McDonald's: An Alternate Perspective

It seems when you operate the world's most successful franchise, you become the target for every criticism or headline--59-year-old Don Gorske, already in the Guinness World Records 3 years earlier, just ate his 25,000th Big Mac; there was a movie 7 years ago called "Super Size Me"; the Nutrition Police are out to ban the clown Ronald McDonald; San Francisco has effectively banned the Happy Meal, by outlawing the distribution of free toys with child-size meals not meeting certain nutritional standards. And, of course, the modest wages for relatively low-skilled work have become a favorite target of progressive politicians pushing so-called "living wages" legislation.

My position with McDonald's is somewhat nuanced. First, I have owned a small number of shares for years in its direct investment program, but my position is not material relative to my portfolio and I have not actively traded my position in years. Second, my interest in McDonald's is sentimental for a couple of reasons.  My dad was career-enlisted in the Air Force, with modest wages for raising a large Catholic family. My folks rarely had the budget for us to eat out regularly; a trip to McDonald's was a special treat, typically on special occasions like one of us kids having a First Communion or Confirmation. 

Years later I was taking a capstone business strategy course in the MBA curriculum. The key team course project was to analyze a company and present a business strategy plan. I joined a team with 3 other people; two members of the team were passive, and so the third member and I took charge and started brainstorming possible companies. During small talk, it turned out before my colleague was married, he and his wife were working in cities about 150 miles apart, and on weekends they would date by meeting at a McDonald's about halfway between the cities. As soon as he uttered 'McDonald's', I knew we found our target company. 

During the process of analyzing the company, I had to navigate past the Ray Kroc-isms (the legendary company founder, a milk-shake mixer salesman to the namesakes; see also here). There's a lot of standard management theory here (e.g., Taylor principles), basically in terms of simplified menus, consistent food preparation, etc. I'll never forget one laughably absurd Kroc-ism: did you ever note that McDonald's doesn't sell the all-American hot dog? Ray Kroc said, "There's only one way to cook a hamburger: you fry it. There are so many different ways to prepare a hot dog..." There is little wonder why Burger King constantly markets its burgers as flame-broiled and that you can prepare the burger the way you want vs. the standard McDonald's way... As for the hot dog: New York street vendors and baseball parks somehow manage to sell large volumes, and you have dedicated hot dog chains like Nathan's Famous. I still have a copy of our final team report, but one thing in particular I remember is that I had criticized the chain's very conservative business expansion plans. The reason this point sticks with me is I went to a local Walmart's about 2 or 3 years back and unexpectedly found a small-scale McDonald's operating in the store; in fact, there was a standalone McDonald's within a couple of blocks of the adjoining intersection. So clearly McDonald's has made some business strategy changes since my MBA project.

There is a lot to say about  the legendary consistency of the McDonald's experience. I traveled to São Paulo, Brazil on a couple of business trips in 1995, one of them an extended visit for nearly 3 months. I ate out all the time, but one of the problems I found was that the restaurants had a hard time maintaining consistency because of chef turnovers. I was very happy sampling Brazilian cuisine during my extended stay, but every once in a while I just wanted a decent American burger and decided to go to the ubiquitous Golden Arches. I was stunned to find a line stretched out into the street--this in a lower-wage country where, at currency exchange rates, combo meals cost somewhere near $7.  Other than have to speak Brazilian Portuguese to order (it's amazing how fast a hungry overweight American tourist can pick up enough Portuguese to get by), I found the experience no different than eating at a typical McDonald's back home--the place was clean, the food tasted the same, the service was quick, etc.

In many ways, business success can make company management both conservative and arrogant. It is conservative in the sense that what it is doing works; its customers buy a lot of food, and the company makes a lot of money. "If it ain't broke, don't fix it." [The following is not based on any interview from company management but is based on my interpretation of their perspective.] The corollary from company management is that the customer himself decides; it is providing what the public wants. If the customer doesn't want to buy, he or she won't. We don't need elitist food critics talking down to us; we have focus groups that test our products before we ever roll them out. And guess what--people don't buy the kinds of food the critics want us to sell. Their criticisms are misguided; what the critics really don't like the kinds of food Americans serve at their own homes: have you looked at the nutrition in mac 'n cheese, peanut-butter-and-jelly sandwiches, pizza, etc.? We are just a convenient scapegoat. Listen, if the preponderant numbers of our customers wanted the tofu burgers, we would sell tofu burgers: what we are really selling is fast, consistent, quality food at a competitive price, we offer busy parents a break where we take care of meal preparation and cleaning.

