Turnarounds – the faster the better?

Last year saw its fair share of headline turnarounds in the bar and restaurant sector - Tragus, SFI, Chez Gerard. But 2005 promises to deliver perhaps the most high profile rehabilitation yet in the UK eating out market.

Last September, the media was licking its lips over the fall of the biggest name in fast food. “McDonald’s profits slump” the London Evening Standard shouted on its front page as it reported that the British arm of fast-food chain had been hit by the biggest profits collapse in its 30-year history after five years of static sales.

But, as I warned at the time in this very column, don’t write McD’s off yet. In the US, the giant is already bouncing back and can be expected to repeat the trick on this side of the Atlantic.

The first signs of that UK comeback are starting to be seen. The architect of the turnaround is a tough 53-year-old Canadian, who also happens to have dual British nationality, called Paul Beresford, a 28-year veteran of the Golden Arches, who was parachuted in as the new chairman and ceo of McDonald’s UK last year.

He has wasted no time getting to work. Head office at Finchley, north London, has already felt the pain with cuts in senior and middle management - “taking out virtually the entire seventh floor”, as one insider described it. But as any good business operator knows: get that bad news over quickly and make sure you don’t have to do it twice.

Out in the stores, the public has seen the salads, freshly ground coffee and now a new breakfast offering with bagels and toast (more on that in my column in the February issue of the M&C Report newsletter). Rumour has it that the next step will be to take on the Subway sandwich chain head on. It’s already McD’s biggest challenger in the States and is shaping up to be the same in Britain too. Last year, Subway was the UK’s fastest growing foodservice brand, pushing up to over 300 stores and leaping into the Top 10 eating-out chains - a table still comfortably headed by McDonald’s.

Beresford has been refreshingly honest about the corporation’s shortcomings, telling Management Today magazine: “We’re not innovating the way we used to, we’re not leading the way we used to. The world is changing - our customers tell us they’re changing and we’ve not been changing.”

All part of the PR campaign, I’m sure, but Beresford has also been true to his word getting out to meet his customers around the country.

He may seem like a man in a hurry, probably because he is. It is said that he hasn’t long to deliver and will be off again by the end of the year - and judging by his last job he won’t need it.

His last task was to rescue McDonald’s Japan, which was losing $50m a year in 2003, when he took charge. It was another market where the company had taken its eye off the ball, plummeting to Japan’s 84th favourite brand from ninth. It is now back at 16th and just as importantly back in profit. In the 1990s he also had the small job of launching McDonald’s in Russia.

It is not just in the service of food that McDonald’s aims to be fast and efficient.