Financing

McDonald's, despite strong sales, prepares for layoffs

The burger giant is temporarily closing corporate offices this week to notify employees who will be left without a job as part of its corporate restructuring. McDonald's argues the reorganization will speed up innovation.
McDonald's layoffs
McDonald's is preparing to inform workers of layoffs this week. / Photo by Jonathan Maze

McDonald’s will notify corporate employees of impending layoffs this week as the Chicago-based burger giant puts into motion a corporate restructuring it believes will foster more innovation and speed decision-making.

Corporate staff for the Chicago-based burger giant was told last week to work from home this week to give the company time to inform workers affected by the layoffs, the Wall Street Journal reported on Sunday. Employees were told to cancel meetings and corporate offices will be temporarily closed during the early part of the week.

The mood at corporate headquarters on Friday was described as “somber” as employees braced for the news to come this week.

Exactly how many people are being laid off is not certain, though it’s not expected to be around the level of the massive layoffs seen in the technology industry at companies like Google and Facebook. McDonald’s employs 150,000 people worldwide, though most of those are in company-owned restaurants and are not expected to be part of the layoffs.

Yet the number of corporate employees has come down over the years as it has cut back on corporate staff, sold restaurants to franchisees and closed its corporate-owned locations in Russia. For instance, at the end of 2017, the company employed 235,000 workers around the world.

The reorganization, which the company calls “Accelerating the Organization,” was initially announced in January. It comes at a time of otherwise strong performance at the company, including 10.3% same-store sales in its U.S. market in the fourth quarter

As the company announced its sales results in January, CEO Chris Kempczinski noted that “we’re not satisfied. That’s the hallmark of McDonald’s.”

It also comes at a time of tremendous change at the fast-food chain, from its base of franchisees where the company is pushing to bring in new operators for the first time in decades, to the composition of its board of directors, which has four new members this year.

Franchisees have viewed the layoffs with some frustration, with some worried that the changes will leave them responsible for more of the services the company has traditionally provided. Others simply wonder why the company is making these moves now when its overall performance—despite weakening cash flow among franchisees—has been stellar.

McDonald’s last instituted mass layoffs in 2018, as part of an effort to cut some $500 million from its corporate overhead. Yet company executives at the time argued, much as it is doing now, that the cuts were needed to make the business more efficient and speed up decision-making.

The company insists that this time the staff cuts are all about efficiency and innovation and not about financial savings, though the reorganization is expected to save the company on G&A costs, even if there is no set estimate on how much.

The company said it would evaluate roles within the corporate staff and its staffing levels as it reorganizes the business. “We will evaluate roles and staffing levels in parts of the organization and there will be difficult discussions and decisions ahead,” Kempczinski wrote in a system message in January. “We will look to our strategy and our values to guide how we reach those decisions and support every impacted member of the company.”

McDonald’s has apparently made these decisions and will communicate them to the employees this week.

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