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How a Frenchman is reviving McDonald\'s inEurope

A.

When Denis Hennequin took over as theEuropean boss of McDonald\'s in January 2004, theworld\'s biggest restaurant chain was showing signsof recovery in America and Australia, but sales inEurope were sluggish or declining. One exceptionwas France, where Mr Hennequin had done a sterlingjob as head of the group\'s French subsidiary to sell more Big Macs to his compatriots. His taskwas to replicate this success in all 41 of the European countries where anti-globalisers\'favourite enemy operates.

B.

So far Mr Hennequin is doing well. Last year European sales increased by 5.8% and thenumber of customers by 3.4%, the best annual results in nearly 15 years. Europe accountedfor 36% of the group\'s profits and for 28% of its sales. December was an especially goodmonth as customers took to seasonal menu offerings in France and Britain, and to apromotion in Germany based on the game of Monopoly.

C

Mr Hennequin\'s recipe for revival is to be more open about his company\'s operations, to be"locally relevant", and to improve the experience of visiting his 6,400 restaurants. McDonald\'sis blamed for making people fat, exploiting workers, treating animals cruelly, polluting theenvironment and simply for being American. Mr Hennequin says he wants to engage in adialogue with the public to address these concerns.

D.

He introduced "open door" visitor days in each country which became hugely popular. InPoland alone some 50,000 visitors came to McDonald’s through the visitors\' programme lastyear. The Nutrition Information Initiative, launched last year, put detailed labels on McDonald\'spackaging with data on calories, protein, fat, carbohydrates and salt content. The details arealso printed on tray-liners.

E.

Mr Hennequin also wants people to know that "McJobs", the low-paid menial jobs atMcDonald\'s restaurants, are much better than people think. But some of his efforts havebackfired: last year he sparked a controversy with the introduction of a "McPassport" thatallows McDonald\'s employees to work anywhere in the European Union. Politicians accused thefirm of a ploy to make cheap labour from eastern Europe more easily available to McDonald\'smanagers across the continent.

F.

To stay in touch with local needs and preferences, McDonald\'s employs local bosses asmuch as possible. A Russian is running McDonald\'s in Russia, though a Serb is in charge ofGermany. The group buys mainly from local suppliers. Four-fifths of its supplies in France comefrom local farmers, for example. (Some of the French farmers who campaigned against thecompany in the late 1990s subsequently discovered that it was, in fact, buying their produce.)And it hires celebrities such as Heidi Klum, a German model, as local brand ambassadors.

G.

In his previous job Mr Hennequin established a "design studio" in France to spruce up hiscompany\'s drab restaurants and adapt the interior to local tastes. The studio is nowmasterminding improvements everywhere in Europe. He also set up a "food studio", wherecooks devise new recipes in response to local trends.

H.

Given France\'s reputation as the most anti-American country in Europe, it seems odd thatMcDonald’s revival in Europe is being led by a Frenchman, using ideas cooked up in the Frenchmarket. But France is in fact the company’s most profitable market after America. The marketwhere McDonald’s is weakest in Europe is not France, but Britain.

I.

"Fixing Britain should be his priority," says David Palmer, a restaurant analyst at UBS.Almost two-thirds of the 1,214 McDonald\'s restaurants in Britain are company-owned,compared with 40% in Europe and 15% in America. The company suffers from the volatility ofsales at its own restaurants, but can rely on steady income from franchisees. So it should sellas many underperforming outlets as possible, says Mr Palmer.

J.

M.Mark Wiltamuth, an analyst at Morgan Stanley, estimates that European company-ownedrestaurants\' margins will increase slightly to 16.4% in 2007. This is still less than in the late1990s and below America\'s 18-19% today. But it is much better than before Mr Hennequin\'sreign. He is already being tipped as the first European candidate for the group\'s top job inIllinois. Nobody would call that a McJob.

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