Case Study Analysis of

Operations and Process

Management of Burger
King & Old and New
McDonalds
June 10, 2013
Submitted by: Team 1 (Melissa Sherman, Beth
Schwindt, Jessica Barnes, Vijay Balijaypalli) and
Team 2 (Lin Jiang, Ting Cai, Yesh Lanka, Amol
Raste, Sai Boy Reddy,Sheng-wei(Sabrina)Chu)

Analysis of Old McDonalds and Burger King

Overview
Burger King is the worlds second largest fast food hamburger
restaurant with its major business located in U.S and Canada. The
company incorporates 12,667 restaurants in the world with 5,214, or
41%, located outside the U.S. and Canada. Franchisees own and
operate 12,072 restaurants, with the remaining 595 owned by Burger
King. Its revenues come from retail sales at company-owned
restaurants and also from collecting franchise revenues, consisting
primarily of royalties. The business model focuses on franchises, which
account for 95% of its restaurants. The high percentage of franchise
restaurants provides a strategic advantage because the capital
required for growing and maintaining the Burger King restaurant is
funded primarily by franchisees. Since Burger King has already built its
standard operation and training procedure, it should keep its strategy
by incorporating with more franchise stores to lower risk and cost and
also to obtain more locations to compete with market leader
McDonalds.
McDonalds is the worlds largest fast food hamburger restaurant with
its headquarters in Oak Brook, IL. In 1980 there were 5,951
restaurants worldwide with 4,998 (84%) in the U.S. 1,292, or about
22%, were owned by McDonalds, and the remainder were franchised,
although a third of those were located on land that was leased by
McDonalds. McDonalds has a similar strategy of franchising
restaurants and expanding in order to make money through per-store
income, franchise royalties and rent from franchise owners on
McDonalds land. Today McDonalds operates over 34,000 restaurants in
119 countries, employing 1.7 million people and service 68 million
customers daily. However, recently McDonalds is changing its focus
and slowing expansion in order to grow per-store profits. Both
companies place their restaurants in high traffic areas.
Process Design
Burger Kings process builds on a customized, made-to-order process.
Rather than stock finished goods in inventory, Burger King produces
and stocks standard components in a steam table and prepares the
ingredients in a non-finished process. Then employees assemble the
semi-products when customers place their orders. Burger King
provides better, fresher food with this process, although the waiting
time for the customer is comparatively longer than the made-to-stock
process. Burger King should slightly change its process to stock some
inventory for major products in peak times to reduce the waiting time.

