For every business momentum is key, whether that is losing, regaining, building up or building on it. Mark Wingett looks at three companies - Bill’s, McDonald’s and Young’s – which currently have different relationships with momentum, one has certainly has it, one has lost it and the other it could be argued needs to build on it or maybe face needing to regain it.
The last time I encountered Steve Easterbrook, the new chief executive and president of McDonald’s was at the PizzaExpress in London’s Charlotte Street, when he was serving my table. He was in the midst of his induction week ahead of his brief spell as the chief executive of the then Gondola-led chain. Even waiting tables there was an insight into the personal touch that he made brought to McDonald’s UK as it began its turnaround on these shores.
As he said at the time of taking the fast food chain’s top role here: “We wanted to send a signal of a step-change in the way that we were going to be seen as a business. We were a faceless business – we were seen as being difficult to get to, and introspective.”
In many ways, Easterbrook faces the same challenges in his new role, as the first Briton to head the fast-food business in its 75-year history. He needs to globalise the success that continues to make the company’s UK business the one light in the global group’s increasing dark after an annual decline for the first time in 12 years.
A McDonald’s employee since 1993, Easterbrook had a meteoric rise through the company’s ranks and, after his success in Europe, was tipped to one day take the company’s highest role. Despite brief sojourns to oversee PizzaExpress and Wagamama, it was always felt that he would return to the Golden Arches in due course.
His promotion has been widely welcomed in the US - shares in McDonald’s were up 3% in premarket trading Thursday, but Easterbrook faces a number of well-documented challenges including dealing with its stagnant business in the States and its “total brand confusion”, according to Yale management professor Jeff Sonnenfeld.
“The quality of the food, the price confusion—are they going to be the place where you go for value meals or dollar meals or are they trying to upgrade it?” asked Sonnenfeld. Harking back to Easterbrook’s impact on the chain’s turnaround in Europe and the UK, Sonnenfeld said that he was a proven implementer and a leader with ideas, and “can make a big difference”.
Easterbrook will need to reinvigorate franchisees, who want the company to take a more regional approach to menu offerings rather than a one-size-fits-all approach. He also faces the challenge of the better burger movement, led by Five Guys and Shake Shack, plus the fast casual movement in general, highlighted by the more consumer-savvy and health-conscious Chipotle.
The company is currently trialling a new cafe concept in Australia after rebranding its McCafe in Sydney as The Corner, which serves gourmet salads as part of plans to take the chain more upmarket to appeal to millennials. The group will need to do much more to turn the corner in terms of sales and momentum is currently slipping. However, in appointing Easterbrook many will feel McDonald’s has taken the first step in putting that right.
It may seem harsh to suggest that Young’s needs to build on its current momentum or maybe face needing to regain it, especially as the company reported a 7% rise in like-for-like sales across its managed estate in the 26 weeks to the 29 September and saw its tenanted estate return to growth with total revenue up by 12.3% and by 4.6% on a like-for-like basis. Impressive enough, but there is a feeling that the company needs to make another statement of intent, especially after the acquisition four years ago of Geronimo and the subsequent lift it gave the whole business.
It is still being successful in picking off impressive single site options and the acquisition of the four-strong 580 Group has opened the door to adding further free-of-tie options to its estate, but there is a sense it should be diversifying its offer more – its new “pub on the go” the Curious Pig aside.
Fellow London-based operator Fuller’s has invested in The Stable, while Marston’s and Greene King have both let it be known that they are keen to invest in smaller food-led groups. It is thought that Young’s has already started to explore options for investing in a complimentary business and I understand it has already run the rule over one central London based operation. With David Page and the former The Restaurant Group executive Trish Corzine on its board it doesn’t lack for knowledge in the restaurant space.
As I said, it may be harsh to suggest that Young’s is under any pressure to change in any way its current successful approach, but it has momentum and better to build on it than have to at some point regain it.
You couldn’t accuse Bill’s, the Richard Caring-backed concept, of currently lacking in momentum. As reported by M&C last month, the 53-strong company is on track to post full-year turnover of close to £90m in its current financial year and has a current run rate EBITDA of over £14m. Average weekly sales across its estate are believed to be around the £35,000-mark.
Turnover for the year to 27 July 2014 was £53.9m, up from £27.5m the previous year, while EBITDA climbed from £3.7m to £7.7m, in a year in which the brand opened 18 sites to reach 41 restaurants. It plans to open a further 20-plus sites over the next 12 months and believes there is scope for over 250 openings in the UK for the brand. As a sales pitch it speaks for itself and many expect that a process will be started sooner rather than later.
I believed that the business should have come to market last year, with momentum strong and an impressive pipeline already in place. That pipeline continues to be strengthened and it is thought that the success of a handful of openings in the North has already assuaged fears that the brand would struggle to translate its success out from its South East heartland.
Another factor in the timing of a process is the trouble the team behind the brand, including Andy Bassadone and Chris Benians, is thought to have encountered during the sale process of former sister brand Cote. It is thought that they might do their own research into what interest is in the market for Bill’s before relying on bringing in outside advice. Either way they hold a very strong hand and any new owner will hope to build on the momentum the brand currently has in spades.
