Peter Beresford, Chairman and CEO McDonald's UK

McDonald's has lost its way, and nowhere more evidently than in the UK.

by Chris Blackhurst
Last Updated: 31 Aug 2010

Twenty-three years ago, or thereabouts, I had my first McDonald's.

I was studying at Cambridge and a group of us drove to London to watch a football match, Fulham versus Nottingham Forest.

We stopped off at McDonald's in the Strand and I experienced the joys of a Big Mac with fries, to go.

It felt like the height of cool. I was from Cumbria, and McDonald's, which came to this country only in 1974, opening a branch in Woolwich, south-east London, hadn't yet penetrated that far north. My friends were Londoners, hip, dead trendy.

They had cars at university, they drove to see the capital's smarter teams, they ate at McDonald's.

I tell this tale not to highlight the yawning cultural gap I experienced but to show how times change. In the same way that Nottingham Forest is no longer a magnet (as it was when Brian Clough was in his pomp), so too is it inconceivable today to imagine a group of students who think they're the epitome of style making a special detour to McDonald's.

I was reminded of this visit on the day I met Peter Beresford, the new head of McDonald's in the UK. I was in the Strand, so, in the interests of research, popped into that same outlet. Clearly, it's not just fashion that shifts: my tastebuds have altered too - either that or after two or three pints at a football ground, anything seems delicious. Eschewing the option - as most of its customers do - to go healthy and order a salad, I went for a traditional double cheeseburger. The burger bun tasted like cottonwool, the beef in the burger patty lacked texture. It was manufactured, processed and quick.

I studied the piece of paper on top of my tray (it's called a trayliner in McDonaldspeak); on one side, it carried an appeal for RMCC (Ronald McDonald Children's Charities). On the reverse, to compound my discomfort, there was the most detailed breakdown of nutritional and allergy information I've ever seen. Every item available in a McDonald's was listed. This went from the obvious - a Big Mac contains 493 calories, 22.9 grams of fat and 5.9 grams of fibre - to the ridiculous: mineral water comprises no nuts, no seafood, no gluten, no egg and is suitable for vegetarians.

No other restaurant chain goes in for this analytical overload. The amount of detail on offer was mind-boggling, and disturbing. You come in for a fast burger and fries, knowing they aren't the healthiest foods on the planet, and you're assailed with a battery of facts and figures that merely confirm what you already know.

This is the mess McDonald's is in. Its posture is one of defence. Still the second best known brand in the world, behind Coca-Cola, it feels itself under siege from diet campaigners and food experts, and from competitors pushing 'healthy' salads and even bread-free sandwiches.

Everything has been hurled at the company, from fears about contracting mad cow disease to two teenage girls from the Bronx suing the company for making them fat; to a savagely critical best-selling book, Fast Food Nation (which revealed, among other things, that the beef in McDonald's patties can come from up to 100 different cows); and a hit film, Super Size Me (whose maker, Morgan Spurlock, did nothing except eat at McDonald's for a month with disastrous effects to his health, turning his liver into something approaching pate). Profits fell, earnings per share were down, the firm famous for its expansion was forced to close restaurants.

McDonald's old certainties have been rocked to their core and nowhere more so than in the UK. Here, the corporation has also been locked in a record-breaking legal marathon with two campaigners, the 'McLibel Two', and competition on the high street from the likes of Pret a Manger (now owned 30% by McDonald's) and others is fiercer than elsewhere. Sales have been reined back at the £1 billion level for five years, while costs have risen.

Things have got so bad in Britain that the company here has abandoned use of its golden arches symbol - one of the three most recognisable images in the world, alongside the Coca-Cola logo and the crucifix - in its advertising. A question mark accompanies pictures of the new range of salad and fruit, and the strapline reads 'McDonald's. But not as you know it'.

On top of these woes, the organisation was dealt two disastrous blows in 2004. First, in May, Jim Cantalupo, the worldwide chief executive, died of a heart attack. Cantalupo had taken the job only in January 2003 on the retirement of Jack Greenberg. He had made a big impact by responding to critics, refurbishing branches, introducing the healthier items, improving service and slowing the expansion programme. Then, in November, his successor, the popular Australian Charlie Bell - the company's first non-American CEO - stood down at 44 to fight cancer. The baton was handed to Jim Skinner, like Bell a company veteran.

