Wall Street isn’t lovin’ McDonald’s (MCD) latest turnaround effort as its new management team attempts to revive the world’s largest fast-food chain. Shares closed on Monday down 1.7% at $96.13 after CEO Steve Easterbrook — two months into the job — announced the chain will speed “refranchising,” which means converting company-owned stores to franchises.Image may be NSFW.
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Easterbrook said 3,500 stores will be refranchised as part of what he termed an “urgent need to reset this business.” McDonald’s previously had said it would refranchise at least 1,500 restaurants by 2016. That would mean 90% of the chain’s more than 36,000 locations worldwide would be franchised by 2018 — up from 81% now. Expanded refranchising will bring “more stable and predictable cash flow,” Easterbrook said.
And he said McDonald’s will restructure its business into four areas: U.S.-based stores; international lead markets (including Australia, Canada, France, Germany and the U.K.); high-growth markets (China, Italy, Poland, Russia and four other nations); and foundational markets (10 other countries). Easterbrook said the changes, along with a more customer-focused approach and moves to improve actual and perceived quality of the food, should result in $300 million in net annual savings by the end of 2017.
“The reality is our recent performance has been poor,” he said. “The numbers don’t lie.” The Oak Brook, Ill.-based chain in April reported first-quarter comparable sales down 2.3% and revenue of $5.96 billion, short of the $6.02 billion analysts expected The quarterly results were more of the same for McDonald’s, which for nearly two years has seen its share price slide and same-store sales slump in the U.S. market and abroad. Easterbrook, 48, the former chief brand officer, took over as CEO in March from Don Thompson. The declines come as McDonald’s tries to compete with old rivals, such as Burger King, and newer ones, such as Chipotle and Panera.
