💾 Archived View for gmi.noulin.net › mobileNews › 5391.gmi captured on 2021-12-05 at 23:47:19. Gemini links have been rewritten to link to archived content
⬅️ Previous capture (2021-12-03)
-=-=-=-=-=-=-
Time to reorder
Selling franchises and reorganising foreign markets might not be enough to turn
things around
May 5th 2015 | CHICAGO | Business and finance
Timekeeper
EVER since Steve Easterbrook took over as the boss of McDonald s in January,
analysts and investors have been awaiting a big plan for a turnaround. Don
Thompson, his predecessor, had seemed unable to steer the world s biggest
fast-food chain in the new direction needed to respond to evolving consumer
tastes and fiercer competition. Mr Easterbook has already announced several
changes for the American market, the company s biggest and most lucrative, such
as a gradual end to its use of chicken raised with antibiotics. But all eyes
were focused on the stronger stuff which Mr Easterbrook unveiled on May 4th
with a 23-minute video announcement.
The new plan features many sensible ideas, but for the most part he seems to be
focused on catching up with rivals, rather than charging ahead with innovative
menu items or an original strategy for what is one of the world s most widely
recognised brands. He is planning to sell 3,500 of around 36,000 McDonald s
restaurants worldwide to franchisees by 2018; that means nearly 90% of McDonald
s restaurants will be franchised. Thanks to the franchisees regular royalty
payments, that should provide more stable revenues. For similar reasons, Burger
King has already sold off all but 50 of its more than 7,000 restaurants in
America, and Wendy s is aiming to own only 5% of its restaurants by the middle
of next year.
Mr Easterbrook also announced a reorganisation of the firm into four divisions
from July 1st: they will be America; international lead markets , such as
Britain and Australia; high-growth markets , meaning China and a few others;
and the rest will go under foundational markets . The idea is to group markets
with similar challenges and consumer trends, rather than lumping together those
that simply happen to be in the same geographical area.
The refranchising and reorganising, along with more stringent fiscal
discipline, are supposed to cut the food behemoth s costs by an annual $300m.
McDonald's is also planning to return $8 billion-9 billion to shareholders this
year. But Mr Easterbook did not explain how he is planning to fund these share
repurchases. Will it be by taking on more debt or selling real-estate holdings
or are there further strategic changes in the pipeline?
The reality is our recent performance has been poor. The numbers don t lie,
Mr Easterbrook conceded. Global sales at comparable restaurants (those that
have been open for at least 13 months) have fallen for the past four
consecutive quarters, while in America they have fallen for six quarters in a
row. Though it makes several steps in the right direction, Mr Easterbrook s
much-ballyhooed plan failed to persuade analysts and investors that he is about
to reverse that decline any time soon. By the end of the day of the
announcement, his firm s share price had fallen by 1.7% on the New York Stock
Exchange.