In Britain, there was also a change of leader: Peter Beresford took charge in September. We meet in the Oxford Circus branch, one of the firm's flagships.

It's bright, gleaming, the state of the McDonald's art. It has been redecorated recently and it can't be faulted for cleanliness. The noise from a bank of television screens blasting out pop music is overwhelming - but judging by the amount of diners, people seem to like it. The place is teeming with customers and staff.

McDonald's has done much to boost its front-of-house, but this is absurd.

At one point, I count seven people in uniforms clearing and cleaning tables, checking that everybody is happy. That's excluding the counter staff and the managers, who are also visible, awaiting Beresford's arrival. Clearly, the new UK chairman is not a man to mess with.

He's a stocky figure, in a conservative suit and tie; his glasses make him seem owlish and serious. He could easily pass for a politician or the host of an American bible TV show. That impression is compounded by his behaviour.

He proffers his hand and says: 'Shall we find a space to sit in this world-famous restaurant?' There's not the slightest hint of irony. World-famous restaurant? I suppose, after a fashion, it is - but a McDonald's on Oxford Street is hardly the Ivy or Nobu.

As soon as we sit down, he produces his business card. It's a picture of him with a £5 off voucher at McDonald's. I've never seen a card like it. For sheer chutzpah, it takes some beating. Imagine Lord Browne handing out a card with his photograph and a discount token for BP garages, or Sir Terry Leahy offering £5 off one of Tesco's Finest range. Beresford, though, is unabashed. If he has any shame, it's well hidden.

He's formidably serious, with the pressing earnestness you get from an evangelical preacher. McDonald's has changed, is changing and 'I want you to experience it for yourself, and to let me know how you find it'. This is all said in what, to the untutored British ear, is an American accent, but is, in fact, Canadian.

You see immediately why Beresford was plucked from running Japan (the multinational's second most important market) and parachuted in to save Britain (number three). There's a directness and positiveness about him that's unnerving. He's on a mission to bring the UK round to the gospel according to McDonald's.

Since arriving here, he has undertaken a whistlestop tour. Last night, he says, he was in Leeds. Tomorrow, it's the turn of Norwich. He still has Liverpool, Belfast and Bristol to go. In three months, he'll have been to 13 cities across the kingdom and met 1,000 people. It's a giant focus group exercise, quizzing existing and lapsed customers on what the company is doing right and what it's doing wrong. Isn't there a danger in over-focusing? What will the Liverpool brethren say that will be so different from their fellow worshippers in Bristol, for example?

'We've a lot of catching up to do,' says Beresford. 'We're going to all four quadrants of the country. It's important we talk to all of them.' It's a theme he returns to time and again, with an honesty and sincerity that is to be admired. 'I'm travelling the country because the best way to find out what has gone wrong is not to sit in the boardroom. This sort of research is invaluable. I've got to get out into the marketplace.'

At the focus groups, he doesn't stay tucked away behind a two-way mirror observing the panel as they're asked questions. He sits with them in sessions that last one and a half hours. Reactions, he says, are different from place to place, but there is a common trend. 'What have I found? That we're not innovating the way we used to, we're not leading the way we used to. The world is changing - our customers tell us they're changing and we've not been changing.'

He's genuinely upset that not everyone in the world shares the McDonald's vision, personally full of remorse that in the UK McDonald's has been underperforming. He displays visible emotion when he says: 'Also, we've slipped. In the area of service, it had become spartan and inconsistent. Our cleanliness didn't just used to be good, it used to be great.' He adds, shaking his head: 'It's not easy, listening to the fact that we've not been getting it right.'

The UK has lost its way and he is here to correct it. 'Our global brand sets out a formula. It's the same as a picture frame, where the global brand is the framework. We define each of the countries, like the UK, to have the freedom to manage within that framework. Every country is a blank canvas within the global frame.'

It's difficult to think of the boss of McDonald's in the UK as an artist, but that is the way he sees himself. 'This country is a blank canvas and I know all about blank canvases - this is my fourth country in McDonald's.'

