McDonald’s recently woke up and smelled the coffee, but I don’t mean the much buzzed-about test of all-day breakfast to begin soon in San Diego. I’m talking about last week’s other big McDonald’s story: its decision to raise the hourly wage for crew members at its approximately 1,500 company-owned stores in the United States. It could be a pivotal shakeup from new CEO Steve Easterbrook, who describes himself as the brand’s “internal activist.”
McDonald’s obviously needs to grow traffic to turn around its disappointing sales. The brand has been proactive on several fronts, including the all-day breakfast test, the change in pay policies and a fresher approach to its ingredients—which recently brought announcements that McDonald’s would look to source chicken free of human antibiotics and some undesirable preservatives.
To me, the increase in pay and benefits has the most potential for good in the short and long runs. Restaurant brands with progressive views on compensation and benefits, from national powerhouse Starbucks to regional brand Burgerville in the Pacific Northwest, routinely show that happy crew members enable growth.
However, I first want to acknowledge the opportunity all-day breakfast would present as well.
Easterbrook has indicated a willingness to challenge McDonald’s executives’ long-held conventional wisdom, particularly their hesitance to extend the hours of breakfast, easily the daypart McDonald’s dominates in quick service. The move carries some risk, in that franchisees are likely to push back because they would rather see operations simplified, not complicated by a line extension that requires round eggs and hamburger patties to share space on the same grill.
But the demand is apparently robust for all-day breakfast. According to Technomic’s Breakfast Consumer Trend Report, 48% of consumers agreed with the statement, “I enjoy eating breakfast foods at nontraditional times,” such as having pancakes for dinner or a late-night snack.
The report also shows just how big an advantage McDonald’s has at breakfast over its competitors. Slightly more than three in five consumers have visited McDonald’s for breakfast in the past 90 days, more than double the visits for any other limited-service brand—including Dunkin’ Donuts and Starbucks.
Remember, McDonald’s has only announced a test of breakfast past 10:30; nothing is going into all 14,500 locations yet. The brand has time to figure out the operational complexity, and if they do, all-day breakfast could be a much-needed win for Easterbrook and the team in Oak Brook.
The decision to increase wages for about 90,000 employees will have some friction as well, certainly in terms of labor costs. But Easterbrook was clear about McDonald’s wanting its pay policies to bring about better performance in its dining rooms. “We know that a motivated workforce leads to better customer service, so we believe this initial step not only benefits our employees, it will improve the McDonald’s restaurant experience,” he said in a statement.
According to Technomic’s Consumer Brand Metrics platform, restaurant customers perceive problems with the McDonald’s experience compared with that at other quick-service restaurants. As of Consumer Brand Metrics’ last update in the fourth quarter of 2014, McDonald’s ratings around staff knowledge, friendly service, payment handling and order accuracy were well below QSR averages.
Those rankings could turn around if McDonald’s is able to attract the best front-of-the-house talent and reduce turnover thanks to higher wages. I’m optimistic that McDonald’s is making high-performing teams its No. 1 priority, so that its restaurants will be equipped to handle the higher-degree-of-difficulty initiatives like all-day breakfast or customizable burgers later on.