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McDonald’s turnaround plan calls for cuts, restructuring

McDonald’s will cut management layers, restructure and sell 3,500 restaurants to franchisees as part of a turnaround program that calls for reducing general and administrative costs by $300 million annually.

The moves are the cornerstone of a new revitalization plan that new CEO Steve Easterbrook had promised to air today. Virtually all of the plans detailed in a statement dealt with corporate structure and operations rather than unit-level elements like menu, marketing or design.

McDonald’s Corp., the brand’s franchisor, will be restructured into four divisions by what the company describes as similar needs. For instance, international markets, previously organized on a geographic basis, will be recarved into three groups based on growth opportunities:

  • High-growth markets, including some areas of Europe and Asia, such as China and South Korea;
  • International lead markets, or established, stable markets outside of the U.S.;
  • U.S. operations, which will continue to constitute the company’s largest division; and
  • Foundational markets, or stable markets where franchisees can provide leadership and ongoing stewardship, according to the company. 

Mike Andres will remain president of the U.S. division. The international and high-growth groups will be headed by Doug Goare and Dave Hoffman, respectively. Both previously served as divisional presidents under McDonald’s prior structure.

Ian Borden, previously CFO of McDonald’s emerging markets, will head the foundational-markets division.

“Our new structure will be supported by streamlined teams with fewer layers and less bureaucracy,” said Easterbrook.

Chief Administrative Officer Pete Bensen added that the new set-up should facilitate faster decision-making and instill more accountability in management.

McDonald’s also said it will ratchet back its role as a restaurant operator. About 3,500 franchisees will be refranchised, or sold to franchisees, by the end of 2018. That will reduce the number of units operated by the home office to roughly 10 percent of the system, from the current level of about 19 percent.

The restructuring, refranchising and increased accountability of the new structure should yield G&A savings of $300 million annually by the end of 2017, McDonald’s said.

“This is how leadership brands evolve to stay in step with their customers,” said Easterbrook.

But he added, “meaningful, positive measures of improvement will take time.”

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