OAK BROOK, Ill. -- McDonald's president and CEO Steve Easterbrook has announced the initial steps of the company's turnaround plan including a restructuring of McDonald's worldwide business.
"Today we are announcing the initial steps to reset and turn around our business," Easterbrook said. "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."
He added, "The immediate priority for our business is restoring growth under a new organizational structure and ownership mix designed to provide greater focus on the customer, improve our operating fundamentals and drive a recommitment to running great restaurants. As we turn around our business, we will look to create more excitement around the brand and ensure that we build on our rich heritage of positively impacting the communities we serve."
Easterbrook continued, "The first critical step of our operational growth-led plan is to strengthen our effectiveness and efficiency to drive faster and more customer-led decisions."
Beginning July 1, 2015, McDonald's will operate under a new organizational structure with the following market segments and leadership:
*U.S. The company's largest segment, it accounts for more than 40% of 2014 operating income. Mike Andres will continue to serve as president of McDonald's U.S.
*International Lead Markets. Established markets including Australia, Canada, France, Germany and the U.K., which operate within similar economic and competitive dynamics, offer similar growth opportunities, they collectively represented about 40% of 2014 operating income. Doug Goare, currently president of McDonald's Europe, will become president of international lead markets.
*High-Growth Markets. Markets with relatively higher restaurant expansion and franchising potential including China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands, these markets together account for about 10% of 2014 operating income. Dave Hoffmann, currently president of McDonald's Asia/Pacific, Middle East and Africa (APMEA), will transition to the role of president of high-growth markets.
*Foundational Markets. These are the remaining markets in the McDonald's system, each of which has the potential to operate under a largely franchised model. Corporate activities will also be reported within this segment. Ian Borden, currently CFO of McDonald's APMEA, will assume the role of president of foundational markets.
"Our new structure will be supported by streamlined teams with fewer layers and less bureaucracy, and our markets will be better organized around their growth drivers, resource needs and contributions to the company's overall profitability. McDonald's new structure will more closely align similar markets so they can better leverage their collective insights, energy and expertise to deliver a stronger menu, service and overall experience for our customers," said Easterbrook.
The enhancements to McDonald's operating approach will be accompanied by plans to further optimize the company's restaurant ownership mix. It will refranchise 3,500 restaurants by the end of 2018, accelerating the pace of refranchising and increasing the global franchised percentage from the current 81% to about 90%. This marks a significant step forward from its prior plan to refranchise at least 1,500 restaurants by 2016.
"We are focused on further optimizing our restaurant ownership mix and expect franchised restaurants to account for approximately 90% of our global restaurant base by the end of 2018," McDonald's chief administrative officer Pete Bensen said. "We will take a market-by-market approach, set higher financial screens for markets operating company-operated restaurants and leverage both conventional and developmental licensee structures across the segments. Our new, more heavily-franchised business model will generate more stable and predictable revenue and cash flow streams and will require a less resource-intensive support structure. Finally, we will continue to evaluate opportunities to further enhance value for all shareholders."
Easterbrook concluded, "These are exciting and liberating moves for our system, and this is how leadership brands evolve to stay in step with their customers. Meaningful, positive measures of improvement will take time. The most impactful measures of our performance will be through the eyes of our customers. While we continue our efforts to regain business momentum through our turnaround plan and improve sales at our more than 36,000 restaurants around the world, our current performance reflects the ongoing pressures of the business, which we expect to persist through at least the first half of the year. We are taking decisive and necessary action to drive foundational improvements in the business and position the company for long-term growth."
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