I mentioned a kind of arrogance. One of the problems, from my perspective, is that management can become unduly complacent. Until a few years ago, McDonald's sold salads in fairly unattractive packaging and sold a modest number. It decided to revamp its salads, and same-store sales exploded as professional women dramatically increased the frequency of their visits, with even syndicated talk show host Oprah Winfrey noting she liked McDonald's premium salads. There are a number of things that McDonald's could go to dramatically cut carbs, salt and other nutritional considerations with modest changes (if any) in taste.

I'll give a couple of examples from my own perspective. I happen to prefer the Big & Tasty burger, the healthier version of McDonald's burgers. McDonald's has had a love-hate relationship with the Big & Tasty. They complain that it doesn't sell well. Well, let me clue management in on my experience: every time I order the Big & Tasty, it takes at least four times longer to get my order than normal. If one of the reasons you go to a McDonald's is quick service, that's not good. So I may order a different sandwich, particularly if I'm pressed for time, say, I have a 1PM team meeting. It doesn't mean I really wanted that Big Mac... At least if I'm at home, I can fire up my Foreman grill, stick a low-fat grass-fed beef burger on it, season with a little sea salt, whole wheat bread, a slice of onion, some romaine lettuce or spinach, sliced tomatoes, maybe some peppers and/or salsa. I know McDonald's is never going to serve that, but it could do better...

The second point is when I'm on business travel, I like the idea of being able to get a quality, healthier fast meal on the fly; McDonald's simply doesn't provide that option, and its website is utterly unusable for the average dieter. You have to thread your way through their menu: what lower-carb entrées or salad dressings are there? Can I get extra virgin olive oil? A whole-grain bun? A side-salad or soup instead of fries? Are there non-fried fish or chicken items without higher-carb breading? Can I get my meal bundle with bottled water? What McDonald's doesn't seem to realize is that it loses a lot of opportunity sales by refusing to acknowledge the market, just like they earlier refused to see the value in offering premium salads.

I remember when comfort food chain Boston Chicken/Market had over-expanded and made some business mistakes (e.g., going into sandwiches which cannibalized its higher-revenue entrée meals), McDonald's bought them for a song, primarily for underlying real estate, e.g., for future McDonald's stores. They suddenly discovered some of these locations were actually making a lot of money... My entrepreneurial dreams were on steroids; okay, so maybe McDonald's stumbled by accident into a gold mine, but surely not all corporate managers were blockheads: they had to see the possibilities: I could see McDonald's drive-throughs selling rotisserie chickens to working parents on their way home from work; I could see McDonald's offering new premium sandwich combos; I could see combination outlets where parents could sit down to a real meal of a quarter-chicken, turkey, meatloaf or beef brisket with sides, like its trademark mashed potatoes, steamed vegetables, dressing, or (child-pleasing) macaroni and cheese, while kids enjoyed their Happy Meals. I'm sure that McDonald's pencil-pushers had a million excuses why these concepts would never work, while they scratched their heads trying to figure out how to attract more business in the evenings when most people aren't satisfied with sandwich/nugget combo meals... (McDonald's sold off their Boston Market stores some time back.)

When I started researching a lower-carb lifestyle back in 2003-2004, I remember writing a long letter of suggestions to McDonald's; maybe I forgot mentioning I was a shareholder. I got back a response from one of their lawyers whom went out of his way to explain not a single McDonald's manager saw a single word I wrote, that the company doesn't want any unsolicited advice (and if they needed any good business advice, they would get it through the management consulting company of their choice). I suspect that the real reason is they are afraid if they admit to listening to what their owners/customers have to say, those people may try to sue them for the market value of their suggestions...

I won't reprint my original letter here, but let me list some revamped recommendations:

