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Commentary: McDonald's Skinner retiring with strong legacy in place

CEO's list of accomplishments includes reimaged restaurants, McCafé launch.

June 25, 2012 by Alicia Kelso — Editor, QSRWeb.com

During Jim Skinner's nearly eight-year stint as McDonald's CEO, the Golden Arches experienced staggering sales growth, shareholder value growth and international system growth.

When Skinner was named CEO in 2004 — a somewhat unlikely appointment following the deaths of his two predecessors — McDonald's was selling shares for about $20. Now the company is valued at approximately $90-$95 a pop.

Last year, McDonald's U.S. generated about $34.1 billion in systemwide sales . To put this into perspective, Subway, Starbucks, Wendy's and Burger King yielded about $38 billion in the same period, combined.

Skinner is one of three architects of the company's "Plan to Win," a strategy put into place in 2003 that has focused on "being better, not just bigger." After spending 41 years climbing the ladder at McDonald's, Skinner will officially retire June 30 having indeed won. He leaves a capable successor in COO Don Thompson, as well as an undeniable legacy as one of the all-time great QSR leaders.

QSRweb examines eight of McDonald's best initiatives under Skinner's guidance:

The McCafé launch. In 2009, McDonald's expanded its offerings beyond most people's imaginations with the national launch of the McCafé line. The move put lattes, cappuccinos and mochas alongside Big Macs and fries and targeted the growing Starbucks consumer base with the promise of quality coffee for lower prices. Now the line contributes a big incremental boost for operators and continues to evolve with new introductions from smoothies to frozen strawberry lemonade.

Reimaging program. In 2006, McDonald's began replacing its fiberglass-heavy, red/yellow restaurants with more modern, sophisticated units that include "social areas," fireplaces, flatscreen televisions and WiFi. Replacing the iconic design was a gamble that continues to pay off. The $1 billion-plus remodeling efforts are expected to be completed at the 14,000 U.S. units by 2015. At the finished units — about 800 were completed at the end of April — sales have been up about 6 percent, Thompson said in the most recent earnings call. Reimaged restaurants that have been open more than 12 months are in the 6 to 7 percent range, highlighting the long-term investment benefits of the program, according to CFO Peter J. Bensen.

Global growth and innovation. Skinner has a strong international team in place, as the longtime American staple is becoming a leader in Europe, Asia and other emerging markets as well. In 2011, the chain made its debut in Bosnia and Herzegovina, as well as Trinidad & Tobago, expanding its footprint to 119 countries. McDonald's boasts about 1,500 units in China, with a plan to hit 2,000 next year, focusing on 24/7 service, as well as delivery options. In Europe, the company has rolled out self-service ordering kiosks, tested table service, implemented contactless payments and introduced numerous sustainability initiatives. McDonald's will be in the spotlight in July and August as a sponsor for the London Olympic Games, and the company has built four new restaurants for the occasion. Another example is in India, where the company plans to double its unit count by 2013, investing heavily in drive-thru and delivery business models.

Diversified menu.McDonald's menu looks significantly different than it did when Skinner took over. In addition to the McCafé rollout, the chain now boasts snack wraps, Angus burgers, oatmeal, Happy Meals that include apple slices, McBites, 10 different salads, yogurt parfaits, McFlurry shakes and more. The variety has inspired competitors to follow suit, and has kept McDonald's on (or ahead of) trend. For example, the snack wrap was first introduced in the U.S. in 2006. It is now available in about 10 varieties and complements a wildly growing snack daypart that falls in-between lunch and dinner. Through all of the innovation, the chain has maintained its value positioning, which provided quite a boon during the recession years.

Talent management. "People" is one of the five elements of McDonald's Plan to Win (along with products, price, place and promotion) and in a recent interview with Fortune, Skinner said his real legacy is the talent management and leadership development. "If you get the people right, the rest is easy," he said.

Reduction of Chipotle ownership(as well as Boston Market, Donatos Pizza and Pret a Manger). When McDonald's and Skinner divested these businesses, it allowed the company to focus on McDonald's and only McDonald's. The company's initial investment in Chipotlewas made in 1998 and share repurchases began in 2006.

Defense of Ronald McDonald.McDonald's has faced numerous firing squads in the past couple of years, shouldering much of the blame for the rise in childhood obesity. Although the chain has responded by reducing sodium and calorie counts in the iconic Happy Meal, it has stood its ground with calls to drop the Ronald McDonald mascot. Skinner has been a fierce defenseman for the company's marketing strategies, reminding opponents that Ronald McDonald (and the Ronald McDonald House Charities) is an ambassador for good. "We offer choices that fit within balanced diets and active lifestyles. We've done more than anyone in the industry when it comes to variety and choice. Tonight, 8,000 families are going to stay in a Ronald McDonald House where their children are receiving treatment. Ronald is not retiring. Ronald is going nowhere," Skinner said during the Annual Shareholders' Meeting in May.

Animal welfare/sustainability efforts. McDonald's has five focus areas under its growing sustainability umbrella: nutrition and well-being, sustainable supply chain, environmental responsibility, employee experience and community. Earlier this month, McDonald's USA shared its 10-year plan to work with its pork suppliers to phase out the use of gestation stalls in its domestic pork supply. The company has released sustainability reports since 2002, each progressively more active than the year before. Now, sustainability themes are woven into the company's marketing messaging, and the company annually recognizes its greenest suppliers, owner/operators and corporate practices. In April, McDonald's was listed as No. 11 on the Environmental Protection Agency's Top 50 organizations.

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