McDonald's goes 24/7

By Michael Arndt

updated 3:04 p.m. ET Jan. 26, 2007

It is 3:36 a.m. Thursday at McDonald's in Garner, N.C., a bedroom community just beyond the city limits of Raleigh. Although the town's taverns closed more than an hour ago, the last clubgoers are straggling home. Their cars barrel by ones driven by waitresses, commercial cleaners, musicians, nurses, and computer analysts heading home from work. The McDonald's sign, posted high along a commercial strip of big-box stores and chain restaurants, is one of the few still glowing.

Inside the McDonald's kitchen, Julia Diaz is mixing buttermilk biscuit dough by hand in a giant stainless steel bowl, while Silvia Roldan is grilling sausage patties and eggs for breakfast, which begins in 24 minutes. Outside, at the drive-through window, D.C. Chavis is picking up a Premium Crispy Chicken Ranch BLT sandwich and a large order of fries. Chavis, 24, has just clocked out after 12 hours at a nearby food warehouse. He used to pick up an after-work snack at an all-night convenience store or diner. Now he swings by McDonald's at least five times a week for the premium sandwich combo meal or, if it's later, a McGriddle and a side of hash browns. The food is a lot better at McDonald's, he says, adding that the prices are cheaper and the brand is one he trusts. Says Chavis: "I was raised on McDonald's."

McDonald's went 24/7 in Garner in April, 2005, after a push by corporate headquarters to boost profits by extending store hours. Franchisee Fred Huebner had doubts at first. He doesn't anymore. By catering to the area's night owls and early birds on U.S. Highway 70, Huebner, who put on his first McDonald's uniform almost 35 years ago, figures he has increased his restaurant's revenue by 4.5%, or $90,000, over a year. "There are so many customers out there all times of the day," he says. "We have to be out there, too."

Over the course of an average day, 1,500 people—the equivalent of 1 out of every 16 people in the middle-class suburb of 24,095—drive in to the Garner McDonald's. The clientele is every bit as diverse as the town's population. Old-timers joshing with one another over morning coffee. Office workers zipping from the pickup window for breakfast behind the wheel. Repairmen on a midshift break. Mothers taking a breather while their preschoolers scamper in the Play Place. Families ordering dinner in Spanish. And, in caravans, twentysomethings after a night of carousing.

It wasn't always like this. When Ray Kroc launched his first drive-in in 1955, McDonald's was a two-meal place, opening just before lunch and closing not long after dinner. It kept those hours for the next 20 years. Then, with the national introduction of the Egg McMuffin in 1975, the company turned breakfast into a fast-food meal, too. Now the world's biggest restaurant chain wants to take over the rest of the day. Since 2003 more than 90% of the 13,700 McDonald's in the U.S. have extended their hours beyond the basic 6 a.m. to 11 p.m. day. Nearly 40% operate nonstop, up from 0.5% in 2002. Breakfast is busting out of its old boundaries. It now stretches up to seven hours at many locations, and the company is considering making it an all-day option. Next on the agenda: snack foods and fruit smoothies for between-meal refuelings and late-night munchies.

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The all-hours offensive reflects a strategic shift at McDonald's. For most of its history, growth meant one thing: more locations. And until the late 1990s it worked. Like a juggernaut, McDonald's rolled over the competition and across the nation, opening hundreds of outlets each year and cranking out a run of hit products. Then the company reached a saturation point. While overall revenue kept climbing, the new sites stole customers from existing locations. Margins and same-store sales slid into 2002, reflecting diminishing returns on the $1.2 billion a year that the company was plowing into new restaurants during this period. By spending so much time on real estate, recalls James Skinner, a 35-year veteran who was promoted to chief executive in late 2004, "we had lost our focus. We had taken our eyes off the fries."

Today the mantra is "better, not just bigger." Instead of building more restaurants, McDonald's is increasing its financial results by squeezing more from the ones it has. The new focus has forced it to rethink every element of its business, from product development and marketing to restaurant design and technology. In the process, McDonald's, which seemed out of touch with consumers just a few years ago, has attempted to realign itself with contemporary tastes.

The changes are obvious at the newly refurbished McDonald's in Garner. The dark wood and glass display case of its McCafé — think Starbucks — tempts customers with its desserts and sandwich wraps. Sheryl Crow and Norah Jones play on the restaurant's piped-in soundtrack, while flat-screen TVs show cable news. Amid live plants and wrought-iron magazine racks, four leather lounge chairs round out a den. Hand-blown light fixtures cast a warm glow. And that trademark McDonald's smell of burgers and fries? There isn't even a whiff of it. The restaurant's air system whisks kitchen odors outside before they can seep into the dining room. This is a place set up to make customers comfortable. The service is still fast, but the meal itself no longer has to be.

McDonald's is, of course, much more than an ordinary fast-food chain. It is a cultural mirror. The changes at the burger company reflect the evolution of American eating habits. Traditional meals are getting pushed and pulled into nontraditional hours as longer drive times and hours on the job combine with busier after-work schedules to take up more and more of the day. The idealized vision of a family gathering for a home-cooked dinner seems as dated as Father Knows Best. These days, with the typical American eating out five times a week, according to market researchers at NPD Group in Port Washington, N.Y., the dining room is likely to be a car seat in the family SUV. "People don't sit down and have an organized meal today," observes Marlene Schwartz, director of research and school programs at the Rudd Center for Food Policy & Obesity at Yale University. "Eating is something you check off."

McDonald's is not responsible for the way Americans eat. But the inescapable fact is that it serves an enormous number of them. The $21.6 billion company now feeds a record 27 million people every day, 1 million more every year since 2003. As No. 1, it is likely to remain the top target for the food police. Although McDonald's now sells salads, its two most popular foods, the double cheeseburger and fries, are high in fat and sodium. McDonald's also seems out of sync with more recent health concerns. Wendy's has quit using trans fats in its fries and chicken, and KFC plans to purge its deep fryers of these oils in the spring, making New York City's recent trans-fat ban a nonissue for them. McDonald's says, though, that substitutes spoil the taste of its fries. "From a public health point of view," observes Michael Jacobson, executive director of the Center for Science in the Public Interest, "more people going to McDonald's means poorer health."

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