om - industry visit report

8/12/2019 OM - Industry Visit Report

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FAST FOOD INDUSTRY

The fast food industry, also known as Quick Service Restaurants, has been serving up tasty

morsels for as long as people have lived in cities. The modern system of fast food franchising is

believed to have started in the mid 1930’s during the great depression. Since then everything

has changed. As cars became commonplace, the drive-thru concept brought explosive growth

to the idea of fast-on-the-go. Fast Food was added to the Merrion-Webster dictionary in 1951

and the fast food companies are now franchised in over 100 countries. In the U.S. alone there

are 200,000 fast food locations.

The Global fast food market grew by 6.8% in 2011 to reach a value of $252,911 million. It is

forecasted that in 2016, the global fast food market will grow by 31.2%. The fast food industry

has even grown during the time of recession, which hit all the industrial sectors around the

globe. It’s no secret that Americans love fast food, which brings us to the fact that Americas

accounts for 44.2% of the global fast food market.

Fast food franchises focus on high volume, low cost and high speed product. Frequently food is

preheated or precooked and served to-go, though many locations also offer seating for on-siteconsumption. Consumers enjoy being able to get familiar meal in each location, and menus and

marketing are the same in every location. The fast food restaurants or quick service restaurants

is the largest segment of the global food market, accounting for 66.4% of the market’s total

value.

There have been challenges for the fast food industry in recent years that have been pressuring

profit margins. But rather than flee from this challenge the fast food industry has been adopting

new practices and offering new products. Modern society is on the go and there is plenty ofdemand for quick bite at all times of the day. Fast food franchising opportunities exists in the

‘traditional’ spaces like burgers and pizzas, but is also sprouting up in healthy and unique ways

as well. The industry as a whole has proven robust enough to withstand these challenges,

though some players have done better than others. Fast food companies like McDonald’s,

Wendy’s, Burger king, KFC, Pizza-hut, Domino’s, Subway, Yum brands and many more, are

competing with each other neck to neck to increase their market share. All the big players cater



Fast food franchises are also focusing upon expanding into new product lines, such as coffee

initiatives in places such as McCafe, Starbucks. Many franchises have successfully explored

other meal times such as breakfast and mid-afternoon snack for growth opportunities and to

increase real estate utilization.

From new cultural cuisines to fresh takes on a traditional story, there are many types of quick

service restaurants than ever before.

The fast food industry is still a large and diverse industry with plenty of opportunity. As one

would hope challenge is being answered with innovation, and the fast food franchises are

responding with new offerings, pricing and strategies to lure more and more customers. Non-

traditional fast food franchises are springing and gaining traction, and with more creativity willalways be welcome. Consumers are now on the look-out for new ways to eat fast and healthy.

And the industry continues to evolve and the economy strengthens, fast food franchise

profitability will continue to grow.



PROFILE – MCDONALD’S CORP.

Every time we hear the name of hamburgers, McDonald’s comes to our mind. McDonald’sCorporation is the world’s largest chain of hamburger fast food restaurants, serving around 69

million customers daily in 119 countries. The company has it’s headquarter in Oak Brook,

Illinois, U.S.A. A McDonald’s restaurant is operated either a franchise, an affiliate, or the

corporation itself. The corporation’s revenue comes from the rent, royalties and fees paid by

the franchisees, as well as sales in company-operated restaurants.

McDonald’s primarily sells hamburgers, cheeseburgers, chicken, french fries, breakfast items,

soft drinks, milkshakes and desserts. In response to changing customer tastes, the company has

expanded its menu to include salads, fish, wraps, smoothies and fruits. McDonald’s operates

over 34000 restaurants worldwide, employing more than 1.7 million people. The company also

operates other brands, such as Piles cafe.

The company began in 1940 as a barbecue restaurant operated by Richard and Maurice

McDonald in San Bernardino, California. In 1948 they organised their business as a hamburger

stand using production line principles. Businessman Ray Croc joined the company as a franchise

agent in 1955 and subsequently purchased the chain from McDonald brothers and oversaw its

worldwide growth. He hired Fred Turner as the head of McDonald’s operations defining the

quality, service and cleanliness that continue to this day. In the year 1958 McDonald’s achieved

their first great milestone of selling 100 millionth hamburger and soon the next year theyachieved another milestone of 100

th restaurant in Fond Du Lac, Wisconsin.

After seeing through the success of the restaurants all over the country, in 1961 Ray Croc

decided to open a Hamburger University in the basement of Elk Grove Village, Illinois,

McDonald’s restaurant. In the same year McDonald’s was given a new logo with red & white

arches which lasted for 9 years. And in 1969 the company finally made a huge decision to

update the logo, to golden arches.

After the company saw huge success in the domestic market, the decision was taken to go

global. So the first international McDonald’s restaurants were opened in Canada and PuertoRico. Today McDonald’s serves 119 countries.

In 1965, McDonald’s celebrated its 10th

anniversary with the first public stock offering at $22.50

per share. And soon after celebrating the anniversary McDonald’s entered into television

commercials by bringing a clown named Ronald McDonald, which proved to be instant hit all

over the world and helped the company to lure more customers.



