San Antonio Express from San Antonio, Texas on May 8, 1977 · Page 20
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San Antonio Express from San Antonio, Texas · Page 20

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San Antonio, Texas
Issue Date:
Sunday, May 8, 1977
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Page 20
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Have it your way, Mac NEW YORK TIMES SERVICE CORAL GABLES, Fla. — The sizzling question in the fast-food league this year is whether Whopper College, having hired away the team captain of Hamburger University, will now mount a major bid for the championship. Whopper College is, of course, the training camp of Burger King, the Hamburger University drills the players at McDonald's. These are serious school names and, indeed, the mass-marketing of hamburgers is a serious business; Ray Krock, the founder of McDonald’s, has explained its supremacy this way: “We take it more seriously than anybody else.” Donald N. Smith is also a young man who takes burgers very seriously. He says that after a tense day or two in the office, he finds it relaxing, “a kind of therapy,” to head for a fast-food outlet. Last New Year’s Day, a Saturday, Smith stepped up to the highest field rank in the industry, senior executive vice president in charge of operations and marketing at McDonald’s. The following Monday, his first working day under the new title, he resigned, cleared out his desk and left to become president of Burger King. Out of the deep frier The switch set the hot-stove league buzzing. It raised three major questions: Why would Burger King, the fastest-growing segment of the Pillsbury Co., want to change captains at this point? Why would Smith abandon the helm of the even more fast-growing McDonald’s chain of more than 4,000 outlets for the 1,700 of Burger King? And what does Burger King have up its sleeve now? Talks with some of the players shed some light on these mysteries, but also deepen the shadows. One key factor seems to be that William H. Spoor, who became chairman of Pillsbury four years ago and has been shaking up its executive personnel ever since, does not seem to care for playing Avis to McDonald’s Hertz indefinitely. Pillsbury does not disclose how much each of its subsidiaries earns, but describes the contribution of Burger King as very satisfactory. Still, although sales by the Burger King chain rose 21 per cent last year to $750 million, sales per outlet rose only 5 per cent — mainly reflecting price increases — to a bit more than $500,000. This is far below the McDonald’s average and helps explain why McDonald’s profits are believed to be nearly 10 times larger than Burger King’s. (Other reasons are that McDonald's is two-and-one-half times bigger, and unlike Pillsbury it owns most of its physical plant and rents to franchisers.) Authorities observe, incidentally, that McDonald’s is the only major fast-food chain that is not owned by a conglomerate, and they remark that some of the others have been faring poorly of late — but not Burger King. The chief credit for this is unanimously given to the television jingle “Have It YOUR Way,” words by Richard Mercer and music by the appropriately named Dennis Berger, both of Batten, Barton, Durstine & Osborne, the advertising agency. The slogan brilliantly exploited the only material difference to the consumer between a McDonald’s and a Burger King hamburger. Whopper fatter Nutritionists, who are not enthusiastic about either, say there is no difference to speak of: the Whopper starts out heavier than the Big Mac, but the edge is in fat. Both are cooked brown in advance and then are stocked in warming bins. But the Big Mac is stored fully dressed, while the Whopper waits nude on its bun for the customer’s order. This may be for the works: mayonnaise, catsup, pickles, tomatoes, onions, lettuce. Or, hold the mayo, or the mustard, or the lettuce. Have it your way. Not content to rest on its laurels, Pillsbury switched the $35 million Burger King account last Sept. 30 from B.B.D.&O. to J. Walter Thompson and adopted a new cheering slogan, “America loves burgers, and we are America’s Burger King.” No reason was given for the switch. (A Madison Avenue observer commented, “Creativity is near the bottom of the list of reasons for clients’ changing agencies.”) Less than two months later, Leslie W. Paszat suddenly resigned as president of Burger King. He had assumed the title only last June, when his old colleague. Arthur A. Rosewall, was named head of all Pillsbury Restaurant operations after serving as the Burger King president. Paszat’s departure was ascribed only to a difference on policy, which was not specified. Now seeking another’ post outside Pillsbury, he declined comment, but an insider said the basic reason was that Paszat had taken too Road to the best burger elevation — that he was thenceforth in full charge. So Pillsbury now set out to find a take-charge man. Edward Wingate, its personnel chief, had been impressed with the way Haley Associates, a head-hunting firm, had found a new- executive job for a former Pillsbury president. So he called Robert L‘ Gette of Haley and placed the order. The search for a top executive can take several years; this one lasted five weeks. Gette went through the motions of checking out several nominees, but from the beginning, everybody seems to have agreed on the best man for the job: Donald Smith of McDonald’s. At 36 years of age. Smith was a veteran of an industry where the average age of employes is said to be 18. Born in Ontario, the son of a mining company accountant, he worked as a youth in what he calls “a burger-and- French-fries-oriented” drive-in