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13/07/01 . By Mary Jo Feldstein . Reuters . USA  
McDonald's customers question service quality  
CHICAGO, July 11 (Reuters) - Henry Martin, who used to visit a McDonald's (NYSE:MCD - news) restaurant in downtown Chicago about three times a week, recently became so frustrated with the long lines that he took a two-month hiatus from the world's largest restaurant company.  

Friday July 13, 3:30 pm Eastern Time

``I get 30-minute breaks and they take 20 minutes to get your food,'' Martin said. ``It's supposed to be fast food, right?''

As McDonald's sales lag company goals and earnings fall below Wall Street expectations, analysts say the fast-food giant will need to improve customer service in order to stay ahead of the competition.

Unhappy customers cost each U.S. McDonald's restaurant some $60,000 worth of business annually, or about 3 cents to 4 cents a share in earnings, based on internal estimates gleaned from the company, Salomon Smith Barney analyst Mark Kalinowski said.

The Golden Arches needs to preserve its main strength -- its brand and all the historic qualities associated with it, such as high quality and speed, Kalinowski said, adding that declining service has had a measurable impact on sales.

``You could make an argument that (erosion) has already happened and things would be a lot better if service had been better the last several years,'' he said.

McDonald's earnings have fallen in the two most recent quarters, and the company warned in June that its second-quarter earnings would likely be down as well.

U.S. sales grew 3 percent in 2000, contributing to $40.2 billion in sales worldwide, ahead of rival hamburger makers Burger King Corp., a unit of London-based Diageo (quote from Yahoo! UK & Ireland: DGE.L) Plc, and Wendy's International Inc. (NYSE:WEN - news).


Two-thirds of fast-food users visit a McDonald's at least once a month, and the average McDonald's customer eats at the chain five times a month, according to a study by the market research firm Sandleman and Associates.

``The number of people who visit McDonald's once a month is really high so they are trying to increase customer satisfaction among people who are already coming in,'' said the firm's president, Bob Sandleman.

Customer service at McDonald's Corp. was ranked last in a University of Michigan study of fast-food chains earlier this year. Customers complained of rudeness, slow service and incorrect orders.

The company has defended its dedication to the 45 million customers it serves daily.

``McDonald's has always and will remain focused on total customer satisfaction,'' said company spokeswoman Anna Rozenich.

The McDonald's frequented by customer Martin received word from above to improve customer service, said manager Ed Williams. He would not say how many complaints the restaurant, located in the city's busy Loop financial district, receives daily.

Companies know the lifetime value of a customer, so they are more than willing to compensate those who complain, said Neil Stern, a retail consultant at McMillan Doolittle. ``They (McDonald's) have put in processes and procedures that say if you complain, you are going to get this handled and get this handled fast.''

For example, McDonald's recently implemented a new e-mail response system by which local store managers are forwarded customer complaints sent to company headquarters and are required to respond within a certain time period, Stern said.

The problem is only about one in 30 disgruntled customers complains, while the rest just never come back, Stern said.


Customers who gripe of slow service could blame McDonald's new ``Made for You'' production system, the company's most recent large-scale customer service initiative.

In 1998, the Oak Brook, Illinois, company began cooking food made to order as part of a system aimed at providing customers more menu options and hotter, fresher food.

``'Made for You' was supposed to address issues at a number of different levels,'' Stern said. ``The flip side of 'Made for You' was speed,'' he said, adding that the improvements to quality hurt timeliness of service.

The new system allows the nearly 13,000 U.S. McDonald's to cook orders as customers place them instead of letting sandwiches bask under warming lamps. Customers have been more satisfied with food quality since McDonald's made the change, Stern said.

The company is responding to the speed problem by experimenting with a more specialized front-counter operation, analysts said. A cashier focuses on taking the customer's order and the exchange of money, while another employee prepares the food.

Finding and retaining competent employees remains one of the largest customer service roadblocks for McDonald's and all fast-food chains, Stern said.

``McDonald's, like everyone, would like to have intelligent, well-trained employees, but knowing how difficult it is in this environment, that's where recovery comes in,'' Stern said.  
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