They’re leaving the Big Mac alone for now, but the world’s biggest hamburger chain plans big changes elsewhere as it tries to reverse a chronic slide in sales and fend off upstart challengers such as Chipotle.
McDonald’s, whose iconic Golden Arches were a symbol of postwar American innovation and market success, said Monday that it will implement a long-awaited “turnaround plan” focused more on local franchises, local markets and re-shaping the chain as a “modern, progressive burger company.”
The announcement comes at a time when the company has been beset by years of slumping profits and underperforming stock.
“Today, we are announcing the initial steps to reset and turn around our business,” President and CEO Steve Easterbrook said Monday in a statement. “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.”
Mr. Easterbrook, who was hired in March to revitalize sales, said the “immediate priority” will be “restoring growth under a new organizational structure and ownership mix designed to provide greater focus on the customer.”
Central to the restructuring efforts will be a more local approach, which will focus the business into four new segments “that combine markets with similar needs, challenges and opportunities for growth.” This is a large structural change for a chain whose quality consistency and tightly regimented production standards were central to its success and early growth following its founding in 1955.
“No business has a divine right to succeed,” Mr. Easterbrook told investors and analysts at a conference call on Monday, “and our recent performance has been poor.”
One of the major parts of the turnaround plan will be moving to a more heavily franchised model and reorganizing the company’s operational model to focus on U.S. markets, “International Lead Markets” such as Britain and Germany, “High Growth Markets” like South Korea and Spain, and “Foundational Markets” where marketing and customer relations will be tailored to “local customs and cultures.”
McDonald’s, based in Oak Brook, Illinois, 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 will mean the company will rely more heavily on franchising fees and move away from the daily work of running restaurants, The Associated Press reported.
“The world is a broad spectrum,” said Mr. Easterbrook explaining how the new market approach would not complicate the chain’s current business model, touting the “leanness,” “cleanness” and “efficiency” of the senior leadership in charge of the reorganized markets. He later said that “unlocking the power of franchising” would be “incredibly liberating” for the company.
McDonald’s recent efforts, which also include trimming down its menu and moving toward sustainable beef, come as no surprise to some who have attributed the chain’s one-meal-fits all approach obsolete for a millennial market that is demanding healthier, locally sourced and personalized food options.
“They’re on it, but there are a lot of problems,” Yahoo finance columnist Rick Newman said of McDonald’s restructuring efforts, “McDonald’s is a huge company, a huge supply chain spread everywhere, and it’s kind of getting nibbled at the margins by all these upscale burger chains, organic places [and] locally sourced beef.”
Mr. Easterbrook said offering more personalized menu options would follow after the current business restructuring, but did acknowledge that “customers respond well to feeling they own a part of the food we serve them.”
Reshaping the corporate model will not be McDonald’s sole focus. The burger giant is expected to open around 1,000 units in 2015.