest drivers of reputation in
the US hospitality industry and the areas in which
McDonald’s stands to improve the most.
2 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
What Drives Reputation for US Restaurants?
Reputation Institute tracks seven dimensions that contribute to
corporate reputation. The importance of a particular dimension in
determining a company’s reputation, or the dimension weight, varies
by market and by industry. Figure 4 depicts the 2015 dimension
weights in the US hospitality industry:
Figure 4: “Governance” and “Innovation” are key reputation drivers
In the US hospitality industry, a
company’s reputation is impacted
most by its product and service
offerings, its governance and its
innovation. Citizenship is also a
critical driver of reputation. The
governance dimension assesses
stakeholder perceptions of a
company as ethical and transparent.
Figure 5 depicts the 2015 US
dimension scores for McDonald’s:
Figure 5: McDonald’s suffers from negative workplace perceptions
2015 Dimension Weights: US Hospitality
19.5%
13.2%
13.1%
13.7%
14.3%
12.1%
14.1%
Key Dimension: Governance
Struggling to Shed Perceptions
Long-held skepticism around
the freshness and quality of
ingredients (i.e. “pink slime” in
meat, “yoga mats” in chicken
McNuggets, “vegetarian”
French fries scandal)
In July, a McDonald’s supplier
in Shanghai was found pumping
chicken with excessive
antibiotics. TV report showed
workers reusing meat that had
fallen to the floor, as well as
mixing fresh & expired meat
Transparency & Engagement
In October, launched YouTube
campaign called “Our Food.
Your Questions.”
Video campaign features
behind-the-scenes web vignettes
and infographics illustrating the
production process
Enables customers to ask
questions on website and
receive answers in real time
“We know some people continue to have
questions about our food from the
standpoint of the ingredients or how food
is prepared at the restaurant. This is our
move to ensure we engage people in a
two-way dialogue about our food and
address their questions and comments.”
Kevin Newell
EVP-chief brand and strategy officer,
McDonald’s USA
56.5
48.2
48.6 67.7
64.1
63.9
55.34 58.6
McDonald’s has long suffered from
negative perceptions surrounding
the health and quality of its food.
More recently, the McDonald’s
brand has been associated with
poor working conditions and harsh
labor policies. This is reflected in its
weak scores in the Workplace and
Products/Services dimensions.
McDonald’s also has weak scores in
Governance and Innovation, two of
the industry’s key reputation
drivers.
3 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
Market Impact
There is a high correlation between a company’s
reputation score and the willingness of consumers to
support the company. Figure 6 illustrates the decline in
support for McDonald’s in 2015:
Figure 6: As reputation falls, so does support
While “Work For” was the one supportive behavior in
which McDonald’s did not see a decline in 2015, its
score in this supportive behavior remains last among all
US restaurant chains. Figure 7 depicts the level of trust
for McDonald’s compared to the rest of the industry:
Figure 7: McDonald’s needs to regain consumer trust
Our data consistently illustrates a strong, positive
correlation between a company’s RepTrak® Pulse
score and its supportive behavior scores. In fact,
last year a five point increase in reputation score
amongst US companies translated to an 8.6%
improvement in willingness of the general public
to recommend that company. Figure 8 depicts the
2015 RepTrak® Pulse scores for select US
restaurants, along with the percent of
respondents who are willing to buy its products:
Figure 8: Pulse Score is a good indicator of support
In the hospitality industry, there is a particularly
strong correlation between a company’s
RepTrak® Pulse Score and the percent of
respondents willing to buy its products. Panera
has the highest RepTrak® Pulse score in the
industry, and also received the highest percent of
support in “Willingness to Buy”. McDonald’s has
the lowest RepTrak® Pulse Score in the industry,
and also has the lowest percent of support in
“Willingness to Buy”.
