Today McDonald’s is the largest restaurant chain in Britain with more than 1,200 outlets. However the first restaurant in 1974 was a “disaster”. How did McDonald’s break the British market?
Establishment of the Woolwich branch
McDonald’s was established by the McDonald brothers in California in 1940. Ray Kroc (1902 – 1984) began to expand the business through franchise agreements from 1953.
The first branch in Britain was established at Woolwich, a London suburb, in November 1974.
McDonald’s had hitherto found limited success across the Atlantic, recording a $1 million profit loss in Europe in 1972. Britain was among the last of the major Western European countries to gain a McDonald’s outlet, due to beef prices that were 20 percent higher than in the United States, and an expensive property market. The Wimpy chain, with 625 outlets, had already popularised the hamburger in Britain, and offered established competition.
McDonald’s had originally sought a West End of London location which could target American tourists familiar with the brand, but the company was unable to obtain a suitable site. Meanwhile the property in Woolwich, acquired from Burton, the menswear chain, was relatively affordable, and with its busy high street was considered to represent “average Britain”. It was argued that if the Woolwich market could be cracked then the rest of the country could follow.
Robert “Bob” Rhea (1932 – 2010), a successful American franchisee, and the United States parent company each held a 45 percent stake in the British venture. Rhea was appointed as managing director. Geoffrey Wade, who had managed the property operations of Burton, held a ten percent stake, and was appointed as assistant managing director.
McDonald’s had a modest start in Britain. First day takings at Woolwich were an underwhelming £98. However, a reporter for the Daily Mail was impressed by “that quintessentially American classlessness about the place – a sense that minks and mackintoshes could mingle here without any sense of self-consciousness”.
A Big Mac cost 45p. This was on par with the price charged for an equivalent Wimpy hamburger, which used soybean as a filler, unlike the pure beef McDonald’s product.
McDonald’s preferred to source ingredients locally, but until it reached scale the company was unable to convince British suppliers to meet its exacting product specifications. An exception was Hawley’s of Birmingham, who won the bread bun contract after nine months of negotiations in August 1974.
When the first McDonald’s outlet opened, the beef and buns were British, but onions were imported from one area of California, cheese and much of the paperware from West Germany, milkshake mix from the Netherlands, fish from Denmark, potatoes from Canada, apple pies from Oklahoma and sauces and pickles from New York. Much of the machinery and interior fittings were imported from the United States.
There was initially only one concession to British tastes: the Woolwich outlet sold tea. Vinegar was not provided, as McDonald’s fries were less greasy than traditional British chips. McDonald’s had reduced the sugar content of its bread buns from 13 percent to nine percent to suit British tastes by December 1974.
Paul Preston (born 1948), a gregarious and outgoing blue-collar native of Ohio, was the first manager of the Woolwich restaurant. He later commented, “The first store was a disaster. Nobody came. Nobody knew who we were. We tried every gimmick under the sun – endless free meals and promotions. It took a long while to get going”.
Bob Rhea agreed that the opening was “tough” and that initial sales were “very, very slow”. He would later recall how, “we couldn’t even give the stuff away”. Rhea described a British public that was highly sceptical of the restaurant, and that didn’t understand what fast food was. British people used knives and forks for most meals, and preferred to administer their own condiments.
Growth was slow to take off for two reasons: not only did McDonald’s have a difficult time persuading British food processing companies to meet its requirements, which increased costs, but secondly, beef burgers had a reputation for low quality in Britain.
Further outlets are opened and advertising begins
The first McDonald’s cinema advertisement appeared in 1975, and on local television a year later.
Three more outlets had been opened in the London suburbs of Holloway, Croydon and Catford by January 1976. The first two were, like Woolwich, in former Burton stores.
McDonald’s began to open outlets in London’s West End, the heart of the entertainment district, from 1976, beginning with a branch in Haymarket. The new outlets were immediately profitable.
Bob Rhea announced that the company’s goal was “nothing less than a McDonald’s restaurant in every town and city in Britain”. McDonald’s had 17 outlets in Britain by the end of 1978.
Ian Watson of The Sunday Telegraph commented in December 1978 that “McDonald’s trendy style has proved popular, particularly with the young”.
Bob Rhea argued that the main obstacle to growth was not competing fast food restaurants such as Wimpy, but mothers, who he claimed were reluctant to bring their children to a restaurant that they perceived as unhealthy and possibly expensive.
Paul Preston claimed that the turnaround for the company began when it began to target its marketing towards children. He said, “most of our television adverts went out in the afternoon when the kids were watching. It was pressure from the kids which brought their parents into our restaurants”.
McDonald’s grows and enters profitability
McDonald’s UK had lost $10 million by 1979. The breakfast menu was introduced from 1982. The American parent company bought out the Rhea and Wade stakes in 1983, however the two men continued to manage the business.