As competition in the US market got stiffer the company brought in new strategies and ideas by

introducing breakfast meals at all the restaurants in 1975. With distances between cities began

to grow and people travelling for long hours had a demand for take-away food, so McDonald’s

solved the problem by installing drive-thru at various places all over the country.

In 1984, the demise of Ray Croc, the founder and senior chairman of the board of McDonald’s,

brought sad news to the whole McDonald’s family. And after that also company never lost its

value of being one of the most iconic companies ever created in the fast food industry. With the

world moving towards the era of internet, McDonald’s always used the technological

breakthroughs that came into existence and so in 1996, the company launched its website

named McDonalds.com.

In the year 1998, McDonald’s surprised the world with a unique strategy named “Made for

you” operating platform, which allowed greater customization of the menu items and more

kitchen flexibility. And since then this strategy is being operated at every McDonald’srestaurant.

McDonald’s through times has successfully adapted to various changes that occurred around

the globe. In the early 2000’s advertising for the products or service became a must for every

company so McDonald’s understood the need to advertise and they launched their first global

ad campaign “I’m loving it”, which proved to be instant hit all over the world and helped

McDonald’s in increasing their market share.

The McDonald’s Corporation’s business model is slightly different from that of the other fast -

food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a

percentage of sales, McDonald’s may also collect rent, which may be calculated on the basis of

sales. The United Kindom and Ireland business model is different than the U.S, as in that 30% of

restaurants are franchised, with the majority under the ownership of the company. The

company follows a policy in which there are no direct sales of food or raw materials to

franchisees, instead the supply of food and materials is made through approved third party

logistics operators.

McDonald’s has become emblematic of globalization, sometime referred to as the“McDonaldization” of society.

The Economist newspaper uses the “Big Mac Index”, to compare the Big Mac costs in various

world currencies that can be used to informally judge the currencies’ purchasing power parity.



McDonald’s has been the face of fast food restaurants for over three decades and still it is

continuing this legacy with quality, price and time. The company has surpassed many hurdles,

criticism from health magazines for providing food high in fat and even rising competition

growing day by day; still McDonald’s is the market king with a share of around 19% in the

industry. Though its share has fallen down because of new entrants in the industry, in terms ofrevenue earned from the sale of hamburgers, McDonald’s is the firm that secures the top

position in the global food industry. Even people who have invested in the stocks of the

company, the company has always cared about them by paying them increased dividends for

25 consecutive years.

The popularity of the food products of McDonald’s has surprised everyone with “Happy Meal”

which completed 25 years in satisfying customers’ needs. On April 15, 2005 McDonald’s

celebrated its 50th

anniversary which reminds everyone about the greatest companies ever

created in the history of the fast food industry.

McDonald’s will be the market ruler for many more years to come and people all around the

globe will continue to chant the slogan “I’m loving it”.



VISIT DETAILS

Date of visit: 10/ 01/ 2013

Place: McDonald’s Family Restaurant, Shri arcade, M.No.1.2.271,

SD Road, Secunderabad – 500003

Contact no: +91 9642350345

Point of Contact: Mr. Venkat (Store Manager) +91 7569658672

We visited the McDonald’s Restaurant at Secunderabad, on 10th

January at 4:00 pm; the store

manager had called us at a time when there was less number of people visiting the store. The

store was located 500 meters from the famous “Paradise” Restaurant of Hyderabad.

We were given head caps made of cloth to cover our hair, when we entered the kitchen area of

the restaurant. The restaurant visit was assisted by Mr. Shravan who was very efficient and

humble to explain us each and every process of the restaurant. He started the tour from the

coffee and tea making machine, and then told us details about the French fries process and its

delivery. He also took us through the process of frying of patty and pizza mcpuff. He then

explained the process of the assembly line i.e. the process of making a burger on the prep table.

(The table on which the burger is prepared is called prep table). He then showed us the Non-

Veg section preparation also, as Veg & Non Veg is prepared on separate prep tables. And bothof them have separate sections inside the ktichen.

He also gave a tour of the storage areas; there are two storage areas in McDonald’s, Viz. the

cold storage and the kitchen storage area. The kitchen storage area is for the carbon dioxide

cylinders (for soft drinks) and wash basins for cleaning the kitchen equipments. The veggies,

patty, sauces, cream, ice-cream and cheese are stored in the Chiller and Freezer where the

temperatures are kept around 2 degrees to -18 degrees. There is also a store room kept for the

glasses, sugar, spoons, etc.

The restaurant visit took us 2 hours to complete and they were courteous enough to help us intaking notes for each and every detail of their processes. McDonalds has one of the lean and

efficient processes in the Fast food industry. Their machines for frying, bun toasting and other

equipments are imported from US. They can boast of having one of the best machines and

processes in the industry.

Our visit ended with a complimentary pack of fries !



