Anton Emmanuel's Blog

As new entrants including Chipotle and Shake Shack emerge in the fast-food industry, the customer experience has been redefined. These new players seem to offer a more contemporary and relaxed twist to the traditional fast-paced dining experience—all the while, touting customization, and placing an emphasis on ethical food sourcing. This new market segment fittingly labeled “fast-casual” has piqued the interest of McDonalds Canada.

McDonalds recently unveiled a new restaurant model that involves customers placing customized orders through digital self-serve kiosks, and food being delivered to tables via servers. Most importantly, a restructured menu will host a line-up of customizable “premium” ingredients that will parallel existing menu items.

Thinking back to Michael Porter’s arguments on strategy, as I’m reading this article the question swirls—what strategic position is McDonalds taking? Variety-based, needs based, or perhaps a confluence of both? Is it possible for them to co-exist as an extremely low cost fast-food provider, and a trendy—perhaps more upscale—restaurant outlet?

In this case, data insights from equivalent models McDonalds has launched in other geographies point to some form of success. For instance, reports from France state that customers spend 30% more when customizing items. That said, I’m now curious—will there be a cannibalization effect on the existing menu? If so, are the margins on the new products adequate to overcome lost sales, and boost top-line performance?

Coincidentally, this article was released concurrent to our class discussion on strategy. Though intrigued, I’m not necessarily convinced this move will deliver the returns McDonalds is looking for. In my opinion, the McDonalds brand is synonymous with fast and cheap. And to a large extent, this value proposition resonates with its core base. Radically changing that perception is no light task.

I’m curious to see how this initiative unravels, and plan to follow the story. Future earnings reports and news briefs should shine light on the implications of McDonald’s strategic decision.

Information sourced from The Globe and Mail and  Financial Post articles. Great reads, have a look!