Burger King has a machine called the Continuous Chain Broiler with a
capacity of 8 burgers per chain, and it requires no human intervention.
Patties are placed at one end, and after 80 seconds they come out the
other end one-by-one. In the working station, Burger King only needs
one worker to place the raw materials into the broiler and assemble
them after the broiling process, and the worker could make 12 burgers
(or 8 sandwiches) a time. The simple process implies that Burger King
requires less staff than McDonalds. Burger King could generate 100
Whoppers and 200 burgers in an hour, which means the average cycle
time is 12 seconds for a burger and 24 seconds for special sandwiches
such as fish and chicken.
On the other hand, McDonalds cooks their hamburgers on grills,
batching 12 patties per grill, and it requires human intervention to
turn, sear, and pull the patties. This batching process favors the maketo-stock environment since it can produce a lot of product in a little
amount of time. Cycle time for McDonalds is 100 seconds for a batch
of 12 patties, so 8.3 seconds per patty, faster than Burger King.
McDonalds idea was to serve uniformly high-quality food that was
delivered quickly and in a clean atmosphere. The emphasis was on
quick order times, in contrast to Burger Kings emphasis on fresh,
custom-order foods. Both companies traded either time for quality or
quality for time.
When McDonalds customers entered the restaurant they would walk up
to an open window. Employees would take the order and punch it into
a computer. They would read the order back to the customer,
assemble the order from pre-made food being stocked in warming bins,
and then they would collect payment. The aim was to have customer
wait less than 1 minute in line and 30 seconds at the counter, and the
Hillybourne location was averaging 2 minutes and 3 seconds total wait
time. The drive-thru had a similar process. After the order was taken
and punched into a computer, the order was assembled using
computers displaying the order information over food bins. The
payment was made and the order was presented. Area standards
allowed 30 seconds on the drive-thru pad per car.
The food flow went from inventory to preparation to being held ready
to serve in warming bins to either the counter or drive-thru to present
orders. There was a specific order in which workers filled orders
moving from cold drinks to warm drinks to sandwiches to dessert and
finally to fries. At the counters, as the customer volume increased,
more windows were open for customers in order to distribute the
orders and increase efficiency. A backer then helped assemble orders
and was available to help optimize the teamwork and cooperation
behind the counter.
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There are six standard sandwiches on the McDonalds menu, which are
produced from three pre-portioned frozen meats. Meats are placed on
the appropriate grill in batches, seared, turned, pulled in pairs at times
signaled by lights and buzzers, then the grill is cleaned. Buns are
grilled and dressed while the meat is cooking, caramelizing half first
then the other half while the first half is being dressed. Burgers then
receive cheese and are slid onto the dressed buns, wrapped and
placed in bins. Filets were placed in wire baskets, deep-fat fried for 3.5
minutes, buns were steamed for 90 seconds and dressed, the filet was
put on the bun, and it was wrapped for the warming bin. Frozen french
fries were thawed for 2 hours in a basket, fried for 2 minutes and 5
seconds, drained, emptied into hopper with heat lamps, scooped and
stored on a carousel for up to 7 minutes. Pies were fried in a vat for 6
minutes, boxed, and held up to 90 minutes in a warmer.

Burger Kings menu is best known for its flame-grilled cooking process,
which results in better tasting burgers. Instead of developing a more
creative menu or new burger flavors, Burger King prefers to maintain
its menu by focusing on its core products, such as their flagship