• Provide healthier/dieter meal combo options: McDonald's needs to improve its website and menu options to quickly identify and simplify ordering of lower-calorie/fat/carb food bundles (including side-salads or fresh vegetable cups and non-carbonated/low calorie beverages); improve offerings of salad dressings, including extra-virgin olive oil and no-sugar salad dressings; improve lower-calorie beverage selections/options, including skim milk, bottled water, and zero-calorie iced tea; improve availability of fresh fruits; provide whole-grain alternatives (e.g., buns or tortillas)
• Initiate soup-and-sandwich bundles. Soup can be nourishing, especially for dieters. Soup choices might include chicken noodle, beef vegetable, clam chowder, or minestrone.
• Improve non-fried menu options: Breaded poultry or fish items are a no-no for lower-carb dieters. Consider options like lower-fat chicken/tuna/salmon salad wraps using whole-grain tortillas.
• Introduce premium meal options: upscale burgers (say, grass-fed or low-fat) with fresh-baked buns and a fixings bar, similar to Fuddruckers; foot-long kosher hot dogs; sirloin steaks; comfort-food entrées, e.g., roast poultry, meat loaf, or pot roast.
• Offer economically-priced family/picnic/party bundles. Offer sales discounts correlated with order totals.
• Implement a special of the day concept. Specially-priced menu bundles may attract bargain customers, drive repeat business, and/or provide an incentive to try new or seasonal menu items. There are other ideas that could work as well. For example, I once did a gig at a television station in San Francisco. I think twice a week a local convenience store/deli would roast a turkey, and people would line up to buy a fresh roasted turkey sandwich. You could easily extend this concept to, say, carving beef or ham.
• Initiate a classic kids menu. I have enough siblings, nieces and nephews to know there are food items kids love--maybe it's old fashioned peanut butter and jelly, macaroni and cheese, hot dogs, grilled cheese, BLT's, etc. (I'm sure mothers can think of others.) Why sell something Moms already make at home? Maybe that's the point...
• Establish a frequent customer program. Imagine if you could earn a meal combo coupon for your child at college or donate it to a local charity. Or perhaps working parents could earn points towards a McDonald's wishbook item (or donate them to Toys For Tots or similar charity). Alternatively, McDonald's could introduce discounted, refillable customer cards.

The Food Police: They're Coming To Arrest You...

One of my favorite rock groups of the late 1970's, Cheap Trick, had a slightly paranoid hit song "Dream Police".   Quite often this suspicion of government spying is the result of a chemically altered state or mental illness. I once mentioned in my political blog hearing a young woman in an upstairs apartment in my last complex scream for help. As I headed for the building entrance I saw the woman's purse and other property strewn down the stairs from the apartment directly above mine. He had chased her out the building, apparently keeping her from leaving in their car. They both spotted me at the front, and she ran in my direction in the rain, pleading me to call the police. She was probably all of 5 feet tall and 100 pounds soaking wet--and sporting a purplish eye swollen shut. The guy was more my height and a sturdy build and tried to convince me to call the police to protect him from her... (I have zero tolerance for violence on women and children.) I waited with the young woman until the police arrived. I don't quite understand the young woman; she didn't want the police to arrest him, just give him a stern warning. She insisted he was a good guy most of the time but he only got this way on drugs. She explained drugs make him crazy and she was trying to get him to stop: he was obsessed that the FBI was spying on him and that I and their upstairs neighbor were in a conspiracy to gas his apartment.

But sometimes it's not one's imagination. In my last post I described Rainbow Acres, a small Pennsylvania Amish farmer Dan Allgyer busted by the feds for smuggling raw milk, a nutritionally superior product, into Maryland and Washington DC.

The Daily has an interesting video report (which you can watch in a separate browser tab or window). The tongue-in-cheek reporter is embedded in yet another nefarious conspiratorial Amish operation to sell quality, wholesome raw milk in New York City to willing, knowledgeable consumers. Notice the firearms raised against the famously non-violent Amish sellers. (No doubt when they did a pre-dawn raid on the Amish farm, they must have said, "Sir, take your hand off the teat, and back slowly away from the cow." I suspect on the long ride back, they must have gotten thirsty and drank the delicious evidence.)

Yesterday there was a high-profile Rally for Food and Farm Freedom focusing on the raw milk; for a particularly well-written post on the rally, see Franklin Taggart's post; he has been a Rainbow Acres customer for years and firmly believes Farmer Allgyer's food products have made a positive difference in helping overcome past health issues. Ron Paul (R-TX), before his recently announced Presidential bid, filed HR 1830, the Unpasteurized Milk Bill...

Just in case you think the two raids are exaggerated out of context, Grassfed on the Hill has a more detailed listing of recent small farm raids available here. Another key source in the battle of culinary choice, is Keep Food Legal.

Of course, Big Nanny somehow allows consumers to buy raw fish, raw eggs, raw vegetables, raw nuts and raw meat, and I'm unaware of any sushi bars being busted. Coming from a lower middle-class family, I never never encountered dishes like steak tartare; I remember just arriving as a new UWM faculty member; Dr. Haseman was hosting a reception for his doctoral student's successful defense of  his dissertation. (If Dr. Scamell had a party after my graduation, the point would have been my not being there...) I was startled to find a huge mound of ground round steak with plates of sliced onions and slices of white bread. I was told it was a well-known Milwaukee tradition (I believed they called it a "scavenger sandwich.) I had eaten raw ground beef before, but I was on a Boy Scouts campout, and it had rained so much overnight, we couldn't get a fire started...

