It’s impossible for big, multinational companies to avoid the impact of geopolitical events.
Just ask McDonald’s.
The big, Chicago-based burger giant is feeling the pain from both Brexit and trade negotiations with China, hitting the company when it comes to labor and sales.
Brexit, for instance, is making it harder for operators in the U.K. to find good workers.
“There’s less migration across Europe,” CEO Steve Easterbrook said Thursday during the company’s second quarter earnings call. “With the impacts of Brexit, that means there has been an exodus of service workers out of the U.K.”
Brexit is the term being used for Britain’s decision to leave the European Union. The country is leaving the union next year, the result of a 2016 referendum in which a majority of British voters opted to leave the organization.
Easterbrook said that is draining the U.K. of a key part of McDonald’s workforce, exacerbating a labor challenge that the company is feeling worldwide.
That’s particularly true in the U.S., where full employment and intense competition for restaurant workers are conspiring to drive up costs for the chain’s franchisees as well as company-run restaurants.
“There is a fight for talent and it’s not just in the U.S., actually,” he said. “It’s in a lot of our mature markets, partly because there is less mobile labor.”
In the U.S., however, “We’ve got to fight that a little bit harder to first of all gain the talent and then retain it,” Easterbrook said, noting the company’s $150 million Archways to Opportunity program is designed to retain talent over the long term.
Meanwhile, the company has another challenge in the form of weaker guest counts. McDonald’s is a fast-food chain, and a big one at that, with nearly 14,000 U.S. restaurants and more than 37,000 total. It needs a steady diet of consumers to feed those locations and keep the company growing.
The company has had some traffic challenges in the U.S. this year, causing McDonald’s to double down on its value efforts. But it has challenges elsewhere, too.
Like in China. McDonald’s is generating same-store sales growth in the country, where it has 2,800 locations. Yet the chain is also seeing declines in traffic there. And Easterbrook laid the blame in part on trade negotiations, which are creating uncertainty in China and lowering consumer confidence there, resulting in lower traffic.
“The guest count growth has gone negative in China through the quarter,” Easterbrook said. “The impact within that market on the uncertainty of the trade discussions, clearly it’s hit the markets, which, in turn, hits consumer confidence. We’re keeping a close eye on that and adjusting our plans so we can be competitive there.”
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