McDonald's to simplify structure, focus on customers

A McDonald's restaurant logo and golden arch is lit on Chicago's near North Side. After turning in another quarter of sliding sales and profit, McDonald’s CEO Steve Easterbrook said the company will unveil initial details on a plan to turn around its fortunes on May 4, 2015. Among the challenges the fast-food chain is facing are intensifying competition and an image for serving junk food that it just can’t seem to shake. (AP Photo/Jeff Roberson)

NEW YORK (AP) — McDonald's CEO Steve Easterbrook says he's stripping away layers of bureaucracy so the company can move faster to keep up with changing tastes.

During a 23-minute video message posted online Monday, Easterbrook said the company's structure is too "cumbersome" and that it can no longer afford its "legacy structure."

"The reality is our recent performance has been poor. The numbers don't lie," said Easterbrook, who took charge of the world's biggest hamburger chain on March 1.

To foster quicker movement, McDonald's is restructuring its units into four groups: the flagship U.S. market, international lead markets such as Australia and the United Kingdom, high-growth markets such as China and Russia, and the rest of the world.

Easterbrook also repeatedly stressed during the video that the company will focus more on listening to customers, simplifying restaurant operations and improving perceptions about the quality of its food with items like a new Artisan Grilled Chicken sandwich.

The company also plans to cut $300 million in costs by around 2017. The company said it's too early to say how that will affect jobs.

The company will also accelerate plans to refranchise its business. It will be 90 percent franchised globally over the next four years, up from 81 percent.

The "turnaround blueprint" comes as McDonald's is fighting intensifying competition from a variety of players and has admitted that it failed to keep up with changing tastes. Sales in Asia took a big hit after a controversy over a major supplier this past summer, and business in Europe has been weak. Its profit dropped 15 percent last year.

In its flagship U.S. market, executives said the menu got too complicated and gummed up operations. Customer visits at established locations declined for two straight years.

Already, McDonald's has tried a number of moves to inject some life back into its brand.

Back in December, it said it would start trimming its menu to simplify operations and make room for new offerings. More recently, it began testing an all-day breakfast menu in San Diego, revamped its grilled chicken recipe and said it would curb the use of antibiotics.

The company also said last month that it would double its planned restaurant closures this year to roughly 700. It hasn't yet revealed its updated plans on overall restaurant count growth. At the end of last year, McDonald's Corp. had more than 36,200 locations around the world.

Easterbrook, who previously headed up the U.K. business, has described himself as an "internal activist" and says he wants to turn McDonald's into a "modern, progressive burger company."

The turnaround plan comes ahead of the company's annual shareholder meeting on May 21 in Oak Brook, Illinois.

 

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