Midday Report: McDonald's Tells Franchises 'Service Is Broken'

McDonald's tries to make its service friendlier, and Taco Bell looks for healthier menu options.

The top complaint of McDonald's (MCD) customers is that employees are rude or unprofessional. According to The Wall Street Journal, company officials recently told franchise operators that "service is broken" – that's a quote – and they need to fix the problem.

The Journal reports that one in five customer complaints have to do with the friendliness of the people who work at McDonald's, and the number of complaints about service has increased significantly over the past six months.

QSR Magazine does an annual study of service at fast-food chains, and McDonald's has consistently ranked near the bottom. Of the seven major chains in last year's report, only Burger King (BKW) scored lower than Mickey D's for friendliness of its employees.

During its webcast with franchisees, McDonald's said customers value good service almost as highly as price.

In addition, McDonald's is one of the slowest fast-food chains. In an industry where every second counts, QSR found the wait time at McDonald's drive-through windows was about 189 seconds. That compares to less than 130 seconds at Wendy's (WEN), the industry leader.

Why does McDonald's have these problems? There's no one answer, but the Journal notes that employee turnover is very high, and that 90 percent of its restaurants are not owned by the company, but by individual operators.

Despite these problems, McDonald's is doing plenty of things well. It continues to remodel its restaurants and roll out new menu items. Also, earnings in the fourth-quarter beat expectations. Its next earnings report is due out next week.

As for Taco Bell, owned by Yum Brands (YUM), the company says it wants to offer "more balanced" nutritional choices on its menu. It plans to launch some new products next year, and it may reformulate some current menu items. And eventually, by 2020, one out of five combo meals will meet federal guidelines for calories and fat content.

That's part of a growing trend in the industry, even though some critics complain that the new "healthier" offerings are not really all that healthy.

–Produced by Drew Trachtenbeg

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