There are, he maintains, 'attributes for which McDonald's is famous', which the UK end was in danger of forgetting. 'Variety and choice, and how they tie in with the whole issue of health. Our customers are asking to be able to make a positive choice.' He leans over. 'By the way, lots of our innovations have become big in the UK, like Salads Plus, for instance.' He's back on the art again. 'We're a global brand which I, as chairman and CEO in the UK, help paint.'

What he wants to do is to get back to basics. 'We were the pioneers in this industry, including in the UK, with Woolwich on 12 October, 1974.' Now McDonald's has 1,248 outlets in Britain, of which 38% are franchised, and the firm employs 73,000 people here. 'The first part of back to basics is giving the customers the choice they want. The second is making sure service and cleanliness are great. I'm finding out what's important and I'm reacting to it.'

When his masters in Illinois picked him to come to London, they chose carefully and deliberately. He's an ambassador through and through, a disciple for the brand. There is absolutely no danger, you feel, of McDonald's falling further back on his watch. He just won't let that happen - no way - and there is a chance that he may lift sales and profits.

Listening to him, what comes across is his belief and determination. He admits to being hurt at what has happened in the UK. 'I've been at McDonald's 29 years, and I've been a senior manager in four different countries. We're the innovators, we're the leaders.

Our customers are outspoken and they criticise. My job is to understand the problem and to lead. If we can get this right, our customers will reward us.'

There is little mention of the external difficulties that beset McDonald's, no questioning of the underlying creed - it's the execution that's to blame, not the corporation's philosophy. The notion touted by some commentators that like all empires, McDonald's has had its day and is now on the slippery slope to oblivion does not resonate with Beresford. Sceptics say McDonald's could go the way of Howard Johnson's, another restaurant chain that once covered America but now has all but disappeared. Beresford says there's nothing that can't be fixed.

He brims with optimism; negative thoughts, if he has them, are banished.

'I have to focus on McDonald's, I must talk to customers in their own language. We took our eye off the ball. Our customers have been changing and we haven't noticed. In the last four or five years, a raft of companies have come to the marketplace that have done a better job of identifying those changing tastes. We've been the leader for a long time and we will stay leader.' It's scary, fierce stuff. It's all spoken in a quiet tone, but is no less purposeful and intense for that.

There is also plenty to be upbeat about. For all its perceived problems in the UK, McDonald's profits are £118 million a year. Nearly three million people visit its British branches every day. Among teenagers, McDonald's is still the number one food brand. These are achievements of which many businesses, supposedly in much better shape, can only dream.

'I want customers to make more visits,' says Beresford. Does it bother him that many ABC1s sneer at the very mention of the company name? We're drinking McDonald's coffee, which, since he asks me, I admit is good.

'Take the rise of coffee shops. That's the sort of thing we could and should have reacted to earlier. Now, we're serving Kenco. That coffee you're drinking is made from freshly ground Kenco beans. Since we started grinding beans, the response has been phenomenal.' Same with salads and fruit. 'Ten per cent of our profit mix is from salads. We've sold 10 million fruit bags in their first year.'

The ABC1s, he argues, will notice the changes and like what they see.

He has other plans for the UK - which he has picked up on his travels round the country - to follow on from the coffee. 'I want McDonald's to be the UK's breakfast restaurant.' He's blitzing households with new menus, including toasted bagels and toast, and sampling deals. 'I want people to try it, to compare us. Breakfast is a huge opportunity for us. We can use our drive-thrus to offer lattes and toasted bagels to people on their way to work. That's a great USP for us.'

He knows what he's doing; he has done it before. 'McDonald's lost money in Japan. It had lost identity and was making a $50 million loss. Japan will be nicely profitable this year.' In Nikkei's survey of brands, McDonald's came ninth out of 100 in 2002, then plummeted to 84th in 2003. It came 16th this year. The difference was Beresford. 'We'd taken our eye off the ball there. Same here. We've got to refocus on the basics. To do that, we've got to have a real understanding of the dynamics.'

Beresford isn't entirely ignorant of this country and what makes it tick.

He's 53 and was born in Toronto. His father, a senior executive of a corporation that made valves and components for petrol pumps, had dual British and Canadian citizenship. When his father was sent to Britain to work, his family went with him.The young Beresford was sent to school in Kent and obtained three A-levels. To illustrate, he switches his accent from Canadian to southern English.

