Mcdonald’s plans to streamline operations
Aim is to simplify while also adding new options
New York — Mcdonald’s wants to simplify, simplify, simplify — but also add a bunch of choices for customers to avoid growing stale.
CEO Steve Easterbrook said Monday he will strip away the bureaucracy at Mcdonald’s so the company can move more nimbly to keep up with changing tastes. The overhaul comes after Mcdonald’s saw its profit drop 15% last year, with sales dipping in regions around the world.
“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 on March 1.
To help make the right changes more quickly, Mcdonald’s said it is restructuring its business into four units led by lean management teams.
The U.S. market, which accounts for more than 40% of operating profit, recently stripped away a level of field oversight and will be its own unit.
Another unit will be made up of established international markets such as Australia and the United Kingdom, and another with high-growth markets such as China and Russia. The countries where Mcdonald’s has a smaller presence will be grouped separately.
Previously, the units were segmented by geography rather than market type.
Embracing simplification
Already, Mcdonald’s has acknowledged the need to simplify food preparation as well. The company has trimmed its menu to reduce complexity for workers and make it easier for customers to decide what they want.
Even as it embraces the mantra of simplification, however, Mcdonald’s is looking at a host of new options to prevent its image from growing stale.
The company is testing an all-day breakfast menu in San Diego and a “Create Your Taste” option that lets people build their own burgers. Janney analyst Mark Kalinowski has also noted the company is testing a scaleddown version of that program called “Taste Crafted” that is available at drive-throughs.
And on Monday, Mcdonald’s launched delivery in New York City in partnership with delivery service Postmates. It plans to offer a mobile app in the U.S. this year as well.
In a call with reporters, Easterbrook said such moves are about offering more choices and not adding complexity.
“This is about being a better Mcdonald’s, not a different Mcdonald’s,” Easterbrook said.
Mcdonald’s, based in Oak Brook, Ill., also said Monday that 90% of its more than 36,200 restaurants around the world will be franchised over the next four years. That’s up from 81%, and 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 cost-cutting targeted by Mcdonald’s, most of which will be realized by 2017. Without providing details, Easterbrook said the costcutting will affect jobs.
Wall Street wasn’t impressed with the presentation. Mcdonald’s stock fell $1.67 to close at $96.13.