Wednesday, October 17, 2007

Supersize That Stoli, Please.

Before I talk about what McDonald's is doing in Russia, I should say that I am a fan of the company, here's a few reasons why:
1. They are and always have been profitable and have had only one quarter with a net operating loss. Not too many restaurant chains can make that claim. Probably none. The sooner Burger King is put out of its misery the better. In Texas, the only hamburger chain that shows more promise is good old Whataburger. In the northeast places like 5 Guys are doing well at copying the McDonald's methods (and they do make a good burger).

2. Until the last 5 or so years, they have always been at the front of the trends. Recently, they have been blindsided by the boomers' health trend, the low carb diet, and by the Starbucks juggernaut. That's their fault, but they have responded.
3. The food is not bad. Their new coffee is good. I actually like the Quarterpounder, and their fries are the industry standard.
4. My grandkids love the play area. In the morning for $3.00 we get pancakes, a drink and 30 minutes of fun for them. That's not too bad. Bring earplugs.
5. The stores are almost always clean and stylistically up-to-date.

But what they are doing in Russia is business remarkable. A few numbers from yesterday's WSJournal:
1. Opening a single McDonalds store in 1988 required 200 official signatures.
2. The first store in Moscow had 27,000 job applicants who had replied to an ad that ran one day in the Moscow newspaper. There were openings for 630 crew jobs.
3. On the first day of business 5,000 people stood in a line -- before they opened.
4. McD's had to build a $43 million plant in order to supply buns and burgers. The country had no existing infrastructure to supply them.
5. The average store serves 850,000 people a year. Twice the American average.
6. The largest store is 24,000 square feet. Over 5 times the American average. The Pushkin square location in Moscow has 900 seats.

Like it or not America has exported efficiency and value when it comes to food and dining. McDonald's did to food service what Holiday Inn and Howard Johnson did to the travel hotel. Americans in the 50's and 60's loved it and for good reason, and the Russians and Chinese love it now. My generation decries the loss of the personal in these massive institutions but what we forget is that the USSR in 1980, except for their military, was not much more than a 3rd world country. They were broke and failed. They could advance by conquest or start over which in a sense is what they did. I'm going to be blasted here for sounding like a Randian, suggesting that market forces turned the evil empire into a prosperous, benevolent state. I am not saying that. I simply find it ironic that places like McDonalds, Coca-Cola and Starbucks, symbol and reality of American Corporation, are so successful in countries that had what they thought was a better way.

If you get a chance read how the Canadian businessman got started in Russia. Great story. Yesterdays (10/16/2007) Wall Street Journal.


Anonymous said...

What do you know about Sonic? They seem to be popping up on the East Coast and have a good rep.


Francis Shivone said...

I have never followed them or researched them much. I do know that they are expanding. Their market is pretty narrowly defined in the teen category. I have tried them and don't care for the food much. They spend a boatload of money on TV ads. Good question which will get me researching a little.

jeromey said...

"I simply find it ironic that places like McDonalds, Coca-Cola and Starbucks, symbol and reality of American Corporation, are so successful in countries that had what they thought was a better way."

It's not ironic. The simpler fact is, our BAD is just WORSE than the BAD that they had before.

I don't want to blast - and, in fact, I like Ayn. However, I have recently come to believe that most of the large American companies are true evil. The problem is, they've discovered if they just provide people with some convenience, the kind people of the US let them do pretty much whatever they want.

Oh, and by the way, whatever "symptoms" your current product causes, you're virtually guaranteed to make billions providing a "new and improved" product that doesn't cause those nasty symptoms - even though you knew all along about how to make the product better and safer for the general population...

I'm stopping myself on purpose now.

Sorry to rain on your post. I agree that McDonalds was probably good "back in the day" - but now, they're a stock price that sells food to the world that will slowly kill the people buying it.

Long live the Mom 'n Pop! (and the good, local burger joint) :)

Francis Shivone said...

Jeromey -- You can't rain on the post my friend. And blast away. But, what took you so long?
Just one question: why is their success which is a result of our choice to purchase from them their fault? It's not like we don't have a choice. By the way, the steak, egg and bagel breakfast sandwich McDonald's had a few years ago was as good of a sandwich I have ever had. $2.50. Why is that an evil?

jeromey said...

I'm behind. Again... or still? Family reunion and traveling for work the past few days.

I have to say, please, please, please. Even if you suffer, please watch the movie, "The Corporation".

I don't think I can sum up my sentiments any better than the way you might feel after watching this movie and reflecting on the way you feel about McDonalds and Coca-Cola.

May I suggest an alternative:

Take your fond remberances and feelings and RECREATE those idyllic circumstances for yourself! Or - find someone locally doing a similar work. There are plenty of local cooking good burgers (as evidenced by your poll). There are even small soda companies that might surprise you with their quality. (without the high fructose corn syrup too! blech!)

To answer:
Your patronage of McDondalds is, partly, now a habit. People visit McDonalds because they have consistent products at a cheap price and their outlets are EVERYWHERE. I'm not saying that their trying to make you buy their product is wrong - it's what corporations do. What *is* wrong (imho) is their attempt to sell you on the fact that they're about food when, in fact, their #1 purpose is making money - no matter what/who they negatively affect in the process. In the process of this, they are dishonest by omission of very, very important facts about what they're doing to local businesses and the environment. It's time for people to start thinking and acting more responsibly in our "global economy".

The Russians are just the latest "victims" of this "great" American institution. Now that Russians have enough money to buy them, McDonalds is more than happy to build the infrastructure to support their very efficient method of delivering edible garbage to make a buck.

Can you imagine how great a Breakfast sandwich you could construct from an Artisan-made Roll, Grass-fed Beef strips, Whole, natural cheese, and free-range eggs?

I know I'm a freak - but I know that you know quality food (from reading your posts). The fact that you're lifting up crap-on-a-silver-platter deserves to be called out. Stop promoting it! Your tastes deserve better!

I picked up a new book today that I'll share more about at a more appropriate time. I think you might be interested.

With respect,

Francis Shivone said...

Unfortunately, I think we are getting to the point of needing to discuss the fundamental ideas of justice, goodness, and the end or purpose of man. And that is not my purpose.
I agree that the corporation of today is too focused on quarterly profits and on the highest good being more profit. I don't agree that the corporation, per se, is an evil and the fact that it has streamlined production, lowered costs and made a product easier to purchase is an evil either.
The problem I have with America bashing is that most of it reminds me of the spoiled Ivy League college boy who talks to his friends about his misguided wealthy father but who lives off his riches. Few complain about inexpensive energy and a/c units when the temperature is 110, or high technology and modern anesthetics when we have a toothache. None of which would be possible without the "selfish" American corporation.
Are there self-serving man behind much of today's corporate and political world? Yes, which brings me back to the original statement -- and that is of discussing man's purpose, because that is true everywhere. But and finally, if one studies the histories of nations, from Rome through modern Europe, what we see in America today is utopian. Live in this 20th century, in Poland, Russia, China, Vietnam, India, almost any of the totalitarian Middle East countries, Cuba, and of course Germany, and you could have seen real evil.

Love your comments.