Just nine weeks into McDonald’s new president and CEO Steve Easterbrook’s tenure, he announced on Monday the initial steps of the company’s turnaround plan, including a restructuring of McDonald’s worldwide business and financial updates. The fast-food giant will be reorganizing its business, selling restaurants to franchisees, and giving billions back to shareholders as part of a much-anticipating turnaround plan.
“Today we are announcing the initial steps to reset and turn around our business,” Easterbrook said. “As we look to shape McDonald’s future as a modern, progressive burger company, our priorities are threefold: driving operational growth, returning excitement to our brand, and unlocking financial value.”
Beginning July 1, the company will restructure the business into four new segments that combine markets with similar needs, challenges, and opportunities for growth, Easterbrook said.
- United States: the company’s largest segment, accounting for more than 40 percent of its 2014 operating income;
- International Lead Markets: established markets including Australia, Canada, France, Germany, and the United Kingdom, which operate within similar economic and competitive dynamics; offer similar growth opportunities; and collectively represented about 40 percent of the company’s 2014 operating income;
- High-Growth Markets: markets with relatively higher restaurant expansion and franchising potential including China, Italy, Poland, Russia, South Korea, Spain, Switzerland, and the Netherlands. Together these markets accounted for about 10 percent of the company’s 2014 operating income; and
- Foundational Markets: the remaining markets in the McDonald’s system, each of which has the potential to operate under a largely franchised model. Corporate activities will also be reported within this segment.
Adjustments in the leadership team will also be made, effective July 1, 2015:
- Mike Andres will continue to serve as president of McDonald’s U.S.
- Doug Goare, currently president of McDonald’s Europe, will become president of International Lead Markets.
- Dave Hoffmann, currently president of McDonald’s Asia/Pacific, Middle East, and Africa (APMEA), will transition to the role of president of High-Growth Markets.
- Ian Borden, currently the chief financial officer of McDonald’s APMEA, will assume the role of president of Foundational Markets.
McDonald’s, which has cut dozens of jobs at its Oak Brook headquarters in recent months, did not indicate how many additional jobs may be eliminated. Millennials and other consumers have been bypassing McDonald’s in favor of fast-casual chains, such as Chipotle and Panera Bread, that are perceived to serve premium, fresher, or healthier menu items. Comparable sales or sales at restaurants open at least 13 months have fallen globally for four consecutive quarters and down six straight quarters in the United States.
The company plans to sell some 3,500-owned restaurants to franchisee restaurants by the end of 2018. If that goal is achieved, McDonald’s will have about 90 percent of its restaurants run by franchisees, up from 81 percent currently. The company said the refranchising, organizational shake up, and being more disciplined about spending should cut costs by about $300 million a year–much of those savings realized by the end of 2017. The company also said it plans to return $8 to $9 billion to shareholders this year with aims to reach the top end of its goal to return $18 to $20 billion to shareholders from 2014 to 2016.
