Recent Activities of Mcdonald

Raul Alvarez, as he was named at birth, was born in Havana and left with his family at age 5 after Fidel Castro took power. He grew up in Miami wanting to be a physical-education teacher. An uncle encouraged him to get an accounting degree, and after working for the firm now known as Deloitte, he landed a job as a budget analyst for Miami-based Burger King.
[President Ralph Alvarez]
McDonald's President Ralph Alvarez
In the late 1980s, Mr. Alvarez twice tried to get hired at McDonald's, "but I couldn't get in the door," he says, since the company mostly promotes from within. He went on to work for rival Wendy's International Inc.
In 1994, McDonald's hired and trained him for a post as a regional manager, partly, he says, because the company wanted more Hispanics in management jobs. While it takes most McDonald's managers decades to climb through the ranks, Mr. Alvarez ascended to the No. 2 spot by 2006. Associates cite his competitive nature and focus on tangible results as reasons he's excelled.
By last year, soaring commodity costs were putting intense pressure on McDonald's. Restaurant franchisees complained that the high cost of beef, cheese, buns and other ingredients, combined with a rising minimum wage and high energy costs, had flattened their profits. Some owners balked at making expensive investments to expand their beverage offerings to include lattes, smoothies and bottled drinks.
To find solutions to problems like these, Mr. Alvarez spends most of his time traveling to McDonald's outlets in 118 countries, sometimes staying at the homes of executives or franchisees. The night before his official meetings, he slips on a baseball cap and sunglasses so he can visit McDonald's restaurants incognito to see whether service is fast enough in the drive-through window and employees are being friendly, says Tom Moroch, owner of an advertising agency that creates campaigns for McDonald's.
"He's really the eyes and ears for me around the world," says Mr. Skinner, who is also the company's vice chairman. Unlike Mr. Skinner, a caustic Iowa native who sometimes bristles in the limelight, Mr. Alvarez appears more at ease in front of large groups of workers and is known for having a warmer personality.
"When Jim became the CEO, part of his style was to get good people in the job and give them room to run," McDonald's Chairman Andrew McKenna says.
Despite the high commodity costs, McDonald's posted strong profits last year.
[McDonald's profit]
Over the summer, Mr. Alvarez met with each department at headquarters and went through their spending seeking to trim costs. He told workers to cut travel and instead hold meetings at the company's Hamburger University in suburban Chicago. Employees who get company cars could no longer select gas-guzzling vehicles, and those that already had them must pay a higher personal-usage fee.
Toward the fall, when McDonald's began negotiations for the following year's TV advertising spots, Mr. Alvarez heard that networks were cutting deals with auto makers for lower rates because the car companies faced dire straits. "The hair on my back went up right away," he says. Mr. Alvarez says he pressed the company's media buyers to seek better rates. "We should not allow somebody else to get a competitive advantage," he says, adding that McDonald's was successful in getting better deals.
By October, Mr. Alvarez and 30 other company leaders had finalized a three-year strategic plan. But as the global financial crisis spread, the group reconvened in December.
Managers decided they must make sure no restaurants shrank the size of products in order to cut costs. They looked more closely at the markets near the 1,000 outlets McDonald's plans to build this year and decided not to go through with some of them if, for instance, a nearby shopping center had fallen through.
By the start of this year, Mr. Alvarez was pressing managers across the world to more closely monitor labor, food and utility costs. One of his top concerns is that stores will reduce staffing so much that they will end up being understaffed for peak periods. As monthly financial reports came out, Mr. Alvarez would sometimes rise at 3 a.m. for sessions where he studied the numbers and reviewed them with managers world-wide.
"It's a feeling that self confidence is our worst enemy," says Denis Hennequin, president of McDonald's Europe.
In the U.K., Mr. Alvarez directed management to examine changes in consumer buying patterns at McDonald's, customer traffic for competitors and general economic data such as projected unemployment rates. Instead of looking at the data twice a year, as U.K. managers had been doing, they're now examining it every two weeks. Taking their cues from the data, McDonald's began running more advertisements for its Little Tasters menu, which includes a small burger on a ciabatta bun that sells for £1.49, or about $2.
Meanwhile, Mr. Alvarez is pushing more restaurants to implement systems that allow each location to price items more in line with demand. During previous periods of inflation, Mr. Alvarez says, restaurants simply raised the price of large sandwiches by 10 cents and the price of small sandwiches, french fries and drinks by five cents. Now, one restaurant may boost the price of an item by three cents while another only adds a penny.
Don Armstrong, a franchisee who owns 14 outlets in Oregon, says he's more careful about raising prices at outlets in economically depressed areas than at ones in more affluent areas. "It doesn't do you any good to raise prices if you lose customers," says Mr. Armstrong, chairman of a council that represents U.S. franchisees.
McDonald's executives say that promoting lower-priced items and products perceived as a good value will be a top priority this year, and restaurants may have to settle for lower profit margins. But McDonald's franchisees, who operate 80% of the company's outlets, say that's getting more difficult because of rising costs and mandates from the company to buy equipment.
In a meeting with McDonald's management last month, franchisees complained their cash flow was only slightly positive last year -- a disappointment given the company's strong sales. "It's not a sustainable model," says franchisee Reggie Webb.
McDonald's executives say they're adding features that will increase sales. Mr. Alvarez showed off a self-service kiosk where customers can place orders electronically. He recently watched customers use kiosks at a McDonald's in Tours, France.
Mr. Alvarez says a top complaint of French customers about McDonald's is that they feel pressured to order, which keeps some families from coming in. Ordering at a kiosk, he says, "allows them to either control their kids or control their order."

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