Lonetree

Source: Retail Digital

Date :4/19/2007 7:00:00 PM

Lonetree: Lonetree bucks the trend

Despite challenging times for the fast food industry, McDonalds franchise Lonetree Ltd has managed to produce consistently strong performances in all its restaurants. Managing director Ron Mounsey told James Hurley how his company are proving that McDonald’s can challenge perceptions and evolve into a respected, modern and responsible fast-service restaurant

Written by James Hurley & Produced by James Smith

McDonald’s has had an image problem for as long as most people can remember. The company’s troubled relationship with the media reached its nadir in 200 when Morgan Spurlock’s Supersize Me took an unscientific and rather excitable brickbat to its marketing practices and the nutritional qualities of its products. While the corporation responded with reduced fat and salt content, a healthier menu and the scrapping of its supersize option, the media remained broadly unimpressed, suggesting that the company had merely shut the stable door long after the horse had bolted. With the range and size of the competition in the UK fast service food industry constantly increasing, McDonald’s has experienced difficult times recently and has had profits hit in a number of its restaurants. Those owned by McDonald’s franchisee Lonetree Ltd, however, aren’t amongst them.

A progressive company

While McDonald’s share of the UK industry may be temporarily shrinking, Lonetree recently acquired two more franchises, taking the total number of restaurants headed by Ron Mounsey, Lonetree’s managing director, to five. Mounsey says that his company have been bucking the trend of the quick service restaurant business for the last four years. “The acquisition of the two new franchises expanded my business by about 40 percent,” he says. “Sales in my existing restaurants increased by just short of ten percent. There’s been a decline in profit terms across the whole of the quick service restaurant business. As much as anything, we’ve been seeing increased competition. Yet we’ve been growing for the last three or four years by just short of double digits. We’re fairly buoyant, we’ve got quite a progressive business.”

Asked how Lonetree has achieved strong growth in such a competitive environment, Mounsey cites a number of initiatives that have been implemented by the franchisor. “McDonald’s has changed considerably over the past four or five years,” he says. “We’ve listened to our customers, and our menu options have changed. We’ve done a lot of progressive work on getting our quality measures implemented. We use quality products and that’s not always fully understood by people who come into our restaurants. McDonald’s offer a range of healthy eating options. They form about 10-15 percent of our sales which in a £1.65 billion business is clearly very significant.” He feels that this is a fact that is often missed, or ignored, by the media. “We get criticised in the media who often suggest that we offer the healthy options simply as a marketing device and that they only produce a negligible contribution to our sales, but that’s not true. It’s a significant proportion and it’s growing. We’ve won various awards over the years for our use of free range eggs, and we were one of the first companies to do that. We use organic milk. We see ourselves as a progressive burger company, not a shrinking business. This is echoed by Lonetree.”

The quality demanded by the franchisor is reflected in its supply chain. “McDonald’s operate on a three-legged supply network – the suppliers, the franchisee and McDonald’s,” Mounsey explains. “We work closely with suppliers to mutually grow our businesses. Because of the quality assurance that is required, McDonald’s will ensure that those suppliers meet our quality standards which are recognised as the some of the highest in the retail sector. A lot of our standards are far higher than those required by Marks and Spencer and Tesco. We’ve got suppliers who work with all those major retail chains so they recognise how high our standards are. Unfortunately, that’s not common public knowledge. Being a McDonald’s supplier is a good account to have and is at least on a par with any other food retailer you care to mention.

“McDonald’s source the majority of our materials and give us the advantages of their economies of scale. Supplies go to one of three distribution centres and then come out via Keystone Distribution who will supply almost everything that the stores need. An individual truck brings all our paper, chilled and frozen products so everything comes at once. Our ordering is done through a computerised system and then everything comes down the supply chain. Overall it works very well.”

Support from above

The benefits of being attached to a large franchisor are numerous. Lonetree draw not only on the advantages of McDonald’s extensive supply chain, but upon a full range of services that the company offers its franchisees. “They are a very good franchisor to be involved with,” says Mounsey. “They give us a lot of support and advice. They’re also very proactive if there are any difficulties in the business. We latch onto any savings on economies of scale. For example, McDonald’s will negotiate an electricity contract and then pass that best price onto us. This extends to any of our supplies, so it’s a huge benefit for us. They also offer many of the courses that my managers and I go on for free.”