Of course, the government's zealous micromanagement of foods doesn't just extend to raw food or to the federal government: one has to cope with multiple business licenses, health department inspections, taxes, zoning laws, etc., all of which serve to restrict entrepreneurial food vendors. Consider this segment from a Mother's Day rant I wrote for my political blog:

What Is Threatening to Bureaucrats About Lemonade Stands?


Remember when I posted last August about a sweet 7-year-old girl from Oregon, Julie Sweeney? She was trying to sell lemonade for 50 cents a glass. She ended up getting bullied by health inspectors (despite the fact she wore gloves and kept things covered) and by other bureaucrats for not having a business license, risking hundreds of dollars in fines...


Nicolas Martin, an Indianapolis native, wrote an LA Times op-ed of his experience trying to guide his 8-year-old daughter through the quintessential childhood business. Lemonade Day started in Houston on May Day 4 years ago and has grown to some 28 cities, last year involving some 38,000 students (just in Houston) raising a million dollars for charity. His property borders a busy urban trail on weekends operated by the park division. Martin and his daughter considered the possibility of her operating an exclusive, profitable location for passing cyclists, pedestrians, and rollerbladers, maybe giving her a chance to put aside some savings for her college fund.


It turns out Indianapolis does participate in Lemonade Day--but only on May Day and only in specially designated areas. To do it at any other day or location may expose the child (or, more likely, his or her parents) to stiff fines or even jail time: Martin went through a 3-day odyssey involving or researching the park division, health division, zoning laws, building and vending licenses, taxes... Chances are, nobody would like the bad publicity of enforcing these laws on kids, but the veto complaint of even one killjoy would likely bring out the enforcement goons. Martin didn't even get anywhere with Lemonade Day organizers, suggesting these considerations provide a learning experience of having to deal with government burden. So Martin had to surrender to the powers that be, fighting to compete, along with dozens or hundreds of other stands along a limited stretch of the parks (because surely people will get thirsty just in one stretch of the park). (Does the faithful reader remember my favorite anecdote of the lost quarter?)


I don't mean to rain on the May Day parade, but isn't it time we decriminalize neighborhood lemonade stands? And I don't mind charity drives, but isn't it time we stop demonizing for-profit businesses? (I understand Obama must love this idea about picking and choosing how and where to operate lemonade businesses--and spreading the wealth around. I bet he has a 2000-page plan for operating a stand...)


If kids can earn a few bucks mowing lawns or shoveling snow, why can't they sell cookies and lemonade without being hassled by pushing-on-a-string petty bureaucrats (no doubt justifiably in a panic over those urban legends of mass illnesses resulting from rank child-sold lemonade...) If I was a city administrator, the very first thing I would cut would be the self-important civil servants with all that extra time on their hands to go around busting child entrepreneurs...

There are some signs of progress even in (gasp!) Washington, DC. (The local government, not the federal.) I'm speaking, of course, of food trucks, constantly harassed in places like New York where it becomes next to impossible for new food entrepreneurs to obtain necessary permits, licenses, etc. Look at the long line to get $15 lobster rolls in the following Reason.com video:

FDA Overreach: Blocking Raw Milk Sales

I have not posted since December 2009; I'm delighted to see hundreds of readers have visited the blog in the interim, and I promise to post on a more regular basis.

I have a separate libertarian-conservative political blog which I've been posting on a nearly daily basis; the reason I'm mentioning this is not to promote the blog but to provide a context. I believe I'm responsible, not the government, for maintaining my health, including my diet and exercise lifestyle choices. I think there's a cost and benefit analysis relevant to government intervention in the marketplace. These regulations often have the effect of restricting consumer choice, and regulatory costs must be passed along to the consumer.

Clearly we have safety concerns (e.g., Salmonella, Escherichia coli, and Bovine spongiform encephalopathy); these dangers are not transparent to the unsuspecting consumer. There are a number of potential issues from farm operations to food or feed processing, e.g., unhygienic food preparation (unwashed produce, unclean hands, pest problems, improperly thawed foods, overexposed cooked foods, etc.), inadequately maintained/cleaned equipment, infected manure fertilization, contaminated water irrigation, insufficiently heated foods or feed processing, and meat, eggs or milk from ill animals. We have typical audit standards: the extent to which farmers, food processors or restaurants can document ongoing compliance with industry safety standards and/or relevant regulations (for example, we heat feed to a temperature guaranteeing any harmful bacteria are killed) enables federal or industry inspectors/auditors to devise an audit plan (such as checking and validating the purported temperature measurement). If, on the other hand, there is no documentation of standard procedures or ongoing record keeping at sufficient detail, we may need to expand the nature of the audit plan. And obviously if there are no verifiable effective controls in place--whether it's inadequate separation of diseased animals from production processes or produce or manifestly unkempt kitchens or facilities--we may need to suspend operations until compliance can be verified.                                  

