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OM PROJECT INDUSTRY VISIT

PROJECT ON MCDONALDS RESTAURANT VISIT

SUBMITTED TO: PROF. SHANKHA SENGUPTA

PREPARED BY: AARUNI SHARMA (43) ABHISHEK JITENDRA KATIRA (08) PRASHANT SINGH (19) SUMIT CHOUDHARY (18)

FAST FOOD INDUSTRY

The fast food industry, also known as Quick Service Restaurants, has been serving up tasty morsels for as long as people have lived in cities. The modern system of fast food franchising is believed to have started in the mid 1930s during the great depression. Since then everything has changed. As cars became commonplace, the drive-thru concept brought explosive growth to the idea of fast-on-the-go. Fast Food was added to the Merrion-Webster dictionary in 1951 and the fast food companies are now franchised in over 100 countries. In the U.S. alone there are 200,000 fast food locations.

The Global fast food market grew by 6.8% in 2011 to reach a value of $252,911 million. It is forecasted that in 2016, the global fast food market will grow by 31.2%. The fast food industry has even grown during the time of recession, which hit all the industrial sectors around the globe. Its no secret that Americans love fast food, which brings us to the fact that Americas accounts for 44.2% of the global fast food market.

Fast food franchises focus on high volume, low cost and high speed product. Frequently food is preheated or precooked and served to-go, though many locations also offer seating for on-site consumption. Consumers enjoy being able to get familiar meal in each location, and menus and marketing are the same in every location. The fast food restaurants or quick service restaurants is the largest segment of the global food market, accounting for 66.4% of the markets total value.

There have been challenges for the fast food industry in recent years that have been pressuring profit margins. But rather than flee from this challenge the fast food industry has been adopting new practices and offering new products. Modern society is on the go and there is plenty of demand for quick bite at all times of the day. Fast food franchising opportunities exists in the traditional spaces like burgers and pizzas, but is also sprouting up in healthy and unique ways as well. The industry as a whole has proven robust enough to withstand these challenges, though some players have done better than others. Fast food companies like McDonalds, Wendys, Burger king, KFC, Pizza-hut, Dominos, Subway, Yum brands and many more, are competing with each other neck to neck to increase their market share. All the big players cater

to almost 50% of the market, with McDonalds as the market leader with around 19% share followed by Yum! Brands with around 10%, Burger King has around 8% share and rest of them is catered by other players like KFC, Pizza Hut, Dominos etc.

The changing time has brought the way the food is served; there has been increased focus on quality of food served in fast food restaurants. Typically highly processed and industrial in preparation, much of the food was high in fat and had been showing an increase in the body mass index (BMI), which caused weight gain. Due to rise in awareness about the negatives of fast food, the companies have to change their strategies. The companies have responded by adopting healthier choices and have had some measure of success, but the shadow of bad press still hangs over the industry.

Rising food prices have also hampered the growth of fast food industry. With food and beverage inputs making up approximately 33% of costs, higher prices for livestock, corn, wheat and more have seriously have shrunk margins over the past decade. In such a fiercely competitive space its impossible to force a price increase on customers, so profit margins are often lower than 10%. The recent economic recession did lower the commodity prices, but recession brought on its own complications, and now the prices for commodity inputs are on the rise again.

Fast food had been thought to be largely recession proof, and indeed the industry did not suffer as much as other discretionary spending sectors. In fact, there was some increase in customer visits as people chose cheaper fast food options over fast casual or traditional restaurant choices. The fast food franchises fared reasonably well during the recession but still felt some pain.

Busy citizens still need quick meal options; the fast food restaurants are fighting these challenges with strategic thinking. Now offering healthy choices to battle the stigma of unhealthy food, some quick service restaurants are serving fresh or organic products. From franchises focused solely on salads or health wraps to the lower calorie options offered at traditional burger franchises such as McDonalds or Wendys, consumers are able to make better choices.

Fast food franchises are also focusing upon expanding into new product lines, such as coffee initiatives in places such as McCafe, Starbucks. Many franchises have successfully explored other meal times such as breakfast and mid-afternoon snack for growth opportunities and to increase real estate utilization.

From new cultural cuisines to fresh takes on a traditional story, there are many types of quick service restaurants than ever before.