Whopper sandwich. Their products were also designed for bigger

patties, thus their major customers are mostly teenagers and males.
With the fast spreading concept of eating healthier, people are starting
to care about a healthier diet. Burger King intends to broaden its
products to meet this demand by launching expanding product
platforms and introducing 21 new or improved menu items in 2012.
However, compared with McDonaldss menu, Burger Kings menu still
does not provide as abundant choices as McDonalds.
Wrapper and Special Orders
Burger King applies special wrappers to maintain foods quality and
freshness and to mark a number to show how long the food is being
made. The pictures on the wrappers also represent the special recipes
for special order customers. It could better prevent people who work at
the counter from giving the wrong orders and having customers
receive the wrong burgers. At McDonalds order-takers made note of
special orders on a slip of paper and handed to the grill workers who
then kept it under the bun top to identify it. Because of the extra time
for additional requirements, consumers would be told to step aside
while counter workers helped the next customers. This was also the
process for regular sandwiches when a regular sandwich was not ready.
Food Waste
Burger King uses a microwave in its production process to keep food
fresh and warm whereas McDonalds serves fresh burgers off the grill
and stores them in a bin. At McDonalds, if the food is not served within
10 minutes, the food is discarded. Microwaving may affect the
freshness and taste of the Burger King burger, and thus the quality of
their burgers may deteriorate compared to McDonalds. However,
because of this process, Burger King only presents 0.4% waste while
McDonalds spends 1.9% more. Also, food wastage leads to paper
wastage for McDonalds. McDonalds spends 0.9% more on paper
wastage compared to Burger King.
Supplies and Maintenance
Burger King receives supplies once a week, and the raw materials are
ready to use. Burger King stores require a 2 hour preparation time
before opening for the food and machine set up and 1.5 hours for
cleaning after the restaurants close. McDonalds stores also receive
one delivery per week from local suppliers of milk and buns. All food
arrives ready to use. However, both opening and closing the store
takes about an hour resulting in less setup and cleaning time than
Burger King. Crew members set up or clean machines, restock, count
change and check for cash shortage and so forth. At night, a custodian
cleans the store, and during slower periods, workers moved stock and
tackled various cleaning chores. In addition, workers periodically
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patrolled the parking lot, lobby and rest rooms to empty trash bags
and to ensure that each area was clean. 4 freezers were used, one in
the back lot and 3 in the kitchen, 2 of which were near the grills and
were restocked during slow periods.
Human Resources
Burger King prefers to use part-time staffs with a starting pay of $3.10$3.50 hourly, and the workweeks are from 3 to 40 hours. Workers will
have a 10 cent increase after two weeks if they perform well, and they
will be evaluated after 60 days. They will also have non-dollar benefits
such as half-price meals, flexible working hours and Saturday off.
However only full-time staffs receive a pension and life insurance.
Burger Kings hourly wage expense is about 17.7 % whereas its salary
for full time staff is 6%. It implies that the staff might have a higher
turnover, which means the management cost will be affected.
Turnover was high and was a problem at both restaurants and
continues to be a problem today. McDonalds employs 45 hourly crew
members, most under 20 and most women. The full-time day crew
members tended to be older and to show significantly less turnover
than the part-time, although the overall turnover rate was about 60%.
The manager made the schedule, aiming to keep a sustainable pace
that workers would maintain over the long run. Training consisted of a
series of videos and an eight-section training course, and employees
were encouraged to learn several jobs instead of gravitating toward
one. McDonalds also introduced a bonus system called Crew Bonus
System (CBS). In this program, crew members would receive minimum
wage plus a thrice yearly bonus check determined by multiplying
actual hours worked during the bonus period by a bonus factor
(cent/hour) keyed to performance and seniority. Performance reviews
for crews were conducted at the end of each bonus period. Salary for
managers range from $12,500 to $27, 500 and raises were also tied to
performance rankings. Full-time employees received medical, dental,
and life insurance (80% company paid) after one month of service.
After one year part-time employees received one week of paid vacation
while full-time received two weeks. After 10 years of service, full-time
employees received an eight-week paid sabbatical. Promotion
progressed from trainee to second assistant manager and first
assistant manager to store manager, which included operation
courses, self-pace workbook study and increased responsibility. The
manager also built community ties to consumers and established a
cooperative team.
Inventory and bins
Burger King stocks inventory during the assembly as semi-finished
goods on the steam table, and these goods are assembled after the
customer places an order. Thus, the idle time for Burger Kings
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complete finished-goods are short, which means it could reduce the

amount of discarded products. This has a financial advantage,
because it is less costly to discard unused semi-finished goods since
the total value of the product is not added together already.
McDonalds products are discarded as finished-goods inventory, so the
total value is already added to the product, labor plus material costs.
At McDonalds the production area and the counter/drive-thru could not
see each other, so a bin manager was required to call for production,
manage the flow of product into the bin, and keep the bins stocked and
organized. The bin manager also wrapped products. The store
manager could predict sales volume pretty accurately and stock the
bin to about 50% -75% of what was expected to sell in the next 10minute period. The manager could judge pretty well by experience
and through the past few weeks data how much inventory was needed
for the time and day of the week, noting any special events, the time
of the year and the weather. Any product not used after 10 minutes
was discarded. During slow periods counter-people or a floating
manager called orders back to the cooks to maintain minimal stocking.
Before peak hours start, runner of the bin would build the bin and try
to run it smoothly. Based on who is on the grill or the team in high and
low demand periods, stocking schedules would be flexible.

Analyze the Old McDonalds Operating System

and the Newer Systems
How is the newer 2001 McDonalds system different from the
old system?
For a long time McDonalds was growing at an astounding rate, opening
well over a thousand new stores per year. Most of the business
strategy was focused on franchising new stores and collecting royalties
and rent from the franchise owners who were on land leased by the
company. In fact, a large portion of McDonalds profits came from land
and rent instead of per-store profit, and they became a type of realestate focused company instead of fast food company. They
franchised about 85% of stores and would get 4% royalties as well as
rent money that equaled about 10% of sales. In 2003 the company
totaled $15.4 billion in revenue, $2.1 billion in operating income, and
$893 million in net income.
Eventually they realized that they would not be able to expand forever.
They were already seeing that they were cannibalizing their own
business by placing stores too close to each other, so they turned to
increasing their international expansion. Expansion overseas had not