CONCEPTUAL BACKGROUND

What is service? We can explain service in the words that it is the management of organization

whose primary business requires interaction with customers to produce the service. Our

project of McDonald’s corporation is the world pioneer in these aspects.

The Customer is the focal point of all decisions and actions of the service organization. The

philosophy is captured nicely in a triangle.

AN OPERATIONAL CLASSIFICATION OF SERVICES

Service organizations are generally classified according to who the customer is for e.g.,

individuals or other business, and to the service they provide. Customer contact distinguishes

one service system from another in the form of its involvement in the creation of service.Customer contact refers to the physical presence of customers in the system and the creation

of service refers to the work process involved in providing the service itself. Extent of contact

here may be roughly defined as the percentage of time customer must be in the system relative

to the total time it takes to perform the customer service. The greater the percentage of

contact time between the service system the customer, the greater the interaction between

two during the production process.

Theservice

strategy

THE

CUSTOMER

The

People

The

System

The customer centered

view



The high contact systems in McDonald’s process is shown below:

DESIGN DECISION Operations may be near the

customer

Fulfilling the requirement

FACILITY LAYOUT The facility should

accommodate the customers

physical needs & expectations

Mcdonalds outlets support

the requirement

TIME STANDARD Service time depends upon

process

Mcdonalds have specific time

set for different processes

WORKER SKILLS The direct work force

constitutes a major part of theservice product so must be

able to interact well with

public

Workers are well trained

CAPACITY PLANNING To avoid lost sales , capacity

must be set to match peak

demand

System is designed so to

capture both peak & non peak

hour cm demand

PROCESS DESIGN Stages of production process

have a direct ,immediate

impact on the customer

Customers can watch clearly

sum of the process from the

counters



SERVICE BLUEPRINTING & FAIL SAFING

Service blue print is a flow chart prepared to emphasize the importance of process design. A

unique feature of service blue print is the distinction made with a “a line of visibility “on the

flow chart

The distinction is made between the high customer contact aspects of the service (the parts of

the process that the customer sees) and those activities that the customer does not see.

Basic blueprinting describes the features of the service design but does not provide any direct

guidance for how to make the process conform to that design. An approach to this problem is

the application of poka yokes; translated from the Japanese as avoid mistakes. It is the

procedure that block the inevitable from becoming a service defect

The application of Poka-yokes to the services can be classified into: warning methods physical

or visual contact method and the three T’s viz. task , treatment and tangibles.

Task means the task to be done, the treatment according to the customer and the tangibles the

environmental features of the service facility to fail safing the actions of the customer as well as

service provider.



UNDERSTANDING & CONCLUSION

McDonald’s has a face-to-face tight specs service system design. This is what enables it to

process customer orders in less than 1 minute. It does so by having a limited menu for the

customers to choose from. Additionally, it uses an assembly line process for assembling the

burgers.

The service process at McDonald’s is as follows:

1. The customer places an order and makes the payment on the POS counter.

2. The order appears on the Kitchen Video System (KVS).

3. Within the next 2-3 seconds the first worker in the assembly line puts the bun for

toasting. The toasting takes around 17-19 seconds.

4. In the next stage the sauces, vegetables and the patty is put on the bun.

5. The burger is then wrapped and sent to the counter for delivery. These two processes

are finished in 6 seconds.

The burgers are ready for delivery within 25 seconds.

There are separate work stations for assembling Veg and Non-Veg burgers.

If the customer has ordered for fries, puff or soft drinks these are also filled as per the order

(small, medium or large) and delivered to the customer along with the burger.

McDonald’s has also developed several failsafe systems in the process. Some of these are

listed below:

To maintain the efficiency of the assembly line system, additional workers are added

to assist in the process in case there are more than 3 orders pending on the KVS.

The equipment used for putting the sauce on the buns is designed to put only the

required amount on the bun at a time. This helps in maintaining the consistency in

the taste of the burgers.

As it takes 3 minutes for frying a batch of 6 patties, A Virtual Cabinet Management

System (VCMS) is used to store the fried patties.

To ensure that the burgers are delivered fresh to the customers, there are time

limits set for the duration of storage of the patties in the VCMS. This time ranges

from 20-30 minutes. If the patty remains in the VCMS for the specified time limit it

has to be disposed.



As in the case of the patties it takes 3 minutes to prepare one batch of fries. Again

the cooked fries must be discarded if not served within 7 minutes.

To ensure that only the appropriate quantity of fries is filled for every order,

McDonald’s has a specially designed scoop for filling the fries.

To maintain the consistency in the taste of the products, there are separateworkstations for frying the different products. The temperature of the oil to be used

for frying and the duration is also standardized.

One day’s supply of frozen fries and patties is stored in a freezer in the kitchen itself.

There are separate freezers for Veg and Non-Veg products.

One week’s supply of the frozen fries and patties is stored in a separate location

within the premises of the outlet.

All the workstations are designed to avoid accidents and to prevent fire hazards.

There is a specified cleaning and other maintenance schedule for all workstations to

be performed throughout the day. All workstations are thoroughly cleaned with disinfectant solution at the end of

every day.

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