The fast food industry is still a large and diverse industry with plenty of opportunity. As one would hope challenge is being answered with innovation, and the fast food franchises are responding with new offerings, pricing and strategies to lure more and more customers. Nontraditional fast food franchises are springing and gaining traction, and with more creativity will always be welcome. Consumers are now on the look-out for new ways to eat fast and healthy. And the industry continues to evolve and the economy strengthens, fast food franchise profitability will continue to grow.

PROFILE MCDONALDS CORP.


Every time we hear the name of hamburgers, McDonalds comes to our mind. McDonalds Corporation is the worlds largest chain of hamburger fast food restaurants, serving around 69 million customers daily in 119 countries. The company has its headquarter in Oak Brook, Illinois, U.S.A. A McDonalds restaurant is operated either a franchise, an affiliate, or the corporation itself. The corporations revenue comes from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonalds primarily sells hamburgers, cheeseburgers, chicken, french fries, breakfast items, soft drinks, milkshakes and desserts. In response to changing customer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies and fruits. McDonalds operates over 34000 restaurants worldwide, employing more than 1.7 million people. The company also operates other brands, such as Piles cafe. The company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald in San Bernardino, California. In 1948 they organised their business as a hamburger stand using production line principles. Businessman Ray Croc joined the company as a franchise agent in 1955 and subsequently purchased the chain from McDonald brothers and oversaw its worldwide growth. He hired Fred Turner as the head of McDonalds operations defining the quality, service and cleanliness that continue to this day. In the year 1958 McDonalds achieved their first great milestone of selling 100 millionth hamburger and soon the next year they achieved another milestone of 100th restaurant in Fond Du Lac, Wisconsin. After seeing through the success of the restaurants all over the country, in 1961 Ray Croc decided to open a Hamburger University in the basement of Elk Grove Village, Illinois, McDonalds restaurant. In the same year McDonalds was given a new logo with red & white arches which lasted for 9 years. And in 1969 the company finally made a huge decision to update the logo, to golden arches. After the company saw huge success in the domestic market, the decision was taken to go global. So the first international McDonalds restaurants were opened in Canada and Puerto Rico. Today McDonalds serves 119 countries. In 1965, McDonalds celebrated its 10th anniversary with the first public stock offering at $22.50 per share. And soon after celebrating the anniversary McDonalds entered into television commercials by bringing a clown named Ronald McDonald, which proved to be instant hit all over the world and helped the company to lure more customers.

As competition in the US market got stiffer the company brought in new strategies and ideas by introducing breakfast meals at all the restaurants in 1975. With distances between cities began to grow and people travelling for long hours had a demand for take-away food, so McDonalds solved the problem by installing drive-thru at various places all over the country. In 1984, the demise of Ray Croc, the founder and senior chairman of the board of McDonalds, brought sad news to the whole McDonalds family. And after that also company never lost its value of being one of the most iconic companies ever created in the fast food industry. With the world moving towards the era of internet, McDonalds always used the technological breakthroughs that came into existence and so in 1996, the company launched its website named McDonalds.com. In the year 1998, McDonalds surprised the world with a unique strategy named Made for you operating platform, which allowed greater customization of the menu items and more kitchen flexibility. And since then this strategy is being operated at every McDonalds restaurant. McDonalds through times has successfully adapted to various changes that occurred around the globe. In the early 2000s advertising for the products or service became a must for every company so McDonalds understood the need to advertise and they launched their first global ad campaign Im loving it, which proved to be instant hit all over the world and helped McDonalds in increasing their market share.

The McDonalds Corporations business model is slightly different from that of the other fast food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonalds may also collect rent, which may be calculated on the basis of sales. The United Kindom and Ireland business model is different than the U.S, as in that 30% of restaurants are franchised, with the majority under the ownership of the company. The company follows a policy in which there are no direct sales of food or raw materials to franchisees, instead the supply of food and materials is made through approved third party logistics operators. McDonalds has become emblematic of globalization, sometime referred to as the McDonaldization of society. The Economist newspaper uses the Big Mac Index, to compare the Big Mac costs in various world currencies that can be used to informally judge the currencies purchasing power parity.

