McD’s sees U. S. expansion in future
Despite slump in traffic, leaders say trends moving in ‘ right direction’
Artisan burger buns, cagefree eggs and table service are some of the changes McDonald’s is promising in the U. S. as it scrambles to update its image and win back customers.
The Oak Brook- based chain has seen customer visits slip, with its flagship U. S. market of particular concern as tastes change and competition intensifies. The rollout of an all- day breakfast menu last fall hasn’t yet translated to a bump in customer visits.
McDonald’s Corp. CEO Steve Easterbrook, who took over last year, and Chris Kempczinski, who takes over as president of McDonald’s USA on Jan. 1, talked with The Associated Press about the recent changes. Their answers were edited for length.
Q. Customer traffic in the U. S. has been down for the past of couple years, and hasn’t gone up despite the turnaround efforts. When do you expect the figure to turn positive?
A. Kempczinski: The trends we’re seeing over time have been in the right direction. When exactly that tips over to positive, to me the key is not just once, but can it consistently be positive? That’s what we’re working toward.
Easterbrook: For large periods of this year, we’ve been taking market share out of our near competition, which is a very important measure for us. Q. You said you took market share, but traffic isn’t up. Is there a broader change happening where people are just going to supermarkets or other places?
A. Kempczinski: I don’t think so. I’m very optimistic about the opportunities. A number of retailers earlier in the year talked about a slowing of traffic. And now obviously there are lots of questions about what happens post- election. So we’ll have to see the trends. But everything we’re hearing from customers is that they still love going out, particularly millennials. They eat out more than any other consumer group we target.
Q. You have more than 14,100 restaurants in the U. S., but the store count is on track to shrink for the second straight year after decades of expansion. Do you think McDonald’s will eventually start expanding again domestically?
A. Easterbrook: We’ve taken time to right- size the estate. As part of the turnaround plan, we’ve made some of those tougher decisions ( to close restaurants) to get our foundation strong. I think if we look into the out years, we will be net adding restaurants. Certainly globally, but in the U. S. as well.
Q. How much room do you see for expansion in the U. S.? It seems like the industry is becoming more fragmented. Is there a place for a McDonald’s with 14,000, 15,000 or 16,000 restaurants?
A. Kempczinski: We only have about a 10 percent share of the total market in terms of eating out. So if you look at me, there’s that 90 percent of the market that we still have an opportunity to go after. So I think there’s plenty of growth, no doubt.
Q. Another issue is the image of McDonald’s food and its association with junk food. How much of an issue is that?
A. Easterbrook: There’s no doubt consumers are increasingly interested in and knowledgeable about their food — what’s in it, where’s it come from, how’s it prepared. That’s not unique to the U. S. That’s a global movement, and one that we support. The more informed people are, then the better choices they’re making.
Q. You’ve introduced more premium burgers with the growth of all the “better burgers” out there now. Five years down the road, will people still be ordering BigMacs?
A. Kempczinski: I would predict in 10 years, we would be selling many, many times more Big Macs than any other type of burger on the premium end of the menu. This is an opportunity for us to continue to offer options. The BigMac is here to stay.
Easterbrook: There’s clearly a market for a more premium priced burger with more premium ingredients. If we can bring to our menu the quality ingredients, but maintain the value ofMcDonald’s, then I think that gives us a competitive edge.
Q. Steve, you’re British, and the executive many believe will be the next CEO of Coke is British. The CEO of Dunkin’ Donuts is British. Is there something culturally about a British management style that is good for turnarounds?
A. Kempczinski: It’s a British invasion!
Easterbrook: I would put it down more to coincidence than reading too much into it. We are a significant international business, and I would imagine an increasing proportion of our senior leadership will come from all around the world. I happen to be British. Our next leader could be one of a number of nationalities.
Kempczinski: Although, now he is a Cubs fan.