gone as planned, however, with problems like mad cow disease,

financial crisis in different countries, and using McDonalds locations as
points of anti-American terrorism acts. Profits were slowing and debt
was growing. The company realized that their focus needed to change
from expansion to increasing per-store profit.
The company decided to reduce store openings and focus on getting
more customers into the already existing stores to increase sales.
They wanted to do this by regaining the restaurants image as a great
American meal instead of just a leader in fast food. Customer
satisfaction ratings were much lower than industry competitors with
customers specifically citing slow, rude and inaccurate service. So
they implemented stricter store grading with mystery shoppers and
regional inspection officers in order to improve or eliminate
underperforming restaurants. They also wanted to add new menu
items to help raise scores.
McDonalds also realized that it was trading food quality for faster order
times, so they implemented the Made For You system in 1998 in order
to make fresher, hotter, made-to-order food for customers. The idea
was to make the consumer the new boss. This was no small feat, with
the kitchen redesign costing between $30,000 to $60,000 per
restaurant, and a total $181 million project. Plus, only half of this cost
was covered by McDonalds, and the other half was the responsibility of
the franchisee. The new system shortened or eliminated some
production steps like using 11 second toasters for browning buns and
using computers to coordinate orders. Even with these changes,
however, order time increased from 11.5 minutes to 23 minutes, and
managers did not see sales increases. Still, the company maintained
that the Made For You system would improve the taste of food by
ensuring that it is always fresh, and it would help facilitate the
introduction of new products in the future. This was the first layout
design change by McDonalds that did not yield immediate results
(other layout changes included indoor seating, drive-thru windows and
play areas).
The Made For You system starts with an employee taking the order and
punching it into a computer. The order is then read in the kitchen and
bun toasting begins with the rapid toaster. The bun is placed on a
wrapper and assembly of condiments on the bun follows. Then the hot
meat patty (kept warm in heated holding cabinets) is placed on the
assembled bun and wrapped. It is then placed in the heated landing
pad where it is to be picked up immediately to keep it fresh. Under this
structure no food is prepared in advance except for the meat patty.