McDonalds has been the face of fast food restaurants for over three decades and still it is continuing this legacy with quality, price and time. The company has surpassed many hurdles, criticism from health magazines for providing food high in fat and even rising competition growing day by day; still McDonalds is the market king with a share of around 19% in the industry. Though its share has fallen down because of new entrants in the industry, in terms of revenue earned from the sale of hamburgers, McDonalds is the firm that secures the top position in the global food industry. Even people who have invested in the stocks of the company, the company has always cared about them by paying them increased dividends for 25 consecutive years. The popularity of the food products of McDonalds has surprised everyone with Happy Meal which completed 25 years in satisfying customers needs. On April 15, 2005 McDonalds celebrated its 50th anniversary which reminds everyone about the greatest companies ever created in the history of the fast food industry. McDonalds will be the market ruler for many more years to come and people all around the globe will continue to chant the slogan Im loving it.

VISIT DETAILS
Date of visit: 10/ 01/ 2013 Place: McDonalds Family Restaurant, Shri arcade, M.No.1.2.271, SD Road, Secunderabad 500003 Contact no: +91 9642350345 Point of Contact: Mr. Venkat (Store Manager) +91 7569658672 We visited the McDonalds Restaurant at Secunderabad, on 10 th January at 4:00 pm; the store manager had called us at a time when there was less number of people visiting the store. The store was located 500 meters from the famous Paradise Restaurant of Hyderabad. We were given head caps made of cloth to cover our hair, when we entered the kitchen area of the restaurant. The restaurant visit was assisted by Mr. Shravan who was very efficient and humble to explain us each and every process of the restaurant. He started the tour from the coffee and tea making machine, and then told us details about the French fries process and its delivery. He also took us through the process of frying of patty and pizza mcpuff. He then explained the process of the assembly line i.e. the process of making a burger on the prep table. (The table on which the burger is prepared is called prep table). He then showed us the NonVeg section preparation also, as Veg & Non Veg is prepared on separate prep tables. And both of them have separate sections inside the ktichen. He also gave a tour of the storage areas; there are two storage areas in McDonalds, Viz. the cold storage and the kitchen storage area. The kitchen storage area is for the carbon dioxide cylinders (for soft drinks) and wash basins for cleaning the kitchen equipments. The veggies, patty, sauces, cream, ice-cream and cheese are stored in the Chiller and Freezer where the temperatures are kept around 2 degrees to -18 degrees. There is also a store room kept for the glasses, sugar, spoons, etc. The restaurant visit took us 2 hours to complete and they were courteous enough to help us in taking notes for each and every detail of their processes. McDonalds has one of the lean and efficient processes in the Fast food industry. Their machines for frying, bun toasting and other equipments are imported from US. They can boast of having one of the best machines and processes in the industry. Our visit ended with a complimentary pack of fries !

CONCEPTUAL BACKGROUND
What is service? We can explain service in the words that it is the management of organization whose primary business requires interaction with customers to produce the service. Our project of McDonalds corporation is the world pioneer in these aspects. The Customer is the focal point of all decisions and actions of the service organization. The philosophy is captured nicely in a triangle.

The customer centered view

The
service

strategy

THE CUSTOMER

The System

The People

AN OPERATIONAL CLASSIFICATION OF SERVICES


Service organizations are generally classified according to who the customer is for e.g., individuals or other business, and to the service they provide. Customer contact distinguishes one service system from another in the form of its involvement in the creation of service. Customer contact refers to the physical presence of customers in the system and the creation of service refers to the work process involved in providing the service itself. Extent of contact here may be roughly defined as the percentage of time customer must be in the system relative to the total time it takes to perform the customer service. The greater the percentage of contact time between the service system the customer, the greater the interaction between two during the production process.

