McDonald’s reorganization is costing the company $180 million, the fast-food giant said on Tuesday.
The company disclosed the amount as part of a restructuring charge noted in its first-quarter earnings report. The charge is expected to involve severance payments made to employees who were laid off this month, as well as lease costs associated with the closure of 10 physical field offices across the U.S.
The charge comes during a quarter in which the Chicago-based company is performing quite well. Same-store sales in the U.S. surged 12.6% in the first three months of the year, driven by a combination of higher prices and traffic growth, along with the company’s marketing promotions.
McDonald’s also said it is generating growth in digital and delivery orders, which totaled $7.5 billion last quarter in the company’s six biggest markets, or about 40% of their system sales.
The company also credited improving customer satisfaction due to its current operational improvement effort, which it calls PACE, or Performance and Customer Excellence initiative.
"While we've talked in the past about the noise in the numbers, it's encouraging to see guest counts grow in every segment," CEO Chris Kempczinski told analysts on Tuesday.
One particularly strong effort was the company's decision to rename its Crispy Chicken Sandwich the McCrispy, which is a name more familiar in global markets. That drove double-digit sales growth of the product last quarter.
The PACE inspections are at the center of a dispute between the company and a large group of its U.S. franchisees, who have argued that many of the company’s actions risk it being labeled as a “joint employer” of operators’ workers under proposed federal rules.
McDonald’s said earnings per share increased 66% to $2.45 per share, a number that beat Wall Street estimates according to figures from the website Earnings Whispers. Revenues at the company increased 4% to $5.9 billion.
McDonald’s undertook a series of corporate layoffs as part of its restructuring, called Accelerating the Organization. It remains uncertain exactly how many people the company laid off during the restructuring, though the company has put the number in the “hundreds,” or less than 1,000.
As part of the reorganization, McDonald’s is closing physical field offices, having employees who are stationed out of those offices work from home. It is also shifting to a national model of field office oversight rather than be divided into two zones, an East Zone and a West Zone.
In addition to the $180 million reorganization charge, the company expects to spend $100 million to $150 million helping European franchisees that are struggling with unusually high inflation.
UPDATE: This story has been updated to clarify the name of McDonald's reorganization. We've since added a graphic and some comments from the company's earnings call.
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