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Steve Easterbrook ousted as McDonald’s CEO

The company said he had a consensual relationship with an employee. Chris Kempczinski was named CEO.
Photograph courtesy of McDonald's Corp.

Steve Easterbrook has been ousted from his position as McDonald’s CEO after the company said Sunday he had a consensual relationship with an employee, bringing an extraordinary end to the tenure of one of the restaurant industry’s more accomplished executives.

The Chicago-based burger giant named Chris Kempczinski (pictured), president of McDonald’s USA, to replace him as president and CEO.

Joe Erlinger, who had been president of McDonald’s international operated markets, has been named to replace Kempczinski as head of the company’s U.S. division, McDonald’s largest market.

The moves are “effective immediately,” the company said.

Easterbrook “has separated from the company following the board’s determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee.”

In an email to employees sent on Sunday, Easterbrook called the relationship “a mistake.”

“Given the values of the company, I agree with the board that it’s time for me to move on,” Easterbrook wrote. “Beyond this, I hope you can respect my desire to maintain my privacy.”

For Kempczinski, who had long seemed destined for the CEO role, the move punctuates a rapid ascendance. He takes over at the company just two years after he was named head of its largest market, and just four years after he arrived at McDonald's.

“Chris takes the reins of this great company at a time of strong, sustained performance, and the board has every confidence that he is the best leader to set the vision and drive the plans for the company’s continued success,” McDonald’s Chairman Enrique Hernandez said in a statement.

The CEO change comes amid a surprising amount of turnover at the company. Silvia Lagnado, McDonald’s global chief marketing officer, left last month, and no successor has been named. Robert Gibbs, McDonald’s chief communications officer, has also left with no successor.

Easterbrook’s tenure will likely go down as one of the most consequential in the company’s long and storied history.

He took over for Don Thompson in 2015. Sales in many of the chain’s biggest markets were slumping, particularly in the U.S., where same-store sales had fallen for six consecutive quarters. The company was losing business to primary rivals, as well as to fast-casual chains. Major menu initiatives such as Mighty Wings proved a failure.

Under Easterbrook, McDonald’s overhauled its corporate structure, cutting many positions and removing layers from what many viewed to be a bloated and slow operation that couldn’t keep up with smaller, faster competitors.

The company also moved its headquarters to Chicago and added numerous executives from outside McDonald’s into lofty positions.

McDonald’s stock price has more than doubled since Easterbrook took over the job. Same-store sales have risen globally for 17 straight quarters. In the U.S., same-store sales have risen for 11 straight quarters and are up 5% to date.

The company has also embraced technology, rapidly adding delivery to thousands of restaurants around the world, including more than two-thirds of its nearly 14,000 U.S. units. It also acquired drive-thru menu board technology company Dynamic Yield for $300 million as well as artificial intelligence company Apprente.

McDonald’s has taken steps to improve its image among consumers, removing antibiotics from chicken, moving to remove them from beef and ending its opposition to minimum wage increases.

In his email to employees, sent at the same time of the announcement, Easterbrook called his tenure at McDonald’s “the most fulfilling years of my working life.”

Kempczinski’s elevation has hardly been a surprise. He has been a visible executive at the burger giant, though he has only been with the company for a few years. The Boston native arrived at McDonald’s in 2015 after working with PepsiCo, Kraft and Procter & Gamble.

In his email, Easterbrook called Kempczinski “an important partner to me over the last four years and is the ideal person to take on the role of CEO. He’s driven and forward-looking, and I am confident he will lead with great purpose and guide McDonald’s to even greater heights.”

Kempczinski helped spearhead McDonald’s initiative to remodel its restaurants, adding self-order kiosks and table service. That effort hasn’t been without its controversy—the changes led franchisees to create the National Owners Association, its first independent franchisee association, last year.

Still, operators keep remodeling: More than 9,000 restaurants have been remodeled this year.

The U.S. business also embraced delivery in 2017, before many other fast-food chains. The efforts have helped the domestic operation generate strong sales growth, primarily from consumers ordering more items.

In a statement, Kempczinski said he would uphold “our rich heritage of serving our customers and driving value for our shareholders and other stakeholders.”

“We have a responsibility not only to serve great food, but to make it responsibly and to enrich the communities in which we operate,” he said.

Kempczinski’s replacement as the head of the company’s U.S. business, Erlinger, has worked with McDonald’s since 2002 and has held positions overseeing some of the company’s key international markets.

The company’s International Operated Markets segment, which includes big markets such as the United Kingdom, Canada, France, Germany, Australia, Italy, the Netherlands, Russia and Spain, has had 20 consecutive quarters of same-store sales growth.

Kempczinski said in a statement that Erlinger “has a proven track record of driving strong results through collaboration with franchisees and a relentless focus on the customer.”

UPDATE: This story has been updated to add numerous details and make changes throughout. 

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