Better Before Bigger

“At lunch time on a recent day here, Khamzat Khasbulatov sat in the world's second-busiest McDonald's and watched as dozens of people lined up at its 26 cash registers.

“‘I have too many customers,’ said Mr. Khasbulatov, chief executive of McDonald's Russia, as workers scrambled to assemble Big Macs and stuff french fries into red cartons.

“Of the 118 countries where McDonald's Corp. does business, none can boast more activity than Russia. On average, each location serves about 850,000 diners annually -- more than twice the store traffic in McDonald's other markets.

“That has presented the world's largest restaurant chain with an unusual dilemma. Russia, with its burgeoning middle-class and consumer appetites for all things American, is a jewel in the McDonald's system. But the company is being prudent about expansion here…

“Aggressive growth plans at McDonald's backfired badly in the past. During the 1990s, the company was fixated on adding restaurants throughout the chain -- as many as 2,500 stores a year. But by 2000, the condition of its existing locations, as well as the appeal of certain menu items, deteriorated. Two years later, the company's flawed expansion strategy was hammering its profits and stock price.

“Aiming then to be ‘better, not just bigger,’ the Oak Brook, Ill., company reined in expansion. In 2003, when McDonald's reported its first-ever quarterly loss, it opened a net of 21 new stores -- down from 1,015 in the previous year.

“New emphasis was placed on improving signature products… Executives also called for an aesthetic overhaul, using more muted colors and lighting schemes in the stores. The changes helped lift sales and profits, ushering in one of the company's most successful performance streaks to date. In the past twelve months, McDonald's shares have shot up 33%.

“Now that the company has improved operations, it is preparing to gingerly pick up the pace of store building.”

(“Steady Diet: As Burgers Boom in Russia, McDonald's Touts Discipline; To Maximize Potential, Chain Rations Growth; Trimming Wait Lines.” Janet Adamy. Wall Street Journal: October 16, 2007. pg. A.1)

BECOME YOUR BEST where you are today, then strive to grow. As we reach into new domains, we will naturally lose focus on what allowed us to move there in the first place. Return, refresh, renew -- grow and then recycle. This is nature's way.