McDonald's announces turnaround plan

GMT 16:35 2015 Monday ,04 May

Arab Today, arab today McDonald's announces turnaround plan

New York - AFP

McDonald's said Monday it would vastly restructure its international operations and sell off more company-owned restaurants to franchisees as it strives to reverse a trend of sagging sales.

The US fast-food burger giant said its overseas markets will be organized by their maturity within the McDonald's system, rather than by region. Its current structure splits markets outside its home US market into Europe and Asia/Pacific, Middle East and Africa.

The existing system is "aligned by geography rather than commercial logic," said chief executive Steve Easterbrook, who described the move as a "significant step change in our thinking."

McDonald's "international lead" segment will be more mature markets such as Australia, Britain, Canada, France and Germany, "which operate with similar economic and competitive dynamics."

The "high-growth" segment will be those with higher expansion potential, including China, Italy, Switzerland, Russia and South Korea.

Remaining regions will go into the "foundational" markets unit.

In addition, McDonald's said the company would refranchise 3,500 restaurants by the end of 2018, lifting the share of franchised units -- those not owned by the company -- from 81 percent to 90 percent worldwide.

The company also said those moves would help it achieve $300 million in annual cost savings by the end of 2017. It pledged to return $8-9 billion to shareholders in 2015.


- 'Modern' burger company' -

With 36,000 outlets in over 100 countries, the home of the "Big Mac" has been under pressure from falling customer traffic and revenues for two years, due to a range of challenges including changing consumer tastes and more agile rivals, such as Chipotle, which has emphasized efforts to avoid processed foods.

Faced with slower sales, McDonald's in January picked Easterbrook to replace Donald Thompson as chief executive.

Easterbrook, in a video address on Monday, said radical moves were needed to better meet demand as tastes evolve and technology alters consumer expectations.

"The reality is our recent performance has been poor," he said. "This is a global turnaround. We have to modernize our approach and run the system differently."

Easterbrook pledged to transform McDonald's into a "modern progressive burger company."

In March, McDonald's annnounced it would stop serving chicken raised with antibiotics that are important to human health. The chain also said it would not accept any poultry in which antibiotics are used to encourage growth.

On April 1, McDonald's said it would increase wages of 90,000 employees in company-owned restaurants in the United States.

The move followed similar wage hikes announced by Walmart, Gap and others and responded to a series of strikes by fast-food workers in the US.

Workers' groups assailed the wage hike as insignificant, in part because it does not benefit hundreds of thousands of workers at franchise-owned US sites.

A note from Morgan Stanley said Monday's reorganization may disappoint investors who expected a more significant shift overall, but "makes sense to us as the only real way to fix the brand is to get more people to eat their hamburgers more often."

Dow member McDonald's shares dropped 0.55 percent to $97.26 in early trade.

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