that his father had organized in Alberta, and held similar jobs while studying marketing at the University of Montana. After an interlude with Montgomery-Ward, he joined another “hamburger-oriented” chain in the Dakotas, then caught the eye of Fred L. Turner, chairman of McDonald’s. Off to Southern California as a trainee in 1966, he rose so rapidly through the ranks that by 1973 he was summoned to headquarters in Chicago as chief of operations. The next promotion, which added marketing to his responsibilities, was to take effect last Jan. 1. Early in December, Smith received a telephone call from Gette, who said Burger King was looking for a new president. Smith said he was interested. Gette reported this to Pillsbury, whose top officers flew in a company jet to Chicago three times, conferring with Smith first in a Hyatt Hotel restaurant near the McDonald’s headquarters, then at I he Smith home. The deal was closed. The head-hunter’s fee. paid by the employer, is one-third of the executive’s salary for the first year. Smith is reliably reported to have signed up for about $200,0(H), plus other benefits, so Gette’s fee for that telephone call, to a man he never met, may be calculated at $67,000. No notice given When a top executive joins the opposition, the common rule calling for giving notice doesn’t seem to apply. Smith resigned effective Jan. 31, and was paid to that date, but by mutual agreement he cleared out of McDonald’s in a matter of hours. It had been a shock to both sides, he has said — “Fred Turner was like a brother to me.” On Feb. 1 he reported for duty in Burger King’s headquarters, a beige cube of Hilton-style modern in a commercial sector of Coral Gables, a posh enclave in Miami. The building has wall-to-wall carpeting and soft music piped into all offices, but no Burger King hamburgers. Smith spent his first month, however, visiting nearby burger shops and Whopper College classes and undertook a fast trip to J. Walter Thompson in New York. “I’ve always looked at business as a calculated risk,” Smith said in an in-, terview. “My decisions have been taken without too much advance study. That’s how you play poker — figure the odds and bet accordingly.” That’s how he decided to quit McDonald’s. It was not the money. Smith said, for income taxes would take much of that, and McDonald’s had been very generous with perquisites, such as stock options and a Lincoln car. More important, in the view of persons w-ho know him, was his wife’s preference for Florida and his own conclusion that Burger King offered a bright challenge. He had gone about us far as he could at McDonald's, with two youngish men above him as president and chairman. He prefers fisb While at home he cooks California Mexican food and prefers fish to beef. Smith by his own account qualifies as a fast-food “freak,” the backbone of the business. That is, he visits fast-food outlets several times a week, and often takes the family on a Saturday. He is very interested in the reactions of his children; his 11-year-old son loves Big Macs and French fries, he said, his 9-year-old went for Whoppers with everything on, and his 5-year-old girl preferred Big Boys. “She really didn’t care for hamburgers,” he said. “She liked the comic books.” Asked for his own opinion, he paused, then replied: “From the consumer side, there really isn’t a whole lot of difference ... that’s tangible. Between a well-operated Burger King and a well operated McDonald’s, there is no difference — the garnish on the burger.” “The individual choice of garnish- all music....all the rime KlUvfcl ment of a burger can be an important point to the consumer in this day when individualism, in my mind, is an increasingly important thing to people.” he added. Burger King’s publicity has stressed the uniformity of its conveyor-belt broilers over the McDonald system of grilling each type of burger by batches, in turn. But the latter is quicker, and Smith said Burger King would have to take a hard look at the possibility of changing its method. The really crucial problem, as he put it, is that average sales of a Burger King are not sufficiently above the break-even point, not far enough into that area where profits begin to be really handsome. This limits the possibility of opening new outlets, for putting them too close together cuts into unit sales. As a result, a pre-Smith in-house joke has it that “you ha\e to trip over two golden arches on your way to a Burger King.” Smith appeared to doubt that Pillsbury would draw heavily on new capital to build its own outlets and rent them to franchisers — one edge that McDonald’s has in earning profits. But Burger King continues to recruit self- financed franchisers at a rate of about one each working day. Costs vary, tint on average a franchiser must invest a bit more than $590,900 to open a Burger King. There are many candidates, however, and few are chosen. The failure rate is low, too. In fact, the survival of Horn & Hardart, the original fast-food chain with its Automats, is credited to its transformation into a network of Burger King franchises. MCDONALD’S Ray Kroc lost one top man Values from Oster! All-in-one Kitchen Center and Food Crafter 139 95 Kitchen Center is a heavy-duty blender, meat grinder and mixer . . . all in one! F ood Craiter slices, shreds and makes salads. Features sure-grip handle and stainless steel cutting blades. A great buy! Can opener, knife or scissor sharpener 21 95 3 appliances in 1! 1 ouch-A-Matic control with magnetic 1 id-1 if tor stops automatically. Has simle wheel knife and scissor sharpener. Gold-tone, white or avocado with chrome trim. 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