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Burger King Vs McDonalds Final Paper
Burger King Vs McDonalds Final Paper
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
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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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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