The company grew by raising standards in the fast food industry with high standards of cleanliness and effective television advertising campaigns. The Times described the outlets as “modern and with attractive decor” in 1983. McDonald’s UK entered into profitability from 1984 onwards.
McDonald’s had 146 restaurants, a turnover of over £100 million, and outlets across the South East, the Midlands and the North West by October 1984. The Yorkshire market was entered from 1985. The company established a stepping stone approach to growth, building a sizeable network of stores before entering a new region.
Chicken McNuggets were launched in 1984. The Happy Meal was introduced from 1986.
Bob Rhea entered into retirement from 1986, and Paul Preston was appointed as chief executive of McDonald’s UK.
McDonald’s did not franchise restaurants until 1986, by which time it felt that its identity and operations had been firmly established. That year, the first McDonald’s drive thru in the UK was opened in Fallowfield, Manchester.
The Strand and Croydon outlets were the busiest McDonald’s restaurants in the world by 1989. There were 340 outlets by the end of the year.
The McChicken Sandwich was introduced in 1989.
Public backlash and mad cow disease
McDonald’s suffered a major mis-step with the launch of the McPloughman’s sandwich of cheese, pickle and salad. Introduced without any prior market research in 1991, Paul Preston later admitted that staff were embarrassed by both the concept and the name.
Meanwhile a company commissioned public survey had determined that the British perceived McDonald’s as, “loud, brash, American, successful, complacent, uncaring, insensitive, disciplinarian, insincere, suspicious and arrogant”.
McDonald’s beef sales dropped by 50 percent in March 1996 amid fears regarding mad cow disease. The company bowed to public pressure and temporarily ceased selling British beef in its restaurants.
The McLibel case
Helen Steel and David Morris were environmental campaigners who had published a leaflet that criticised McDonald’s. The company sued the pair for libel in 1990.
The media portrayed the battle as a David vs Goliath fight when the two campaigners, denied legal aid, were forced to represent themselves in court. The pair received intermittent assistance from Keir Starmer, a barrister and future leader of the Labour Party, on a pro bono basis. The trial lasted for seven years, and became by far the lengthiest libel case in British history.
McDonald’s finally won the case in 1997. Newsweek described the result as a “pyrrhic McVictory”. The High Court judge decided that the company “exploited” children with its advertisements and placed young employees under undue pressure. It was also accepted that low pay at the chain had helped to depress wages in the catering sector.
The Financial Times argued that the McLibel case was a “public relations disaster” for McDonald’s. The Economist questioned why McDonald’s would want to sue “two environmentalists with no money and no clout”. Bradley Gerrard, writing in the Daily Telegraph, commented that the chain had, “developed a reputation for being an impervious and secretive corporate giant which hits back at detractors hard”.
Paul Pomroy, later to become CEO of McDonald’s UK, would later admit that proceeding with the McLibel case was a mistake for the company.
In 2005 the European Court of Human Rights ruled that Steel and Morris had been denied a fair trial, and that their conduct should have been defended under their right to free expression.
Decline and business revival
The use of genetically-modified food was phased out in 1999.
The McFlurry ice cream was launched in 2000.
McDonald’s UK profits stagnated from the turn of the century amidst increasing concerns about the negative health effects of fast food. Sales fell every year between 2000 and 2005. The chain responded by launching fresh fruit and organic milk in 2003, and toasted deli sandwiches from 2005. Porridge, bagels and freshly ground coffee were added to the breakfast menu from 2004.
25 unprofitable stores were closed in 2006 and the company began to refurbish its outlets. The rise of coffee chains such as Starbucks and Costa had made outlets seem dated: new furniture, subdued lighting and wifi were introduced. That year Steve Easterbrook was appointed as CEO of McDonald’s UK.
McDonald’s converted its delivery lorries to run entirely on biodiesel made from oil discarded from restaurant fryers from 2007.
New stores were opened for the first time in six years in 2008, and a regional pricing system was introduced. This followed a decision to allow franchisees more flexibility in setting prices.
The changes worked: sales rose by ten percent in 2008. 80 percent of all British families visited McDonald’s at least once a year by 2009.
Deli wraps were introduced as permanent menu items from 2011.
McDonald’s became the first high street chain in Britain to use 100 percent Freedom Pork from RSPCA-monitored farms from 2013.
A testament to his success, Steve Easterbrook was appointed CEO of McDonald’s Corporation in Illinois, Chicago from 2015.
McDonald’s was the second largest seller of coffee in Britain by 2018, behind Costa.
The British operation serves three million people every day, and over the course of a year, 90 percent of the British population visits a McDonald’s.
There are around 1,300 McDonald’s outlets in Britain as of 2020, with a combined turnover of around £1.5 billion.