Jan 6, 2023
McDonald’s Quickens New Store Growth While Also Cutting Jobs
(Bloomberg) -- McDonald’s Corp. is accelerating new store openings to capture increased demand, while cutting corporate jobs as it winds down other priorities.
The fast-food company warned that it would be eliminating certain initiatives to help it “move faster,” according to an emailed statement Friday. McDonald’s also said it would be making job cuts that would be final by April 3.
McDonald’s said it would “evaluate roles and staffing levels in parts of the organization and there will be difficult discussions and decisions ahead.” The updated strategy — dubbed Accelerating the Arches 2.0 — will help McDonald’s cut global costs and free up more resources for growth, the chain said.
Companies across the US are laying off employees, tightening down operations in the face of relentless inflation and slowing consumer demand. McDonald’s, the largest chain in the world by sales, is the first restaurant in the US to announce job cuts despite its relatively strong sales performance in recent years.
“You’re expecting to hear this from tech companies, but why are they cutting headcount now? Are they concerned about the next 12 months?” Bloomberg Intelligence analyst Michael Halen said in a phone interview. “The job cuts could indicate that they’re maybe worried about the direction the consumer is going in.”
McDonald’s shares rose 2.8% to $269.47 in New York trading. It’s the biggest daily rise for the stock since Oct. 28.
McDonald’s said store development may include testing new-store technology like the order-ahead car lane in a new small-format location in Texas. Since the pandemic, restaurants have increasingly sought ways to serve diners on the go. Even before Covid-19 upended the restaurant industry, Chicago-based McDonald’s got about two-thirds of its business from the drive-thru.
In a sign of diner cutbacks, the Big Mac seller in late October said that customers were buying less expensive items, trading down from meals to value items. Higher menu prices have continued to help sales for McDonald’s and others in the industry.
Growing costs are a concern, however, with Chief Executive Officer Chris Kempczinski forecasting inflation in food, paper and wages in 2023.
McDonald’s said that many of its restaurants worldwide are operating at capacity, which led to this strategy overhaul. The company declined to comment further on layoffs, store-opening goals or cost cuts.
The new initiative builds on the original Accelerating the Arches program that McDonald’s introduced in November 2020, which focused on modernized marketing; a renewed commitment to its core products of burgers, chicken and coffee; and a focus on the “three D’s” of digital ordering, delivery and drive-thru.
The 2.0 version adds a “fourth D,” restaurant development, and an internal restructuring dubbed Accelerating the Organization. The company promoted four executives, effective Feb. 1, to address aspects of the restructuring.
One new position, president of global business services, is meant to help the organization better leverage economies of scale, the company said. It will start off focused on finance and human resources, eventually expanding to marketing, development, supply chain and technology.
Elsewhere, McDonald’s added development responsibilities to the role of global franchising chief and expanded the chief marketing officer’s job to include new business ventures. The company also created a position called chief transformation officer, meant to keep Accelerating the Organization on track.
“It sounds like they want to reorganize the company into different structures to grow faster,” BTIG LLC analyst Peter Saleh said. “Maybe they feel like they don’t have the right people in place.”
(Updates with analyst comments in fifth and final paragraphs, shares in sixth paragraph.)
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