The notion that the "national roster shops have the only answer to a certain issue at play is no longer the case," said Tom Moroch, founder of the agency that handles slightly more than a quarter of McDonald's co-ops. "Talent doesn't reside just at [McDonald's national agencies] Leo Burnett or at DDB."
Moroch has its bets covered in any case-it's 30% owned by Bcom3 Group's Leo Burnett USA, which is separately pitching McDonald's value assignment. The alignment will be cemented further when the Dallas-headquartered agency changes its name in January to Moroch Leo Burnett USA. It's also adopting a new identity under the theme "The Art of Action," which will be unveiled in first quarter 2002 in agency signage, collateral and on its Web site at www.moroch.com. Moroch's Hispanic unit, La Embajada, will also be rebranded as Moroch Latino.
The tie with Burnett helps solidify the relationship with the fast-feeder for both agencies. Doug Porter, exec VP-worldwide management director on McDonald's and Toys "R" Us, said that "when we credential together, Burnett tries to create brand believers, where people feel certain characteristics toward that brand, and Moroch is in charge of activating that belief."
"Most ad agencies have research departments that begin with consumer perception," said Moroch CEO Pat Kempf. "Ours begins with sales metrics. Our first focus is the consumer's behavior, not the perception." To prompt behavior, field agencies like Moroch create and execute hard-sell retail initiatives ranging from local advertising to on-air radio promotions, publicity and in-store materials, all aimed at supporting short-term strategies such as regional price promotions.
Win or lose, the chance to pitch a national McDonald's assignment is a coup. "That's like throwing raw meat in front of these agencies like Arnold and Moroch ... It increases your stature within the McDonald's organization," said John Verret, associate professor of advertising at Boston University and former vice chairman of Havas Advertising's Arnold Worldwide Partners, Boston.
The chain is Moroch's largest client, accounting for between half to 60% of revenue. The agency had 2000 gross income of $14.6 million, up 36%, and billings of $97.1 million, according to Advertising Age figures. (About 75% of its revenue comes from media commissions, Mr. Moroch said, with the remainder from fees.) The agency, ranked the 153rd largest in the U.S. by Ad Age, saw gross income grow to $14.6 million in 2000 from $10.7 million in 1999.
Moroch now handles 47 co-ops, or 3,531 McDonald's units-about 27% of the system, bumping Arnold to the second-largest field agency for the fast feeder, with 17 co-ops representing about 2,300 units. The third-largest field agency is Omnicom Group's Integer QSR, Denver, handling about 13 co-ops, or 1,341 restaurants, followed by DavisElen, Los Angeles, with 6 co-ops, or 900 stores. McDonald's declined to comment on Moroch or any of its field agencies. A decision on the assignment is expected in January.
What makes Moroch stand out from the average field agency is its sprawling 20-office network, built mainly from scratch, to reach critical mass. "They are the cream of the crop for size, efficiency and politics," said Mike Sheehan, president of Interpublic Group of Cos.' Hill, Holliday, Connors, Cosmopulos, Boston, and former top creative for Omnicom Group's DDB, Chicago. "As you gain critical mass, you know how to handle costs."
Mr. Moroch, known for his collarless white wardrobe, long gray ponytail and charismatic approach with clients, agreed cost management is key. "We've figured out a way of getting services done traditionally in field with a central function," he said. Moroch's "knowledge of the market is critical," said a competing executive from a West Coast shop, who also noted Moroch's ability to service accounts and make money. "Both are huge problems" for smaller competitors," he said.
Between Burnett and Moroch, the two shops handle about 34% of McDonald's local system.
Such a harmonious relationship between field agency and national agency is unusual, said John Swan, former managing director on the KFC account for WPP Group's Y&R Advertising, who consults with Tricon Global Restaurants.
"When field marketing agencies are at their best, they are local consultants to franchises that deal with a unique competitive set. They can be tremendous resources for local ideas that bubble up. At their worst, they try and get too parochial and overwhelm the greater systemic good," he said.