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Brand Revitalization: Background to the Turnaround at McDonald's

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The authors present a case study of how they turned around the McDonald's brand.
This chapter is from the book

Big Brand in Big Trouble

In February 1996, McDonald’s stock traded at 27 times earnings. But in July 1997, McDonald’s second quarter profit growth was just 4%, with a 2% decline in earnings from the US business.

When I joined McDonald’s in September 2002, the stock price was down to $17.66 from a high of $45.31 in March 1999. McDonald’s reported its first-ever quarterly loss of $344 million since it went public in 1965, with same-store sales down 1.9% in Europe, 6.1% in Asia-Pacific, and 1.4 % in the United States.1

In December 2002, after McDonald’s stock declined 60% over three years, the board of directors replaced Jack Greenberg with Jim Cantalupo as CEO, who they wooed out of retirement. Jim was a McDonald’s veteran who had led the international division beginning in 1987. By March 12, 2003, the stock price was just above $12.2

McDonald’s sales were in decline, market share was shrinking, franchisees were frustrated, employee morale was low, and customer satisfaction was even lower.3 The loss column was full.

On the plus side, McDonald’s had one great asset: Consumers had truly fond memories of their McDonald’s brand experience. People recalled their happy experiences at McDonald’s as a child. Parents remembered their parents taking them to McDonald’s. Unfortunately, this great asset was not generating great profits: The problem was that the majority of consumers did not have recent fond experiences.

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