The old system was a batch system instead of a continuous flow like
the Made For You system. The old system focused on make-to-stock,
while the new system focused on make-to-order. The old system ran
like a job shop whereas the new system functioned more like an
assembly line. During high volume times it is easy to add an extra
employee to the Made For You assembly line, added to the other side
of the counter, so it is easier to manage human resources.
Is the new system better than the old system? What are the
competitive advantages of the new system vs. the old system?
The new Made For You system is not necessarily better or worse than
the old one. It simply traded fast order times for increased food
quality. It was supposed to take 90 seconds to order and receive your
food with the new system, but instead, order times drastically
increased and long lines ensued. Most restaurant managers think the
new system slowed service while increasing quality only minimally, to
the point that customers do not really care or notice. Customization is
the trend of the market, but it takes more time and more money. In
the fast food industry, cost and speed are two core factors. Do
customers want to pay more for the special order? If the answer is no,
it may cause some problems with profitability. The new system made
training harder too, especially with a 60% turnover rate and having to
train everyone on the new process and getting people to accept it.
The advantage of the old system is that the food was already made
and waiting in a bin for order assembly when the customer placed the
order. Sometimes the order was being assembled before the customer
finished placing the order. This allowed for fast order times, which is
especially advantageous during peak demand times, like lunch hours.
However, the food was sitting in a bin waiting, and customers realized
that it was not as fresh as it could be, especially with other restaurants
promoting fresh, made-to-order food. The new system allowed for
custom orders and fresher, higher quality food, but it came at the
expense of higher wait times since the food was not made until after
the order was placed. Advantages of Made For You include never
having the problem of stock-outs since the process of building the
sandwich begins once the order is placed. The system also decreases
the cost of holding inventory, since there will be less food wasted from
sitting in bins too long. The old system required having to judge and
guess how much inventory was needed at certain times of the day
resulting in overstocking the inventory and wasting food. One other
advantage of the Made For You system is less food waste. In the old
batch system, managers had to guess how much production was
needed each hour, and often too much inventory was waiting in the
bins, which then had to be discarded after 10 minutes. In the new
system the orders are not made until actually ordered, therefore no
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food is sitting and waiting in bins, resulting in less waste. The new
system would also be able to accommodate new, future products using
the same assembly line approach, giving this system another
sustainable competitive advantage. Although the new system did not
yield profits right away, McDonald's revenues did grow 27% from 2004
to 2007, and yielded a 9% growth in operating income showing that it
was the right choice to implement Made For You.
How might McDonalds further improve its current operating
system? What impacts would you expect those improvements
to have on profitability?
McDonalds realizes that order times have increased because of the
new system, so they are exploring ways to speed things up again.
They want to get back to being faster so they are testing ideas like
going back to boxes instead of wrapping sandwiches and using an
upgraded version of warming bins. They are trying to find a happy
medium between fast order times and quality. If they can find this
happy medium and please both markets, profitability could skyrocket.
Also, in a world continuously being driven by technology, they could
implement an online ordering system or a 10 minute pre-order app
for phones and tablets. With this app customers pre-can order their
food and make payments before they come to the restaurant. When
customers arrive at the restaurant, they can pick up their meals with
their electronic receipt. In this way customers can save waiting time
and the restaurant can relieve the press of peak periods.
There are different menu items in different countries or different parts
of the same country. Why not try items that do well in some countries
in the other locations? McDonalds could start special week-long
promotions such as Indian Week or Mexican Week that promote
different foods and create a sense of urgency to go to McDonalds that
week. There could be a McDonalds World in urban areas with all menu
items from around world. Some countries offer delivery of the food.
That is something no other fast food hamburger chain does in the U.S.,
and so it could give McDonalds a strong competitive advantage if they
started delivering in the U.S.
Other suggestions our team have discussed that could improve
profitability include opening another restaurant chain. Other fast food
burger places have started separate chains that have nothing to do
with the burger market, such as coffee and donut shops, and collect a
large portion of their profits from those other chains. Also, there is
room in the burger market for burger places that are fast and burger
places that are made to order. McDonalds is trying to be both, but
maybe they should choose which one they are going to be and put
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their resources into being that business. They could make McDonalds
the fast burger company and open another chain that is a fresh,
made to order company so that they could successfully compete in
both market segments. An interesting statistic is that the hamburger
industry is only growing at about 2.8%, while the other sandwich
industry is growing at a whopping 12.8%. In fact there are now more
Subway restaurants than McDonalds restaurants in the U.S. Perhaps
McDonalds should incorporate more menu items in the other
sandwich category in order to grow sales. Something that was not
discussed in these cases was the advertising and marketing
campaigns. Burger King is trying to target a younger audience through
a push in internet marketing, even giving The King his own Myspace
page. This is a market untapped by McDonalds who should invest in
internet marketing to keep up with competition.
How have more recent process and product innovations
changed the capability for service speed, customization, new
product introduction and profitability?
In the early 2000s McDonalds came up with another plan that aimed to
increase sales by 2% and operating income by 5%, while cutting the
time needed to collect and analyze sales data from weeks down to
minutes. They began to implement a revolutionary new technology
system called Innovate. It was a $1 billion project that, once installed
in all stores, allowed anyone in the company to see how processes in
any given store were operating at any given moment. For instance
they could see how many sales occurred over the last hour, how much
inventory is in a store at any moment, how many burgers were served
in a certain time frame, etc. One could even check to see what the
temperature is of the oil in the fryer or how much CO2 was in the soda
machine, and the system would identify electronic problems right
away. The system could also streamline scheduling and training, which
is a major problem area in stores because of the high turnover rates,
and it would help restaurants meet market demand faster because you
could immediately adjust shipments of supplies or re-route them to
different stores. The aim was to identify underperforming stores and
problem areas and to create consistency across all McDonalds
restaurants, ultimately improving operations.
However, the 5 year project was pulled after spending $170 million on
it in the first year, after the companys first every quarterly loss. The
return on investment was unclear, and after the $1 billion 5-year
implementation, it would take millions more for the upkeep each year.
In order for the system to pay for itself in the first 5 years, sales
needed to increase 1.5% in addition to the already projected 3-5%.
There were lots of challenges associated with making it a success
worldwide as well like getting enough bandwidth for 30,000 plus
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locations, or in some parts of the world getting broadband access at