The high contact systems in McDonalds process is shown below: DESIGN DECISION FACILITY LAYOUT Operations may be near the customer The facility should accommodate the customers physical needs & expectations Service time depends upon process The direct work force constitutes a major part of the service product so must be able to interact well with public To avoid lost sales , capacity must be set to match peak demand Stages of production process have a direct ,immediate impact on the customer Fulfilling the requirement Mcdonalds outlets support the requirement Mcdonalds have specific time set for different processes Workers are well trained

TIME STANDARD WORKER SKILLS

CAPACITY PLANNING

PROCESS DESIGN

System is designed so to capture both peak & non peak hour cm demand Customers can watch clearly sum of the process from the counters

The top of the matrix shows the buffered core, which is physically separated from the customer, the permeable system which is penetrable by a customer via phone or face to face contact as like McDonalds and the reactive system which is both penetrable and reactive to customers requirement. the left side of the matrix shows what we believe to be a logical marketing proposition , namely that the greater the amount of contact the greater the sales opportunity as in the case of McDonalds , the right side shows the impact on production efficiency as the cm exerts more influence on the operation. The entries within the matrix list the ways in which service can be delivered. At one extreme service contact is by mail, customer have little contact with the system and the other extreme cm have in their way through face to face contact. The remaining four entries in the matrix contain varying degrees of interaction In the case of our subject of study McDonalds face- to face tight specs entry in the matrix suits the most as in these situations there is little variation in service process , neither the customer nor the server has much discretion in creating the service.

SERVICE BLUEPRINTING & FAIL SAFING


Service blue print is a flow chart prepared to emphasize the importance of process design. A unique feature of service blue print is the distinction made with a a line of visibility on the flow chart The distinction is made between the high customer contact aspects of the service (the parts of the process that the customer sees) and those activities that the customer does not see.

Basic blueprinting describes the features of the service design but does not provide any direct guidance for how to make the process conform to that design. An approach to this problem is the application of poka yokes; translated from the Japanese as avoid mistakes. It is the procedure that block the inevitable from becoming a service defect The application of Poka-yokes to the services can be classified into: warning methods physical or visual contact method and the three Ts viz. task , treatment and tangibles. Task means the task to be done, the treatment according to the customer and the tangibles the environmental features of the service facility to fail safing the actions of the customer as well as service provider.

UNDERSTANDING & CONCLUSION

McDonalds has a face-to-face tight specs service system design. This is what enables it to process customer orders in less than 1 minute. It does so by having a limited menu for the customers to choose from. Additionally, it uses an assembly line process for assembling the burgers. The service process at McDonalds is as follows: 1. The customer places an order and makes the payment on the POS counter. 2. The order appears on the Kitchen Video System (KVS). 3. Within the next 2-3 seconds the first worker in the assembly line puts the bun for toasting. The toasting takes around 17-19 seconds. 4. In the next stage the sauces, vegetables and the patty is put on the bun. 5. The burger is then wrapped and sent to the counter for delivery. These two processes are finished in 6 seconds. The burgers are ready for delivery within 25 seconds. There are separate work stations for assembling Veg and Non-Veg burgers. If the customer has ordered for fries, puff or soft drinks these are also filled as per the order (small, medium or large) and delivered to the customer along with the burger. McDonalds has also developed several failsafe systems in the process. Some of these are listed below: To maintain the efficiency of the assembly line system, additional workers are added to assist in the process in case there are more than 3 orders pending on the KVS. The equipment used for putting the sauce on the buns is designed to put only the required amount on the bun at a time. This helps in maintaining the consistency in the taste of the burgers. As it takes 3 minutes for frying a batch of 6 patties, A Virtual Cabinet Management System (VCMS) is used to store the fried patties. To ensure that the burgers are delivered fresh to the customers, there are time limits set for the duration of storage of the patties in the VCMS. This time ranges from 20-30 minutes. If the patty remains in the VCMS for the specified time limit it has to be disposed.

As in the case of the patties it takes 3 minutes to prepare one batch of fries. Again the cooked fries must be discarded if not served within 7 minutes. To ensure that only the appropriate quantity of fries is filled for every order, McDonalds has a specially designed scoop for filling the fries. To maintain the consistency in the taste of the products, there are separate workstations for frying the different products. The temperature of the oil to be used for frying and the duration is also standardized. One days supply of frozen fries and patties is stored in a freezer in the kitchen itself. There are separate freezers for Veg and Non-Veg products. One weeks supply of the frozen fries and patties is stored in a separate location within the premises of the outlet. All the workstations are designed to avoid accidents and to prevent fire hazards. There is a specified cleaning and other maintenance schedule for all workstations to be performed throughout the day. All workstations are thoroughly cleaned with disinfectant solution at the end of every day.