Corporate Case Study: McDonald's opens up to rebound from tough times

When McDonald's hit a rough period, the restaurant chain decided it needed a new comms strategy. By opening up PR on the local level, the company has been able to bounce back.

When McDonald's hit a rough period, the restaurant chain decided it needed a new comms strategy. By opening up PR on the local level, the company has been able to bounce back.

When Patti Temple Rocks worked at Golin Harris 15 years ago, she recalls, everyone wanted to work on the firm's McDonald's account. But when she returned to Chicago three years ago, that attitude had changed. McDonald's was experiencing hard times, and PR had been cut back, recalls Rocks, now a Golin EVP and consumer brands group director. Various interest groups were attacking the fast-food king, and the company couldn't find a successful growth strategy. PR spending was cut, and company PR people went into a defensive mode that saw them ignoring many media calls, says one veteran food-industry reporter. Mike Donahue, VP of communications with McDonald's USA, admits PR needed to change. An 18-year veteran of McDonald's public affairs and government relations, Donahue was named head of US communications in January 2002. Brought into his job by CEO Michael Roberts, Donahue says he was given a simple directive by Roberts: "Take us from reactive to proactive." McDonald's PR had been seen primarily as a tool to be used for new product rollouts and special events. Media relations was seen as a crisis management function. Donahue, with Roberts' backing, set out to change that. The two have been doing just that ever since with McDonald's US PR. Spending has doubled in the past two years, boosted in part by money being moved from what had been the advertising budget. The US communications department has expanded from 15 to 20 people and now has its own media relations person for the first time. McDonald's corporate media relations department previously had handled US press outreach. Internal communications has been beefed up with company employees and with managers of McDonald's outlets across the country. Customer service, which had been an operations function, now reports to Donahue, so PR can keep its finger on the pulse of what customers are saying and asking for. Senior executives like Roberts have begun meeting with reporters, something unheard of during past executive regimes. Reporters who follow the company say they have noticed the difference in US communications. "It's a much more supportive and responsive PR operation," says Mike Nuckolls, business editor with QSR (Quality & Speed for Restaurant Success) magazine. "[PR seems] to have played a particularly large role in getting out the messages from top management." Finding value in open PR The changes in US communications have come in a period when McDonald's has also turned around its business fortunes. The company has experienced 18 consecutive months of sales growth (through September) in the US, thanks to new products, such as its salads with Newman's Own dressings. Analysts who follow the company say the resurgence can be traced to the combination of new products, a greater sensitivity to what customers are saying, and a more open PR stance. "They were a company that everyone loved to hate, [but] that doesn't seem to be true anymore," says Bob Goldin, EVP with Technomics, a restaurant consulting firm. A recent Technomics report shows that McDonald's last year accounted for 20% of the total growth recorded by the US' top 500 restaurant chains. Its US sales rose 9% last year to $1.8 billion. Donahue says that the changes in McDonald's US communications have been propelled by a simple philosophy. "When we tell our story, we win," he says. He's worked hard to make that mantra one that everybody on McDonald's US PR team, from headquarters to field operations across the country, believes in. In July 2002, he held a summit of the 125 PR firms that work with McDonald's and its various owner-operators across the country, encouraging them to tell McDonald's story locally. In the past, local PR agencies had been accustomed to a command-and-control model of PR - headquarters dictated what could be done on the local level, Donahue explains. He wanted them to become creative in their locales and put money behind the effort to get them to change. McDonald's has begun paying for studies in various markets that showed the economic impact McDonald's has. Local owner groups can use such studies to show their contribution to the local community. Guidelines have been developed to communicate social responsibility messages in local markets. In previous years, the only PR guidelines that went out had to do with new product PR. Talking about social responsibility has become a priority for McDonald's, Donahue says. "PR has to be proactive and socially responsible," he says. "It was clear to me McDonald's had a great story to tell, and we weren't telling it." Even before its PR summit two years ago, McDonald's was stepping up PR efforts. In March 2002, Roberts met with editors of industry trade magazine Nation's Restaurant News. That September, after a speech in Chicago, he also sat down with The Wall Street Journal and the Chicago Tribune. By last year, McDonald's was ready to espouse a balanced-lifestyle theme. Talking about exercise and lifestyle has been the approach most food and restaurant companies have taken in response to ongoing coverage about obesity in the US. But rather than just talk about it, McDonald's decided to go after third-party endorsers who could help it convey its message with more credibility. Donahue had become an adherent of using third-party endorsers during his years in public affairs work with McDonald's. The company was fighting a battle over the role its packaging played in waste-disposal problems in the late 1980s and early '90s, and Donahue had seen firsthand the value of using third-party endorsers in that fight. In the lifestyles debate, McDonald's aligned itself with Paul Newman as it introduced its new salads last year. Salads were rolled out in April with a New York press conference featuring Newman. Advertising didn't kick in for several weeks, but PR alone managed to boost sales in test markets, an important sign that convinced owner-operators of PR's value, says Rocks. Golin suggested that McDonald's work with Bob Greene, who had gained fame as Oprah Winfrey's personal trainer and fitness guru. The result was the Go Active! American Challenge with Bob Greene, a campaign that had Greene visiting 36 cities to talk to consumers about balancing exercise with healthy eating and living habits. The Greene campaign garnered more than 1 billion media impressions for McDonald's and helped defuse negative publicity from the film Super Size Me, in which the filmmaker eats nothing but McDonald's food for a month with disastrous health effects. Rocks and Donahue credit McDonald's proactive efforts around the balanced lifestyle theme with blunting the movie's impact on sales. "It's not a coincidence that the movie has had virtually zero financial impact," says Rocks. More changes ahead Those who follow McDonald's say its new approach to PR has definitely contributed to its business turnaround. "I don't think their resurgence could have been as strong if they didn't have some sort of change in terms of openness," says Amy Garber, a reporter with Nation's Restaurant News. Donahue says more changes are ahead. "We have not yet begun to fight. We've made incremental progress, but we have a long way to go," he says. Donahue wants McDonald's to get better at anticipating issues it will need to deal with. He's planning to add a director of anticipatory issues management to help in that regard. He also expects to continue working with third-party endorsers. While PR will continue to discuss balanced lifestyles, as well as the quality of McDonald's products and social responsibility, Donahue also wants to work on improving the image of McDonald's as an employer. The company was rankled last year when the Merriam-Webster Collegiate Dictionary included "McJobs" as a term for dead-end work. Donahue wants the company to talk about how many of its execs started as line workers at various McDonald's outlets. Such efforts will tie into the social responsibility theme, showing McDonald's jobs can be the first steps along successful career paths for workers who might not have other alternatives for entry-level employment. Donahue wants people to feel good about McDonald's. So far, its US communications team is feeling good about its efforts to do that, and improving sales show the messages seem to be reaching consumers. ----- PR contacts VP of communications Mike Donahue Director of media relations Bill Whitman PR agency Golin Harris

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