March 4, 2017

Random Thoughts on McDonald's Analyst Day

Transactions - It was surprising to hear Oak Brook discuss the fact they've lost 500 
million customers since 2012. Why would a company so focused on big brother McSpin
and non-transparency toss around such numbers?

1) This move blames everything on their predecessors, "look at the mess we inherited". 
When they wear out that transference they'll start blaming everything on the Operators.

2) While these executives don't know anything about restaurants or McDonald's they are probably aware that a chain can only go down so far (except for Sears) so there's a good 
chance McDonald's USA will turn positive in 2017 or 2018. Then, if they are still around, 
this management team can take all the credit.

Can't tell the players without a scorecard - Because I have no connection to these people
I ignore them when they come and go. It's been a blur over the past ten years.

This week I kept coming across the name "Lucy Brady", who's that? She's McDonald's new
chief strategy officer. She's been with corporate a total of six months. That's right, 180
days.

Capex - Management is telling investors their capital expenditures will be reduced after 
2017. There are many components to Capex but one reason it will be reduced is in a 
few years there will be less small Operators who can't keep up with reinvestment and McDonald's will be unwilling to help the larger Operators.
.

11 comments:

Anonymous said...

McD projects 20% of Operators will opt out of the REQUIRED Technology Modernization and be forced to sell. The USELESS NLC approved this move.

PS- If we are truly "Partners", why are NLC reps forced to sign non disclosure agreements (NDAs)to keep Mcd plans secret???

Anonymous said...

By now, why does anyone think that MCD and its operators are Partners??? Legally, it has never been a business partnership. For many years MCD has had way too many operators for reasons having nothing to do with making money. They kept adding operators to keep the larger operators from having too much influence and also to get the minority numbers up. This only created more problems in the regions because the new and smaller operators could not make a decent living and do all of the reinvestments, ineffective promotions helping lead us to many current problems. Continuing to control the larger operators they have proposed that all second generation operators in an organization have the vote. Our co-op said one vote per organization. They don't like it. If they were smart they would reduce the corporate staff and give more authority to the co-ops but the brureaucy wanting to preserve their own status and power fights it all the way. Once 20% of the operators exit what is the plan? Anyone know? Are they going to expand with qualified large operators? Not if they can help it.

Anonymous said...

I am not sure where you get 20% leaving the system. At an average of 6 stores per operator now then going to between 10 to 15 stores per operator , as was Chris K. projection . With not many being built and a few being closed. I get somewhere between 1350 to 900 Operators left. That is more like 40% to 50%. This projection was not being shown as a Gobal number this was a U. S. A. number.

It was stated:
1). "Today is a Great Day to be an Operator wether you are Buying or Selling".
2). I am Paraprashing. "Time to Get ALL in or Time to Get ALL Out".

None of this will work any better than anything else if Operations does not improve. With the lack of people I forsee a disaster on the horizon for many Operators.

Anonymous said...

The Wall Street Journal had an article last week in which they said That MCD, at a news conference, said they were going back to our core products. They said they realize that we will never attract Millennials and other non-traditional groups; that they were going to try to attract our traditional customer segment. They also said menu proliferation does not work. That, plus Easterday's commitment to cut dead wood.

We shall see.

Anonymous said...

At some point the company has got to take more difficult action. I think they should close another 200 stores and cut staff by another 30%. Closing stores will give other stores more sales to do the coming reinvestment's and cutting staff will reduce costs and give more opportunity to make decisions closer to the customers.
MCD now admitting that so many things they forced on the operators doesn't work is, in a way, refreshing but better decisions at the time would have saved lots of money and frustration. the company, in my opinion, cannot make good "turn around" progress without more drastic action as outlined above. I believe very strongly that the McDonald' bureaucracy is threatened by this whole turn around effort and does not support it and will do most anything to thwart it. Easterbrook has a civil war on his hands wheather he knows it or not. He can't wait for his advisors to push him. He has got to take forceful action. He has got to purge bureaucrats and operators from the system.

Richard Adams said...

You assume that he knows what he's doing. There's little evidence so far.

Anonymous said...

Your point is well taken. We don't know much about him. A funny story. I was talking to a good friend who is Cuban and has a pronounced latin accent. Easterbrook, walked over to us and he, with his pronounced English accent began talking to my friend and neither knew what the other was saying they kept smiling, talking. Easterbrook, shook hands with both of us and walked away. It kind of reflects some of our issues in a comic way.

I have seen his picture at meetings with well known hedge fund managers from Wall Street. I would like to know more about the people giving him advice. The China sale came as a big surprise but had to take intense planning and coodination to pull it off. People none of us know are having big influence, I think.

Richard Adams said...

They've been talking about reorganizing Asia for several years, I think it goes back to Thompson. don't think it was thrown together overnight but they did have trouble finding a buyer - probably because of the lackluster performance of Arco Dorados (Latin America).

Anonymous said...

Regional staff are scared for their jobs again. Recent conversations indicate another purge of Corporate staff is coming. Also, McD is pushing consolidating co-ops into super co-ops, each with 400-500 stores. This would allow a pruning of Marketing staff.

Anonymous said...

We have been hearing about all kinds of consolidation of co-op's , regions, departments within regions, but little action, so far. Lots of resistance coming from the entrenched bureaucrats skillful in delaying everything. This will be a test of the leadership. Heard that many regional managers and others are selling themselves as being indispencable to the turn around. Due to their deep local knowledge and positive relationship with the operators. we will see who has the ball's in this family.

Richard Adams said...

Regional managers with substantial operations and store management experience should be careful because when McDoanld's has a CEO or USA Pres. with no operations background those with an ops background are the first to be sent packing. Big threat to those who don't know a spatula from a fry scoop.