I also believe that regulators should attest to certain marketing claims made by businesses, e.g., this fish is wild-caught (versus farm-raised), younger (versus older) or was caught in Alaska, this produce is organic, or this chicken was processed air-chilled (versus standard water-immersion). [As an aside: younger and/or wild-caught fish are thought to have lower metabolized exposure to mercury or other contaminants. I don't have any business relationship with SmartChicken (see above link); my Columbia, MD Safeway once had their whole chickens on special, and I tried one and was blown away by the difference in taste versus, say, your 88 cents/lb. roaster on sale at Sam's Club. It's pricier (roughly $8 per 3 lb. bird); if you are interested, they have a store locator or you can order directly.]

Several years ago my middle sister married a high school sweetheart. My brother-in-law's father operates a small ranch in east Texas raising a few livestock. I went to visit them in married student housing at a nearby university, and while I was there, my sister prepared this roast, which she informed me came from "Blue Eyes", one of her father-in-law's grass-fed livestock. The meat was perhaps a little tougher and tasted somewhat different from the supermarket beef I was used to buying, but I liked it.

So flash forward several years to around 2003 when I started paying more attention to my diet and started looking into nutrition more seriously. I never had glaring deficiencies in the sense I was never a big purchaser of snack foods or or sugary items or desserts (about the only time I eat them is on social occasions, e.g., refreshments at breaks during a training class); I almost never eat out unless I'm traveling on business. But it was clear I didn't really have an appreciation for the value of dietary balance and  nutritional diversity of various fruits, nuts, and vegetables, the effects of refining various foods (e.g., the fact that regular white bread has been stripped of various nutrients available in whole grains) and the suboptimal effects of a starch-heavy, lower-fiber diet, particularly on those of us with a propensity towards weight gain.

One of the things I blackboxed was the effect of the product life cycle. I, of course, had heard the old saw that "you are what you eat". But, for instance, I knew about dietary concerns over excess consumption of saturated fat, but I didn't realize that most supermarket beef was conventionally finished to make cattle fatter (i.e., to improve the taste of the beef, with the satiety effect of fat). In order to do that, they feed foods not metabolized well by cattle (such as corn). Corn and other foods are rich sources of omega-6 fatty acids, and we have seen the optimal omega-6 to omega-3 fatty acid ratio explode in the American diet over the past few decades--which I personally believe correlates with the higher incidence of obesity in Americans.

One alternative is to get back to a more healthy essential fatty acid ratio is through more traditional diets:




I have purchased some grass-fed meats locally, but I remembered my sister's roast and felt (given the premium pricing) if my brother-in-law or his father ever decided to competitively market their beef, I was willing to throw my business their way. In fact, over the past year or so, it looked like my brother-in-law was considering a second career raising beef. My sister gathered a number of grass-fed beef recipes, and my niece, a graphics designer, had put together a website extolling the ranch and a business logo. But suddenly his business model changed, aimed more at marketing conventionally finished and processed premium cuts of beef at very competitive prices from other suppliers.

I was confused by the change in his business model; he explained that to sell meat across state lines, he had to go through a USDA inspection process and given his smaller operation, that wasn't feasible.

Now the observant reader may be wondering, what does grass-fed beef have to do with my post heading dealing with raw milk? The same type of  "you are what you eat" considerations apply to the milk you drink. For example, the rancher in the above video references CLA; CLA is proportionally available in raw milk produced by grass-fed cattle, e.g., by the Amish.



The FDA has decided to protect residents of Maryland and Washington DC from the health benefits of raw milk produced by an Amish farm, Rainbow Acres, in Pennsylvania by blocking its sale. For your convenience, I'm embedding the guest editorial below:

Guest Editorial: IBD, "Raw Deal"



My personal opinion? The editorial is spot on. Instead of the federal government pushing on a string to prevent giving consumers a healthier alternative to Big Milk, they should stick to their core competencies of regulating Big Agriculture instead of targeting the industrious small business Amish farmer, whom drinks his own milk and knows his sales are dependent on maintaining the quality of his product.