McDonald’s also gives advice on human resources policy and law changes. “Although we are independent businesses, because of the headline nature of the industry we work within, we listen to the advice that the company gives us. They are very easy to work with and are very supportive. I’ve bought a twenty year license to use the McDonald’s brand, with each of my restaurants on a separate deal. The brand is the strength that we’re buying into. The success of any franchise depends on a good relationship between franchisee and franchisor.”

Asked to what extent he is free to set his own policies as franchisee, Mounsey admits that he does experience some frustrations. “Obviously we have to use McDonald’s core products but I can price whatever I like. The downside is we can’t always source local brands. We’re often approached by local people wanting to supply us with things, like spring water for example. Sometimes you can’t use a good local product that you’d like to and the spring water issue is one such example. That can be frustrating because many times I could buy cheaper locally. I do use local electricity service companies. Some of the employment policies we’d like to use ourselves but we have to go with the corporate guidance. Ultimately I don’t want to be in the media for anything negative, so we take our lead from the franchisor.”

Mounsey holds a senior position in the UK franchise community, sitting on the National Leadership Group, an assembly of franchisees that represent the franchise community. “We sit on an under board with the executive team in the UK,” he says. “It gives us an insight and input into future strategies for the UK company. The UK is part of the European division so we do take the lead from the European leaders. But each region has some individual autonomy, and it’s in their interests to have the franchisees all working in the same direction.”

An ongoing challenge

At one point, 85 percent of all the media coverage that McDonald’s received was negative, arguably culminating in a dictionary entry for the term ‘McJob’, defining it as a low-grade, dead end job. Now, this is down to 15 percent, so things are clearly changing. Improving perceptions of McDonald’s, however, is an ongoing challenge. “We’ve had an ongoing process of educating people. We’re challenging the dictionary definition because it’s wrong. A lot of our managers start as crew members or graduates and work their way up. There is progression in the business and there are career opportunities and our positions are competitively paid.

“We have a structured training system for our crew members. It takes between nine months to a year to fully train a new crew member. We also have a structured management training programme which works very well. It improves knowledge and confidence. There’s a definite progression path that everyone fellows. A lot of the qualifications that we provide are now verified externally. Our food hygiene and restaurant safety qualifications are handled by an outside company so staff can take them with them should they leave. We also offer NVQ’s and we have a system called ‘our lounge’.” ‘Our lounge’ is a website which helps staff at McDonald’s to do English and Maths GCSE as they work. “We see ourselves as having a progressive human resources policy and we’re trying to dispel this McJob myth,” he says.

“The attitude is changing – we have always had this process in place, but maybe we haven’t sold it hard enough and stood up to those who have criticised us. We’re more proactive in combating that attitude now. We’re working really hard on changing people’s perceptions. We open our doors. I have a policy in my business that allows anyone who wants to look around our kitchens to do so. We get a number of schools in, we do health and safety and food safety days, food technology days for teachers and college lecturers, and whenever people come in they’re surprised by the high standards that we have. People don’t realise the minute detail we go into and the importance we place on the quality of the produce that we use – our burgers are one hundred percent beef, there are no ears, eyes and noses as some may have you believe, and our products are sourced from UK and Irish Farms. We know we’re not going to change people’s attitudes overnight but it’s something that we’re working on.”

As for the future, Mounsey is very optimistic. “There’s a plan being implemented to re-image a lot of our high street restaurants. That’s going to be an ongoing process across the majority of the stores. A lot of our stores are starting to look their age both outside and in. It’s a complete modernisation.

“The UK market is going to be increasingly franchised and I plan to buy more stores. I meet the criteria required to do this; I’m a leading edge operator based on the audits that we do, our people practices, and the sales growth which means I’m expandable. I anticipate my business will grow for the next four or five years by acquiring more stores and increasing sales in the existing restaurants. There is a lot of competition but I’m confident that with our future strategies, including marketing, new food products, improved service and general ambience in the restaurants, Lonetree will continue to be successful.”