R² = 0.9471
30%
40%
50%
60%
70%
80%
50 55 60 65 70 75 80 85% o
f U
S ge
ner
al p
ub
lic w
ho
wo
uld
bu
y p
rod
uct
RepTrak® Pulse Score
"Willingness to Buy"
39% 47%
47% 39%
23% 19%
“Trust”
“Recommend”
53% 39%
2014
“Buy”
“Work For”
40% 30% “Invest”
% of US general public that strongly agrees they would perform supportive behavior
2015
47%
39%
49% 49%
30%
35%
40%
45%
50%
55%
60%
2 0 1 4 2 0 1 5% R
ESP
ON
DEN
TS
WH
O S
TRO
NG
LY A
GR
EE
THEY
WO
ULD
TR
UST
CO
MP
AN
Y
McDonald's US Restaurant Average
+0.4%
-7.9%
“I Would Trust”
4 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
McDonald’s in Crisis Mode
Americans’ love affair with McDonald’s is fading. Ex-CEO Don
Thompson resigned in March amidst six straight quarters of declining
sales. In January, McDonald’s posted its steepest monthly decline in
U.S. same-store sales in more than 14 years.
McDonald’s reputation overseas also took a hit in 2014. In August, a
supplier scare decimated store traffic in China, while Russian
regulators shut down several locations on food safety concerns. In all,
McDonald’s reported a 30% drop in worldwide sales in 2014.
Figure 9 illustrates the change in McDonald’s stock price and U.S.
RepTrak® Pulse Score since 2012:
Figure 9: McDonald’s struggles led to ouster of ex-CEO Thompson
The red line depicts McDonald’s RepTrak scores in Q1 of each
respective year. The blue line depicts McDonald’s stock price on
January 1st of each respective year. McDonald’s stock fell nearly 15%
from January 2012 to January 2015. A company’s stock is a reflection
of its reputation. Companies with better reputations are not as
negatively affected during a crisis, recover faster, and continue to
outperform peers in the stock market.
McDonald’s in Crisis Mode
1.) Younger customers are fleeing
McDonald’s is struggling to stay
relevant with millennials
Fast-casual restaurants like
Chipotle and Panera are
growing rapidly… offer fresher
ingredients and custom ordering
with convenience of fast-food
2.) Public criticism
McDonald’s was focal point of
the “Fight for 15” protests, a
campaign to get fast-food chains
to boost minimum wage to $15
In 2014 the NLRB made history
by holding McDonald’s Co.
responsible for violations
occurring at individual franchises
In January, a group of former
employees of a Virginia
McDonald’s sued the franchise
for racial and sexual
discrimination
In March, McDonald’s workers
in 19 US cities filed 28
complaints to OSHA about
workplace safety
3.) Product quality
McDonald’s has been trying to
upgrade the quality of its food
Menu complexity is causing
delays and prep mistakes
Very few “Big Hits” recently,
either due to marketing failure
or too many products on menu
65.5
61.3
64.0
55.3
101.799.7
96.9
89.6
80
85
90
95
100
105
50
52
54
56
58
60
62
64
66
68
Jan. '12 Jan. '13 Jan. '14 Jan. '15
NYS
E St
ock
Pri
ce (
USD
)
Rep
Trak
®P
uls
e Sc
ore
McDonald's: RepTrak® Pulse vs. Stock Price
RepTrak® Pulse Score NYSE Stock Price
5 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
Rebounding from a Reputation Crisis
As the economy has improved, consumers increasingly prioritize
value for their dollar, rather than price value. McDonald’s can no
longer lure customers with new offers and inexpensive menu items
off the Dollar Menu, a concept that has grown redundant. Rather, the
fast-food giant must demonstrate a willingness to change. It must
push for simpler, healthier ingredients and customizable product
offerings to compete with emerging competition from Wendy’s and
more upscale burger chains like Five Guys and Shake Shack. And
McDonald’s must take action that shows they are serious about
improving conditions for its workers.