all. Then there was the resistance from franchise owners. In the end
the company decided to scratch the project and continue focusing on
getting more customers into the current stores in order to increase
sales. However, the benefits of this kind of system for operations could
prove to be very profitable. McDonalds should look into implementing
this system on a smaller scale to test the benefits before making such
a huge investment in all stores.
Other recent process changes include being able to pay with a credit or
debit card. Visa estimates that people spend 30-50% more when
paying with plastic. Although it cost about $12,000 per store to
implement the new systems, that kind of sales increase pays for itself
quickly. Paying with a credit or debit card is also quick, so it sped up
the payment process, and therefore the overall order time. Similar
payment technologies that McDonalds tried to implement failed, such
as a fingerprint reader or a card with a chip in it that just had to be
waved over a reader.

Observations from our research/visit of current McDonalds

restaurants
There are 30-minute policies where customers who order food
can stay 30 minutes from the time of order.
Customer service was poor near the counters (no greetings,
mixed up order, long wait times).
When our order was mixed up, they did not replace or exchange
the order immediately, but instead asked to see the receipt.
Some locations in the US have slightly different menus. For
instance California and Florida have tacos.
Menu variety also changes by different countries. For instance
Europe McDonalds serve beer, India has all vegetarian locations
and Taiwan serves rice burgers.
Menus change on a regular basis as per corporate guidelines.
The company will survey consumer demand and keep changing
the menu.
Items are added to the menu at certain test-market locations
first, and if it goes well they expand that item into all locations.
They try to bring in the latest technology in their processes.
Some locations are up to date, like having an LCD display near
pick-up counters.

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The ingredients are procured from different sources, are very

fresh, and obtained at a good price so they are able to pass
savings to the customer
There are people who avoid McDonalds thinking that their food is
very cheaply priced so the quality might be low as well.
They do not have vegetarian customers in the U.S. as they do
not sell veggie burgers or wraps.
Their career path is well defined. Everyone starts part-time and
then they are promoted based on their experience at McDonalds.
They do not have free refill ads for drinks in their stores.
They change the interiors of restaurants every 2-3 years so that
customers do not get bored.
New items in the menu are advertised on separate banners
inside and outside the restaurant.
Employees are made to do different sets of tasks inside the
store. You need to learn one task before moving to another. (For
instance the serving lady was cleaning the floor.)
Hygiene is important. When asked for a refill, they asked us to
keep our lids open on the soda.
Customers can use the restrooms without having to buy
anything, and they are well maintained.
They introduced vegetable oil since 2002.
Regular customers sometimes get special benefits.
Employees should never be idle in front of a customer.
Seating areas are uncomfortable with hard plastic booths or
chairs.
There are inconsistencies between stores, even between two
downtown Chicago locations (such as with technologies)
References
Burger King. (2013, June 7). In Wikipedia, The Free Encyclopedia.
Retrieved 17:26, June 10, 2013, from
http://en.wikipedia.org/w/index.php?
title=Burger_King&oldid=558723693
McDonald's. (2013, June 9). In Wikipedia, The Free Encyclopedia.
Retrieved 17:27, June 10, 2013, from
http://en.wikipedia.org/w/index.php?title=McDonald
%27s&oldid=559062780
Sasser, W. Earl Jr., Rikert, David C. (1980) Burger King Corporation
[Case Study]. Boston: Harvard Business Publishing.
http://hbsp.harvard.edu. 9-681-045. Rev. February 27, 1998.

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Sasser, W. Earl Jr., Rikert, David C. (1980) McDonalds Corp.

(Condensed) [Case Study]. Boston: Harvard Business Publishing.
http://hbsp.harvard.edu. 9-681-044. Rev. February 27, 1998

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