On Monday, McDonald’s Corporation (NYSE:MCD)‘s new chief executive unveiled plans for attracting customers, increasing sales and converting the world’s largest restaurant chain by revenue into a contemporary progressive burger firm.
The plans involve categorizing McDonald’s business into four new operating divisions, auctioning more restaurants to franchisees, slashing corporate expenses, enhancing food quality and eliminating layers out of its cumbersome management structure.
McDonalds is following a strategy of relying more on franchises to compensate for years of sliding sales and Profits.The Company suffers from too much bureaucracy resulting it being pretty slow to adjust to major changes such as current customer’s increasing preference for healthy fare. It is also facing a negative perception of its existing food quality and level of customer service.
According to CEO Steve Easterbrook he will not hesitate to take bold decisions to turn the business around. He took his position on March1 subsequent to one of McDonald’s most disappointing years on record.
As per Easterbrook, McDonald’s recent performance has been disappointing with the numbers speaking for themselves.
Competitors from Wendy’s Co (NASDAQ:WEN) to Starbucks Corporation (NASDAQ:SBUX) to Chipotle Mexican Grill, Inc. (NYSE:CMG) have siphoned away customers. In the previous month McDonald declared an 11% drop in revenue and a 30% decline in profit for the first 3 months consistent with the pattern of years of poor financial results and closing of hundreds of stores.
Easterbrook opined that the advantage of additional franchise-owned restaurants was that it provides McDonald’s with a more stable and predictable cash flow all while shifting accountability to local outfits. Totally the executive estimated this would save McDonald’s $300 million a year.
The company also is accelerating its re-franchising efforts. Its goal is to have 90% of its restaurants globally to be franchised by 2018, from 81% currently. That translates into 3,500 more restaurants will be operated and owned by franchises, which is higher than an earlier planned increase of 1,500 restaurants. Totally, the firm intends to open 1,000 more restaurants per year. There are presently around 32,500 McDonald’s restaurants globally.