When it was time for university, he went back to Canada, to Ontario, to study economics. His first job was as a trainee advertising manager for Toyota in Canada, where he stayed for four years before joining McDonald's Canada. 'We were a young company with just 100 restaurants. I met with the people. It seemed a great young company in which to be an executive.'

He worked his way through the ranks. Such was his devotion to the company and his resolution to succeed that at one stage he was working as an executive in Toronto in the day and serving in a restaurant out in the suburbs at night - just to immerse himself in all aspects of the company and to be able to see customers at close hand.

In 1987, headquarters in the US assigned to the Canadian subsidiary the task of launching in a new country. Beresford was selected to head the project. It was his big break, the opening in Russia sealed his reputation.

The first employee hired in Moscow was a Russian woman, Marina Tulupnikova.

Later, she became the second Mrs Beresford. He describes how they started dating in the mid-90s, when both their marriages were over, and he reaches into his wallet for a photo of her. It's touching and, as with his business card, a gesture that is quite affecting.

There's something personal about him - especially given McDonald's monolithic size and nature - that is reassuring and endearing. Staff, you feel, will go the extra mile for him. He now lives with Marina in London, and they have flats in Toronto and Moscow. He has two daughters by his first marriage and she has a son by hers.

McDonald's launch in Moscow was a huge event, full of political symbolism.

Identified with President Gorbachev's efforts to modernise, it was part of perestroika and TV news pictures showed eager Muscovites queuing around the block. Beresford had to woo politicians, not all of whom were in favour, and to handle a huge media circus. He also had to educate Russians, who wouldn't dream of using their hands, in how best to eat a burger. They didn't know how to order, to take a tray and to sit down. He printed millions of brochures instructing them in the art of visiting a McDonald's.

Then, in September 2003, he was sent to Japan. Exactly a year later - such were the mounting issues in Britain - he was on the move again. Did he inherit an organisation that was depressed and demoralised in the UK?

'I found people who were very excited about the future,' he says, without so much as a twitch.

One of his immediate tasks was to assuage the franchisees and owner-operators.

'If our performance is flat, they're flat,' he says. He held a two-day get-together with a lavish gala dinner for franchisees and suppliers.

'My philosophy is that we're like a three-legged stool - staff, suppliers and owner-operators.'

The departure of Bell, a close personal friend, affected him. 'People talk about the strength and depth of our management. Well, Charlie is a fine example of what they mean. He was a great president. Last week, I wrote to him, wishing him the very best and a speedy recovery.'

Does Beresford eat at McDonald's? 'Not every day, but three times a week.' His favourite? 'Double cheeseburger.'

Once his odyssey round the country is over, he will sit down and analyse the results. It's exciting, he says: new branches will open, the company will continue to expand; new products will come on stream (low-fat dressings will launch soon, he reveals); and he insists he will give customers what they want.

This is a chastened McDonald's, very different from the faceless corporation of old. Beresford intends to be everywhere, spreading the word. In that direct, personal way, he says he'll meet me again to go through the findings of his focus groups and to let me know what action he's taken. There's no faulting his zeal. 'I'm walking up a staircase one step at a time, but I'm making progress - I will get there,' he says.

Just how far he gets remains to be seen.

FOUR TOUGH CHALLENGES FACING BERESFORD

1. How to compete with McDonald's smaller rivals, with their ability to adapt more quickly.

2. How to turn around a brand tainted by criticism from food experts to film makers. Beresford needs to concentrate on company ethos, as well as day-to-day execution.

3. How to give the restaurant chain more up-market appeal.

4. How to apply recent lessons to other national markets.

BERESFORD IN A MINUTE

1951: Born 20 December, Toronto, Canada, Educated at St Lawrence College, Ramsgate, Kent, and Western Ontario university

1972: Trainee advertising manager, Toyota Canada

1976: Joins McDonald's Canada as ad manager

1990: Opens first McDonald's in Russia, in Pushkin Square, Moscow

1999: Executive vice-president for McDonald's Canada

2003: Takes Charge of McDonald's Japan

2004: Chairman and CEO of McDonald's UK

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