Iconic fast-food operator McDonald’s announced the outline of its new global turnaround strategy on Monday, admitting that its business model had aged and that the firm was in urgent need of change.
The world’s largest restaurant chain has been steadily losing sales to rivals such as Chipotle, Shake Shack and Panera, who have attracted a new generation of customers with somewhat more expensive, but fresher and healthier, foods.
Steve Easterbrook, McDonald’s new CEO, has been under pressure to produce details regarding how he plans to turnaround after years of poor growth, especially domestically.
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Easterbrook will be taking questions from analysts and the media later on this afternoon.
Statement McDonald’s from CEO Easterbrook
“No business or brand has a divine right to succeed, and the reality is our recent performance has been poor,” Easterbrook commented in a video message posted on McDonald’s corporate site Monday morning. “I will not shy away from the urgent need to reset this business.”
More on McDonald’s turnaround plan
The steps Easterbrook announced today were mainly operational. McDonald’s will reorganize itself into four new global segments: “lead” markets such as the UK and Australia; “high-growth” markets such as China and Russia; the U.S., which represents over 40% of the firm’s operating profit; and the fourth segment encompassing the businesses in the 100 other countries where the fast food chain currently operates.
McDonald’s is also planning to sell more company-owned stores to local franchisees. Easterbrook emphasized that this push for “refranching” would boost local entrepreneurship and result in a more predictable revenue stream. The firm is planning to refranchise 3,500 restaurants over the next 48 months, which will bring the number of franchises to 90% globally, up from the current 81%
In the video statement, Easterbrook commented that these and several other planned changes to the corporate structure would eventually add up to close to $300 million in net savings a year for the firm.