McDonald's to simplify structure, focus on customers
NEW YORK - McDonald's (MCD) 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 too "cumbersome" and that it can no longer afford its "legacy structure."
"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 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, Illinois, also plans to have 90 percent of its restaurants around the world franchised over the next four years. That's up from 81 percent, and will mean the company will rely more heavily on franchising fees than sales from 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. The company said it's too early to say how slashed costs will affect jobs.
Its stock fell 1 percent to $96.65.
Easterbrook also repeatedly stressed during the video that the company will focus more on listening to customers, saying 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 is fighting intensifying competition from a variety of players and has admitted that it failed to keep up with changing tastes. Sales in Asia took a big hit after a controversy over a major supplier this past 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.
Already, McDonald's has tried a number of moves to inject some life back into its brand.
Back in December, it said it would start trimming its menu to simplify operations and make room for new offerings. More recently, it began testing an all-day breakfast menu in San Diego, revamped its grilled chicken recipe and said it would curb the use of antibiotics.
The company also said last month that it would double its planned restaurant closures this year to roughly 700. It hasn't yet revealed its updated plans on overall restaurant count growth. At the end of last year, McDonald's Corp. had more than 36,200 locations around the world.
Easterbrook, who previously headed up the U.K. business, has described himself as an "internal activist" and says he wants to turn McDonald's into a "modern, progressive burger company."
The turnaround plan comes ahead of the company's annual shareholder meeting on May 21.
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