McDonald’s Turnaround Menu Leaves Analysts Hungry for More


McDonald's Steve Easterbrook

McDonald’s CEO Steve Easterbrook’s presentation of the chain’s new “initial steps in its turnaround plan” this morning was multifaceted and certainly may alter some important things for the brand. But for all its talk of McDonald’s turning into a modern “progressive burger company,” it appears to have left some investors, analysts and reporters asking, “Where’s the beef?

CEO Steve Easterbrook’s three-pronged strategy aims to unlock financial value, drive operating growth and create brand excitement. It’s a bold transformation that Wall Street wants in order to reward the brand—leaving some analysts hungry for more details on the transformation and growth strategy, beyond refranchising and other organizational changes.

As USA Today noted, the company’s “shares closed on Monday down 1.7% at $96.13 after CEO Steve Easterbrook—two months into the job—announced the chain will speed ‘refranchising’ (or) converting company-owned stores to franchises.” Under Easterbrook’s new “operational growth-led turnaround” plan, 3,500 stores will be refranchised in line with an “urgent need to reset this business,” doubling its earlier goal to refranchise 1,500 restaurants by 2016. As a result, 90 percent of the chain’s more than 36,000 locations worldwide will be franchises by 2018, up from 81 percent today.

In addition to the refranchising move, Easterbrook’s plan highlighted efficiency moves to unlock financial value and increase decision-making at the local level. He aims to drive operating growth by reorganizing its global business into four geographic units: its US-based stores; international lead markets (including Australia, Canada, France, Germany and the UK); high-growth markets (China, Italy, Poland, Russia and four other nations); and foundational markets (10 other nations).

McDonald's plan

Customer-facing changes include the introduction of a new, everyday value menu; today’s launch of delivery service in New York City via third-party provider Postmates, which is already working with Chipotle, Starbucks, Five Guys and Whole Foods; and new drive-through express menu boards.

The announcements follow the other customer-facing changes that have been launched or announced since Easterbrook took the CEO’s office on March 1.

That includes committing to antibiotic-free chicken, a wage increase for its lowest-paid workers at company-owned locations, a refresh of its iconic “I’m Lovin’ It” tagline with a multi-faceted campaign, a new premium sirloin burger, a pared down menu in the US and testing everything from all-day breakfast to Create Your Taste / TasteCrafted, its current personalized burger tests in a handful of US markets.

Easterbrook, McDonald’s former global chief brand officer, kicked off his presentation with a 23-minute video that stated in part, “No business or brand has a divine right to succeed. The reality is our recent performance has been poor. The numbers don’t lie.”

Announcing his latest actions on Monday, he stated in a press release, “These are exciting and liberating moves for our system, and this is how leadership brands evolve to stay in step with their customers.”

Investors, meanwhile, are waiting to see what big moves Easterbrook and team have in store.

“Everything he talked about seemed sensible but it seems to lack that calculated risk they talked about on the last earnings call,” R.J. Hottovy, who follows restaurant companies at Morningstar, told the Chicago Tribune. “I don’t look at anything they discussed today as truly groundbreaking, and more of just catching up with a lot of things their peers have done.”

Easterbrook’s plan has its supporters, including veteran McDonald’s Vice President Jerry Langley, now an executive in residence at the University of Notre Dame’s Mendoza College of Business.

“Like most large companies, McDonald’s has been through down times before and always comes back with a revised strategy to address the market at the time,” Langley told USA Today. “Steve Easterbrook is addressing a major issue for the company — the menu complexity and its impact on customer service — and, given time to implement, I think we’ll see positive impacts.

“I also like his restructuring of the organization. It will allow management to focus on the existing large markets that make up the majority of revenues, as well as doing special things to focus on the smaller and developing markets that have different needs. Nothing ‘major’ here—just redefining how they do business, with the customer in mind.”

Update: Matt Biespiel, senior director of global brand director, tweeted in response to this story that Easterbrook’s plan—”More progressive, create brand excitement, more focus, evolve product. That’s a marketer’s dream.”

Below, Bloomberg reporter Susan Berfield outlines her take on Easterbrook’s plan in an interview on Bloomberg TV:


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