McDonald’s new plan: Simplify bureaucracy
NEW YORK — McDonald’s CEO Steve Easterbrook says he’s stripping away layers of bureaucracy and increasing accountability so the company can move more nimbly to keep up with changing tastes.
During a 23-minute video message posted online Monday, Easterbrook said the company’s structure is “cumbersome.” McDonald’s can no longer afford its “legacy attitudes,” he said.
“The reality is our recent performance has been poor. The numbers don’t lie,” said Easterbrook, who took charge of the world’s biggest hamburger chain March 1.
To foster quicker movement, McDonald’s is restructuring its units into four groups based on the maturity of its presence in the market: the flagship U.S. market, established international markets such as Australia and the United Kingdom, high-growth markets such as China and Russia, and the rest of the world.
Previously, the business was segmented by geography
McDonald’s, based in Oak Brook, Ill., also said 90 percent of its more than 36,200 restaurants around the world will be franchised over the next four years. That’s up from 81 percent, and it will mean the company will rely more heavily on franchising fees and move away from the daily work of running restaurants.
The organizational changes will contribute to $300 million in planned cost cutting, most of which will be realized by 2017. The company said it’s too early to say how slashed costs will affect jobs.
Larry Light, who was chief marketing officer of McDonald’s between 2002 and 2005 and now runs a brand consulting firm, said Easterbrook offered little in the way of what matters to customers.
“Being more efficient, having less bureaucracy will buy you time, but will not buy you enduring success,” he said.
Wall Street wasn’t impressed with the company ’s presentation. McDonald’s stock fell 1.7 percent to $96.13.
Easterbrook also said during the video that the company will focus on listening to customers and that there will be “less sweeping talk of millennials” as though they’re a homogenous group. The company is also working on improving perceptions about the quality of its food with items like a trio of new sirloin burgers. In New York City, Easterbrook said, McDonald’s is partnering with Postmates to offer delivery starting Monday.
The “turnaround blueprint” comes as McDonald’s fights intensifying competition and shifting tastes. Sales in Asia took a hit after a controversy over a supplier last summer, and business in Europe has been weak. Its profit dropped 15 percent last year.
In its flagship U.S. market, executives said the menu got too complicated and gummed up operations. Customer visits at established locations declined for two straight years.
In December, McDonald’s said it would start trimming its menu to simplify operations and make room for new offerings.