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Investors: McD's turnaround plan lacks sizzle and steak

Written by George Anderson

When Steve Easterbrook was named McDonald's CEO in January, just about everyone paying attention agreed the company needed to reinvent itself to reverse slipping customer counts and comp sales. So what happened yesterday when the company went public with its "initial" plan to turn its business around? Mr. Easterbrook focused primarily on a reorganization that will save $300 million, leaving many investors asking, "Where's the reinvention?" At the end of the day, McDonald's stock was down 1.7 percent.

As to some of the specifics, Mr. Easterbrook emphasized McDonald's new operating structure is intended to make the organization less bureaucratic and more responsive. The company will be grouped in four market segments:

  • U.S., which accounts for more than 40 percent of the company's operating income;
  • International Lead Markets, which include Australia, Canada, France, Germany and the U.K., also representing about 40 percent of McDonald's operating income;
  • High growth markets, such as China, Russia, South Korea, and European countries, including Italy, the Netherlands, Poland, Spain and Switzerland that currently are 10 percent of the company's business;
  • Foundational markets that have room for development using McDonald's franchise model.

McD's quickfacts
Source: McDonalds - “Quick Facts”

Speaking of franchises, part of the plan includes McDonald's selling 3,500 company-owned restaurants to franchisees by the end of 2018. The company had previously set a goal of refranchising 1,500 restaurants by the end of next year.

McDonald's chief administrative officer, Pete Bensen, said the company was looking for 90 percent of its global restaurant base to be franchised. "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," said Mr. Bensen in a statement.

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