McEuros

Every so often, we see news coverage of a McDonald's somewhere in Europe that's become the target of anti-Americanism and/or anti-corporate activism.  But, Europeans now spend more money in McDonald's than we do.

Europe is now McDonald's largest region by revenues, despite having roughly one-quarter the number of outlets as the US. Last year, revenues from company stores and royalties from franchisees topped $8.9 billion in Europe, compared with $7.9 billion in the US. It's a trend that analysts expect to continue when the world's biggest restaurant group reports second-quarter results on July 23. West expects US sales to rise by 3.4 percent, vs. 9 percent for Europe (19 percent if you include the foreign currency impact). This year, he reckons, McDonald's, the most American of brands, will generate 55 percent of its earnings outside the US.

The European region is leading the way, thanks to its transformation under Hennequin. The profitability of existing operations has improved in top performing markets such as Britain, Germany, and France (the country where the chain's profitability is second only to that of the US). And growth in Russia and Eastern Europe has soared. Hennequin says Russia, with 230 outlets planned by the end of this year, boasts the company's highest sales and profits worldwide on a per-restaurant basis.

Not many Americans go to McDonald's for the ambiance.  That's less true in Europe.     

Hennequin's recipe for success focuses on upgrading the customer experience. "The brand position is different in different parts of the world," he says. In the US, customers tend to eat on the go, and around 70 percent US sales come from drive-throughs. Europeans prefer to linger. "In Europe it's more about the experience," he says. "It's convenient and a destination place at the same time."

To make the Golden Arches a place where Europeans want to hang out necessitated a major design overhaul. Hennequin, as French country head, refurbished the chain's outlets there, and he was tapped to do the same across the 40-country-strong European operation. He created a McDonald's design studio outside Paris to come up with a range of eight design packages from which franchisees, who account for 68 percent of European outlets, can choose.

The transformation is dramatic. The bold red-and-yellow plastic signage has been replaced by muted facades in dark olive and yellow, and the 1970s-style interiors have given way to more elegant spaces. Retro plastic and Formica fittings are gone, supplanted by wood, leather, and stainless steel. Many outlets are even kitted out with wireless Internet connections and "egg" chairs designed by Danish architect Arne Jacobsen. This year, McDonald's will invest $800 million on opening 150 restaurants (up from 80 in 2007) and remodeling existing company-owned outlets.

They've also upgraded the play areas into Ronald Gym Clubs, which are located in an adjacent building.  The concept, which puts a greater focus upon fitness, may be tested in the U.S. next year.

His strategy has been to stay true to McDonald's American roots while making the products and entire experience more localized. That focus is evident in everything from management and staffing to menus. If you don't fancy a Big Mac in the branch at the Piazza di Spagna in Rome, you can order pasta freshly cooked to order. In France, McDonald's serves wine and runs an annual promotion called Le Saga du Fromage, where instead of the usual cheddar, burgers are topped with beloved French cheeses such as Reblochon. The concept has now been rolled out across Europe and Latin America.

... 

Another Continental-style offering helping to drive growth is the rapid rollout of McCafés. By the end of this year, there will be 940 across Europe. These coffee-bars-within-a-store offer cappuccino and espresso and a range of familiar pastries -- from cornettos in Italy and flan in Spain to tortes in Germany and Austria. In Germany, where there will be 547 McCafés by the end of this year, McDonald's is already the country's leading coffee chain.

Those would certainly further dent Starbucks here in the U.S.