For years, McDonald’s and Burger King (BK) have been the world’s two largest and most successful fast food chains. Both have battled out all these years over their operational differences which form the core of their corporate culture. The “Doing It All For You” (McDonald’s) vs. “Having It Your Way” (BK’s) stems from their respective production methods. McDonald’s “Made to Stock” vs. BK’s “Made to Order” also originate from the differences in their respective processes. Exhibits 1 and 2 show the Process Flow Diagrams (PFDs) of McDonald’s and BK respectively.
Exhibit 3 provides a detailed comparative analysis of the PFDs of these two fast food chains. The main operational difference between McDonald’s and BK is that McDonald’s cooks their hamburgers on grills using a “batch process” (a batch of upto 12 patties/grill) with human intervention to turn, sear, and pull. BK uses the machine based – Continuous Chain Broiler assembly process (8 burgers/meat chain) for the production of their burgers – similar to an assembly line in a manufacturing process thus, requiring no human intervention. For a “made to stock” process, it requires burgers in bulk and hence the batch process in McDonald’s.
Whereas, for a “made to order” process, it requires an assembly chain process where meat patties are placed at one end and after 80 seconds they come out the other end, cooked – one by one. Also, since BK harps on “make to order” process, it requires a semi-finished inventory – Steam Table in which mated buns and patties sit for 10 minutes and then discarded. In McDonald’s “continuous process” there is no such inventory and all the buns and patties are mated during the assembly process following the dressing. It should be noted that mating of the buns and patties before the assembly process in BK is a result of BK’s variety of menu.
Whoppers and Burgers both are of different sizes and hence the mating before assembly process. McDonald’s menu “Less product more often” offers standardized burgers. This cost of complexity is a huge cost driver for BK. The “dressing process” of McDonald’s is standardized with lever based dispensers and portion controlled condiments. In BK, dressing is done by humans using plastic squeezed bottles without pre-measured quantity. This is where McDonald’s is ahead of BK as can be seen from the statements – BK spends 1. 1% of their sales in condiments (wastage). Exhibit 4 provides a comparative analysis of the operating results of both chains.
Also, absence of pre-determined quantity of sauces/condiments causes variation and can affect taste and quality. Due to their “made to order” philosophy, BK uses microwave ovens to produce warm and fresh burgers. The high costs incurred by BK in “utilities” (2% more than McDonald’s) is a direct result of both a machine based cooking process and use of microwave ovens. Finally, once the burgers are ready – McDonald’s keeps them in “bin” – a finished goods inventory – a result of their “made to stock” concept. The burgers sit in the bin for 10 minutes before being discarded which produces waste costs for McDonald’s.
As a result, the cost of “food” for McDonald’s is roughly 1. 5% higher. Paper is also wasted (wrapped sandwiches) due to the food wastage. Statistics show that McDonald’s spends 1 cent/revenue dollar on paper costs – a $15 million dollar systemwide savings for BK. BK manages its inventory efficiently, partly because of its “made to order” process. During slow periods, BK strictly follows “made to order” compared to McDonald’s minimum inventory. Also, whereas McDonald maintains a paper inventory at the basement, BK stores its paperware in shelves in the production area. This adds to McDonald’s rent costs (1% higher than BK).
Moreover, BK calls for local supplies of milk/buns 3-4 times a week indicating fewer inventories compared to once a week by McDonald’s. The operational difference also reflects on the corporate culture. Batch Process requires that workers maintain a sense of teamwork, especially during busy periods. Speed becomes a key element and it requires the workers to be motivated and willing to help. At BK where the broiler paces the process (one burger comes out at 8/minute), there is not much teamwork required. Hence, McDonald’s gives better motivational and non-salary rewards. McDonald’s also spends around 2. % higher than BK on the salaries of their workers which include incentives. A major similarity between the two corporations is their effort to deskill the process (minimize human intervention). McDonald’s deskill at assembly process (automated dispensers) whereas BK aims at deskilling at the cooking phase by machine based broiler. Both are extremely customer centric which can be gauged from their tag lines – “Doing it all for you” vs. “Having it your way”. The other processes – hiring, counter, drive-through, and fry products (fries, etc) are also mostly similar barring few exceptions.
At McDonald’s, the counter specialist takes payment after assembling the order. In BK, the counter specialist takes the payment and then starts assembling the order. The information flow is also different. BK counter specialists use microphones to relay the order in the production area (a potential error producing process during busy periods) and register slips to assemble orders. McDonald’s have display monitors to assemble orders. During busy periods, a dedicated individual at bin relays the demand to the grill workers at McDonald’s.
At BK, a level indicator at the top of chutes operated by the manager relays the demand requirement to the production area. During peak periods, McDonald’s batch process allows for much greater throughput and faster speed of service. Though both McDonald’s and BK meet the hourly peak demand for Friday noon based on the case facts (Exhibits 5 and 6), there is significant operational difference in their approach to peak demand. McDonald’s philosophy of “keep more in the bin than make customer wait” is at the heart of its peak demand operations.
During busy periods, McDonald’s appoint additional “backers” or “expeditors” both in the production area and service area including a dedicated worker at the bin to maintain uninterrupted flow of supply. They also employ “on the turn” technique to allow for burgers at different stages of cooking. BK prefers to open extra cash registers than using an “expeditor” in the service area. In the production area, BK workers use microwave time of 12 s to work on other sandwiches. Hence, McDonald’s is systemically better equipped to handle busy periods whereas the assembly process is a huge bottleneck for BK. 60 burgers/hr vs. 200 burgers/hr and a target TAT of 90 s for McDonald’s vs. 3 min door-to-door for BK accounts for at least some of the tremendous difference between the annual sales of both chains at Hillybourne. ($1. 1 million for McDonald’s vs. $700,000 for BK). It is only during off-peak periods when BK comes close in dollar volume and is more efficient because of less waste, paper, and salary expense. Hence, it is safe to say that most of the operational differences at the heart of the two chains stem from their methods of production.