In early 2000, stock for QSR giant McDonald's had fallen to an all-time low of $12 per share. Ten years later, those shares were selling for $82-plus.
The company's dramatic turnaround can be attributed to successful new product launches, buoyed by the McCafe line, as well as reimaged restaurants and the implementation of a world class restaurant performance measurement system that focuses on customer and employee satisfaction.
Jerry Calabrese, who recently retired after 35 years with McDonald's, including as corporate vice president of global restaurant measurements, discussed these metrics during a June 23 webinar titled "The Metrics that Matter: Think you can continue to drive same store sales by just monitoring financial metrics?"
The event was sponsored by Market Force, a provider of business intelligence, and FastCasual.com. Janet Eden-Harris, chief marketing officer and senior vice president of strategy at Market Force, was co-presenter alongside Calabrese.
Eden-Harris opened with an overview of the restaurant industry's performance over the past few years. Sales were down 3 percent in 2009, but made a slight comeback in 2010. However, competition remains higher than ever within the industry. As customers continue to boomerang back into restaurants, it's important for businesses to differentiate themselves.
Calabrese said there are only three ways to boost same-store sales: growing the number of customers who visit; growing their frequency in visits; and growing the amount of money they spend each visit.
"The key enabler to growing the number of customers, frequency and check size is by having outstanding customer satisfaction and experience," he said.
Eden-Harris added that operators too often get too wrapped up in just measuring their business by their financials. "The customer focus gets lost," she said.
Successful companies build their brand by building their customer satisfaction, but measuring non-financial metrics is tricky.
"It's harder to data to collect, it's hard to understand because there is so much information. And it costs money," Calabrese said. The remedy is to implement more sophisticated analytics that help make this data actionable. This is exactly what McDonald's did when it began rebounding 10 years ago.
McDonald's includes customer experience metrics in growth plan
To add a measurement plan that made many people uncomfortable was difficult at a company the size of McDonald's.
"We made a commitment. This wasn't just another initiative to us. It took a lot of time, a lot of communication and a lot of training. It went back to the basics and held people accountable. It was a lot of work and a lot of anxiety," said Calabrese. "But the results went beyond our wildest expectations."
Those results include significant same-store cash flow growth; growth in brand loyalty; and lower employee turnover.
While new products, value items and re-imaged restaurants helped yield some of this success, so too did the measurement system that was put into place. The key enablers of putting that system into place, according to Calabrese, were:
- Leadership's unwavering support
- Dedicated cross-functional team
- Restaurant-specific measurement tools and metrics
- Funding to capture the necessary measures around critical drivers (operation, customers, employees)
- Work via a third party partner to conduct measurements
- Technology platform
- Comprehensive training
- "Communication, communication, communication"
- On-going enhancement of the program
The benefits of each tool
The biggest tools in the program are operational reviews, mystery shops, customer satisfaction surveys, employee commitment surveys and overall performance score indexes.
Operational reviews gauge a restaurant's performance in quality, service, speed, accuracy, friendliness and cleanliness. They should be conducted on both an announced and unannounced basis throughout the year depending on past performances.
Mystery shops should be conducted by an outside third-party company. Calabrese suggests conducting mystery shops at a minimum of once per month, and more for poorer performing units.
Customer satisfaction surveys uncover key questions the operator would like to know about a customer's most visit restaurant. The questions should be conducted by an outside third party, should be concise, and should be reported weekly. Calabrese suggests offering incentives for those taking the time to provide feedback.
Employee commitment surveys are ideally conducted at least once a year, with an outside firm. "You can only deliver excellent customer experiences through employees who are happy and engaged," Calabrese said. "They are the face of the brand."
Overall performance score indexes are based on all of the measurement tools used. For this, technology should be leveraged "to the hilt,' said Calabrese.
The purpose of all of this effort, he said, is to capture the data electronically and report to people responsible for the restaurants so they can take appropriate action toward improvement. Restaurants with higher customer satisfaction outperform lower-performing restaurants by 2-3 percent in comparable transaction growth.
"It's very important for restaurants to remember that the customer drives everything. They visit more, they spend more and they tell their friends. They are the engine of same-store sales," Calabrese said. "You have to measure their satisfaction. It is just as important as financial metrics."
Listen to the entire webinar, including an extensive Q&A session, here.