McDonald’s is in dire straits. Addressing poor first quarter results from the global fast food chain, CEO Steve Easterbrook said yesterday that “the numbers don’t lie.” He “will not shy away from the urgent need to reset this business…and how we galvanise competitive threats.”
In a 23 minute video, Easterbrook said that the corporate structure of McDonald’s had made it too slow to respond to the needs of its 69m daily customers.
So Easterbrook, who has been with McDonalds since 1993 but took over as Chief Executive at the beginning of March, is to take a bottom’s up approach. The company will consolidate management, focus on listening to customers, and act faster to adapt to consumers’ changing tastes.
“Our existing organisation is inefficient and lacks clear accountability,” Easterbrook said. “We need to execute fewer things better.”
“In the last five years, the world has moved faster outside the business than inside,” added the 47 year old. “We’re not on game.”
He continued: “we’d like less simple talk of millennials [people born between 1980 and the mid-2000s] as though they are one simple group with shared attitudes.”
McDonald’s same-store sales have fallen for six conservative quarters in the US, where it struggles against a public perception that its food is unhealthy and over-processed. The chain has also been hurt by a series of food safety scandals in Asia, which contributed to a 15% loss in net income last year.
Add to that the company’s relationship with franchisees, who operate 81% of its restaurants globally, which is at an all-time low, and employees who have been striking for higher pay and better working conditions – McDonald’s has the recipe for disaster.
McDonald’s restaurants need to deliver “great-tasting, high-quality food with better service each and every time,” Easterbrook said. Internally, the company needs “stronger financial discipline, faster decision-making, and hard-edged accountability.”
The Big Mac maker announced will also place more of an emphasis on regions that earn McDonald’s the most – namely the US, which brings in 40% of operating income and top international markets, such as Australia, Canada, France and the UK, are to become a priority.
The firm also identified high-growth markets in countries such as China and Poland, where new stores will be opened to boost its share in the market of “IEO” – Informal Eating Out.
“We can no longer afford to carry legacy commitments, legacy structure or legacy attitudes” said the father-of-three.
McDonald’s also plans to cut $300m in costs over the course of the next two years. It’s too early for the fast food retailer to comment on how jobs will be affected.