Newly appointed CEO Steve Easterbrook is taking steps to
accomplish these goals. In a 23-minute video released in May,
Easterbook detailed McDonald’s “Corporate Turnaround Plan”,
highlighting the desire to be branded as a progressive, modern burger
company. As part of this re-branding, McDonald’s will upgrade its
menus and stores, improve service and add modernized payment
systems and digital ordering capabilities. Easterbrook also announced
the company’s plans to give 90,000 workers a raise.
Overview
Times change and so do consumption habits. McDonald’s once-reliable
base of younger customers have defected to fast-casual chains like
Chipotle, Shake Shack and Panera, which are deemed as tastier and
healthier options offering customizable meals with more trustworthy
ingredients. In order to maintain a reputation advantage, you have to
adapt to market trends and be willing to innovate. McDonald’s was late
to the party, but looks to be moving in the right direction under new
leadership. In Easterbrook’s short time at the helm, McDonald’s has
simplified its menu, opted to serve only chicken free of antibiotics used
on humans, transitioned to all-day breakfast in most restaurants, and
agreed to bump up its wages at company-owned U.S. locations. These
are good first steps, but only time will tell if the once iconic Golden
Arches will reign supreme again.
McDonald’s Action Items
1.) New Philosophy
Get out of the past; re-brand as
modern burger company under
new leadership
Don’t rely on inexpensive menu
items and incentives to lure
customers; earn customer’s trust
and goodwill
2.) Simplify product offerings
Simplify menu, which has
become too broad and complex
for consumers to understand and
workers to execute; smaller
menu will translate to speedier
transactions and enables more
ingredient transparency
Eliminate wraps and other menu
items, introduce custom burgers
with better add-ons
Prioritize transparency, continue
and build on “Our Food, Your
Questions” campaign…
leverage social media to
promote awareness of such
initiatives
3.) Address workplace perceptions
Be proactive, not reactive in
improving workplace conditions
Build on April’s announcement
to raise minimum wage…
expand to more workers, find
new ways to engage employees,
turn employees into
McDonald’s brand ambassadors
6 | 2015 Reputation Report: McDonald’s at a Reputation Crossroads
2015 Reputation Ranking: US Restaurants
Rank Company 2015 RepTrak®
Pulse Score 1 Panera Bread 80.00 2 Dunkin’ Brands, Inc. 78.44 3 Subway 77.38 4 Krispy Kreme 77.21 5 Baskin-Robbins 77.06 6 Pizza Hut 76.62 7 Texas Roadhouse 75.76 8 Wendy’s 75.60 9 Chipotle Mexican Grill 74.15
10 Mrs. Fields 73.92 11 Papa John’s Pizza 73.65 12 Cheesecake Factory,
Inc. 72.99
13 Red Robin 72.69 14 Buffalo Wild Wings 72.05 15 Cracker Barrel Old
Country Store 71.58
16 Starbucks Coffee Company
71.11 17 Chick-fil-A 70.44 18 Applebee’s 70.12 19 Outback Steakhouse 69.83 20 Chili’s 69.29 21 Ruby Tuesday 69.29 22 Olive Garden 68.31 23 Domino’s pizza 68.10 24 Little Caesars 67.90 25 T.G.I. Friday’s 66.95 26 Red Lobster 66.25 27 Quiznos 66.06 28 Burger King 64.24 29 KFC 63.99 30 Long John Silver’s 62.60 31 Taco Bell 62.20 32 McDonald’s 55.34
About Reputation Institute
Reputation Institute (RI) is the world’s leading consulting
and advisory firm for reputation. RI enables many of the
world’s leading companies to make more confident
business decisions that build and protect reputation
capital, analyze risk and sustainability topics, and drive
competitive advantage.
RI’s most prominent management tool is the RepTrak®
model for analyzing the reputations of companies and
institutions — best known via the Global RepTrak® 100,
the world’s largest and most comprehensive study of
corporate reputations.
Learn more at: http://www.reputationinstitute.com/