So... more of the same. She has never actually worked in or been responsible for running a restaurant. Like so many executives before her, her only restaurant exposure appears to have been the standard operations training required of corporate employees. Her finance background may be a positive, but that's about the only fresh perspective she brings.
Our system doesn't lack executives. It lacks leaders who have actually lived the day-to-day reality of running restaurants, making payroll, dealing with staffing shortages, handling equipment failures at 2:00 a.m., and signing the front of a loan instead of approving it from headquarters.
After years of disappointing U.S. performance, even Chris Kempczinski acknowledged in the second quarter results that "industry growth remains muted." Maybe part of the problem is that McDonald's keeps benchmarking itself against mature, slow-growth brands like Burger King and Subway instead of the companies that are actually taking our customers, Chick-fil-A, Raising Cane's, In-N-Out, Culver's, and others.
If we want different results, we need different thinking. We need someone who genuinely wants to listen to franchisees, the people who talk to employees and customers every single day, not someone who swoops into a field office with an entourage, watches a dog-and-pony show, and leaves with Chris K.'s marching orders.
On todays webcast and earnings call, Chris K tried to blame the operators who did not vigorously support the McValue 2.0 initiative. He should be looking in the mirror as to why sluggish sales exist.
Yeah... that's not going to happen now that he's the CEO and Chairman. More likely, you'll see him hand over the CEO job to someone else (next year) so that Chris can just be Chairman and spend more time with his mansion. .
From the conf call: "Part of Anderson's main focus in the months ahead would be fine-tuning the chain's current discount offerings, Kempczinski said." .
What stood out to me on the earnings call was Chris saying, “We don’t have a strategy problem. We simply didn’t execute at the level we needed to.” That’s a tough statement for operators to hear when he also admits the restaurants were overwhelmed with too many deployments, value changes, digital changes, beverages, promotions, etc. If the restaurants were overwhelmed by what the system pushed into them, I’m not sure you can turn around and call it an execution problem. He also keeps talking about strong operator “alignment” around value, yet only 60–65% of the system followed the recommended EDAP pricing. Maybe that isn’t an alignment problem. Maybe operators are looking at their P&Ls and questioning whether the economics work.
The comments that bothered me most were around pricing and investment. Chris said pricing compliance is now part of business reviews and can affect things like “growth and eligibility.” At that point, how “recommended” is recommended pricing? Then, when asked about declining franchisee cash flows and the investment coming with NEXT and another remodel cycle, the response was basically that franchisees are financially healthy and have “a lot of borrowing capacity.” Borrowing capacity is not cash flow. Operators have been absorbing higher labor, food, insurance and operating costs while continuing to reinvest in the restaurants. We all understand that McDonald’s has to win on value, but value has to drive profitable incremental traffic, not just sales and transactions that improve corporate royalty income while operator cash flow continues to decline.
I’m all for NEXT, better food, better hospitality and getting our swagger back. But there have to be three winners: the customer, McDonald’s and the operator. If the customer gets lower prices, corporate gets higher system sales and royalties, and the operator gets lower margins and more debt to fund the next investment, that’s not a sustainable definition of alignment.
"Borrowing capacity is not cash flow" - What a profound statement.
In other words, managment is perfectly comfortable with loading the Operators with more and more debt in order to upgrade the MCD real estate portfolio. And they know that's exactly what shareholders want to hear. .
13 comments:
So... more of the same. She has never actually worked in or been responsible for running a restaurant. Like so many executives before her, her only restaurant exposure appears to have been the standard operations training required of corporate employees. Her finance background may be a positive, but that's about the only fresh perspective she brings.
Our system doesn't lack executives. It lacks leaders who have actually lived the day-to-day reality of running restaurants, making payroll, dealing with staffing shortages, handling equipment failures at 2:00 a.m., and signing the front of a loan instead of approving it from headquarters.
After years of disappointing U.S. performance, even Chris Kempczinski acknowledged in the second quarter results that "industry growth remains muted." Maybe part of the problem is that McDonald's keeps benchmarking itself against mature, slow-growth brands like Burger King and Subway instead of the companies that are actually taking our customers, Chick-fil-A, Raising Cane's, In-N-Out, Culver's, and others.
If we want different results, we need different thinking. We need someone who genuinely wants to listen to franchisees, the people who talk to employees and customers every single day, not someone who swoops into a field office with an entourage, watches a dog-and-pony show, and leaves with Chris K.'s marching orders.
Outstanding points
Stepped down or fired? Was Joe the scapegoat for sluggish performance?
Ive got no love lost for Joe, but I am underwhelmed with Skye as his replacement.
Stock still trading near 52 week low. Wall Street is not impressed.
On todays webcast and earnings call, Chris K tried to blame the operators who did not vigorously support the McValue 2.0 initiative. He should be looking in the mirror as to why sluggish sales exist.
If only Chris K would have fired himself!
Yeah... that's not going to happen now that he's the CEO and Chairman. More likely, you'll see him hand over the CEO job to someone else (next year) so that Chris can just be Chairman and spend more time with his mansion.
.
Hey Skye, how about some fresh new marketing ideas to spark sales instead of constant discounting and give aways?
From the conf call: "Part of Anderson's main focus in the months ahead would be fine-tuning the chain's current discount offerings, Kempczinski said."
.
What stood out to me on the earnings call was Chris saying, “We don’t have a strategy problem. We simply didn’t execute at the level we needed to.” That’s a tough statement for operators to hear when he also admits the restaurants were overwhelmed with too many deployments, value changes, digital changes, beverages, promotions, etc. If the restaurants were overwhelmed by what the system pushed into them, I’m not sure you can turn around and call it an execution problem. He also keeps talking about strong operator “alignment” around value, yet only 60–65% of the system followed the recommended EDAP pricing. Maybe that isn’t an alignment problem. Maybe operators are looking at their P&Ls and questioning whether the economics work.
The comments that bothered me most were around pricing and investment. Chris said pricing compliance is now part of business reviews and can affect things like “growth and eligibility.” At that point, how “recommended” is recommended pricing? Then, when asked about declining franchisee cash flows and the investment coming with NEXT and another remodel cycle, the response was basically that franchisees are financially healthy and have “a lot of borrowing capacity.” Borrowing capacity is not cash flow. Operators have been absorbing higher labor, food, insurance and operating costs while continuing to reinvest in the restaurants. We all understand that McDonald’s has to win on value, but value has to drive profitable incremental traffic, not just sales and transactions that improve corporate royalty income while operator cash flow continues to decline.
I’m all for NEXT, better food, better hospitality and getting our swagger back. But there have to be three winners: the customer, McDonald’s and the operator. If the customer gets lower prices, corporate gets higher system sales and royalties, and the operator gets lower margins and more debt to fund the next investment, that’s not a sustainable definition of alignment.
"Borrowing capacity is not cash flow" - What a profound statement.
In other words, managment is perfectly comfortable with loading the Operators with more and more debt in order to upgrade the MCD real estate portfolio. And they know that's exactly what shareholders want to hear.
.
Sorry Chris K, but if you knew anything about restaurants, you would know that WE DO HAVE A STRATEGY PROBLEM.
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