To Woo Europeans, McDonald’s Takes an Upscale Turn
LONDON — Taking a respite from an afternoon of shopping, Ita Clift sips a cappuccino at a McDonald’s. Though she rarely sets foot in the fast-food restaurant, Ms. Clift says she dropped in to this one in the Edgware Road section of Northwest London for a quick boost of energy and because the restaurant “looked so nice and sophisticated.”
The Golden Arches are going upscale. Aiming to create a more relaxed experience in a sophisticated atmosphere, McDonald’s is replacing bolted-down plastic yellow-and-white furniture with lime-green designer chairs and dark leather upholstery. It is the restaurant chain’s biggest overhaul in more than 20 years and, with its franchisees, it plans to spend more than 600 million euros ($828 million), remodeling 1,280 European restaurants by the end of this year.
The changes are more than cosmetic. McDonald’s is introducing healthier foods and items that cater to regional tastes, like caffè lattes. Hoping to attract more young adults and professionals, in addition to its core customer base of children, the chain is also adding amenities like Internet access and rental iPods.
The changes are paying off. In the first half of this year, combined sales at Europe’s 6,400 restaurants rose 15 percent, to $4.1 billion, compared with a 6 percent increase in the United States, where McDonald’s has 13,800 restaurants and sales totaled $3.9 billion.
The strength of European currencies helped, but even without the lagging American dollar, European revenue is rising faster in real terms than revenue in the United States.
“McDonald’s is doing a great job in Europe, which has become an enormously important market for them,” said Larry Miller, an analyst at RBC Capital Markets.
The chain now serves over 10 million customers a day in Europe, which contributes 36 percent to the company’s operating income, making it the most profitable region, after the United States.
The original impetus for the makeover was a European sales slump in the late 1990s, brought on by concerns about obesity and annoyance at unappealing décor and grumpy employees. But the ideas for how to change came from Denis Hennequin, president of McDonald’s Europe, the first non-American in that role.
As head of McDonald’s restaurants in his native France in the late 1990s, Mr. Hennequin had searched for ways to make fast food more appealing to a nation that prefers slow-simmered cassoulets and likes to savor a meal.
“To make McDonald’s and a Big Mac work in the country of slow food, we felt we had to pay more attention to space and showcasing,” said Mr. Hennequin, seated in front of zebra print wallpaper in one of the remodeled London restaurants.
He was right. After refurbishment, on average, sales increased 4.5 percent at the upgraded restaurants in France. The new outlets were so successful that two years ago Mr. Hennequin was asked to do the same for the rest of Europe.
But now the success of his makeovers comes with a challenge of its own: How much can you upgrade the image before McDonald’s isn’t McDonald’s anymore? “If you stretch the brand too much it can snap,” said Dean Crutchfield, director of marketing at the brand consultancy Wolff Olins in New York.
Mr. Hennequin said he did not have a choice. “Reimaging is essential in the competitive world of retail,” he said. “We need to avoid aging faster than our customers.”
To do that he instructed the design studio he had set up in Paris to come up with nine different designs. Franchised restaurants, which account for about 64 percent of all European outlets, can then choose the design most appropriate for their location and clientele.
The designs range from “purely simple,” with minimalist décor in neutral colors, to “Qualité,” featuring large pictures of lettuces and tomatoes and gleaming stainless steel kitchen utensils, like meat grinders.
“The new ones are much more comfortable, less crammed and we love those chairs,” said 16-year-old Shane Bogela, referring to the redesigned stores and the “egg” chairs, designed by the Danish architect Arne Jacobsen, at a McDonald’s in London.
A separate food factory in Munich is trying to come up with new menus for the different tastes in the 41 European countries, including Russia, where McDonald’s operates.
In Britain, McDonald’s restaurants started to serve porridge for breakfast. In Portugal, they offer soup and in France, cheese saga — burgers with French cheeses.
McDonald’s first adapted its menu to local tastes in the 1980s when it started to offer beer in some of its German restaurants.
Paying attention to local European tastes has also helped McDonald’s overcome some of the cultural hurdles it faced as a large American fast-food chain. “The problem in Europe was the perception that any large U.S. brand has, which is bringing the American way of eating and marketing and invading the local culture,” said David Kolpak, who helps manage $62 billion, including McDonald’s shares, at Victory Capital Management in Cleveland.
While head of McDonald’s restaurants in France, Mr. Hennequin experienced opposition to American corporations firsthand in 1999 when Jose Bové, the firebrand leader of a French farmers union, organized a bulldozing of a McDonald’s restaurant to protest the spread of American “hegemony.”
Mr. Hennequin reacted with a large advertising campaign promoting the American chain’s use of local produce and its creation of local jobs. McDonald’s not only organized open-door days for customers to come see its kitchens, but also invited customers to make a trip to its suppliers.
While palates differ from country to country, design is more universal, Mr. Hennequin said. He admires strong brands that reinvent themselves to become more fashionable and appealing, as the trendy car line Mini Cooper did. In France, he hired the same advertising agency as Apple Computer, another brand Mr. Hennequin said he admired for its adaptability.
“We would like to stay true to our roots while moving forward,” Mr. Hennequin said.
This means that McDonald’s kept its trademark golden arches logo in Europe but got rid of the red accompanying it. Instead, restaurants feature a warm burgundy color. The pointy roofs are being phased out and replaced by simple olive green facades, and the bright neon lights in the restaurants were dimmed.
French fries and cheeseburgers remain the best sellers on the menu.
Remodeling is also catching on in the United States, where McDonald’s has renovated about 6,000 of its 13,800 restaurants in the last two years, though less extensively than in Europe. Some analysts say the new design works better in Europe than in the United States, where most McDonald’s customers prefer to eat in their cars or take their food home.
“And they won’t change their habits,” Mr. Kolpak said.