McDonald's unveiled on Monday its massive turnaround plan to revive business.
"Our recent performance has been poor. The numbers don't lie," McDonald's CEO Steve Easterbrook said in a 23-minute video overview of the plan. "I will not shy away from the urgent need to reset this business."
Easterbrook said the company would strip away layers of management, focus more on listening to customers, and act faster to adapt to consumers' changing tastes.
"Our existing organization is inefficient and lacks clear accountability," Easterbrook said. "We need to execute fewer things better."
McDonald's same-store sales have fallen for six straight quarters in the US, where the company is battling a pervasive public perception that its food is unhealthy and over-processed. The chain has also been hurt by a series of food safety scandals in Asia, which contributed to a 15% loss in net income last year.
Meanwhile the company's relationship with franchisees, who operate 81% of its restaurants globally, is at an all-time low, and employees have been striking for higher pay and better working conditions.
McDonald's restaurants need to deliver "great-tasting, high-quality food with better service each and every time," Easterbrook said. Internally, the company needs "stronger financial discipline, faster decision-making, and hard-edged accountability."
The company will be restructured into four market segments: the US; international lead markets (Australia, Canada, France, Germany, UK); high-growth markets (China, Italy, Poland, Russia, South Korea, Spain, Switzerland, the Netherlands); and foundational markets (the remaining markets in the McDonald's system).
McDonald's will also refranchise 3,500 restaurants through 2018, bringing its total percentage of franchised restaurants to 90% from 81% globally. The restructuring is expected to save the company $300 million annually by 2017, according to the company.
Going forward, improving food quality will be a top priority, Easterbrook said.
"In the last five years, the world has moved faster outside the business than inside," he said. "The business cannot ignore what customers are saying when the message is clear: We're not on our game."
Easterbrook has already made a number of changes since he took over as CEO in March.
The company has cut several menu items to help speed up customer service, introduced a new higher-quality burger, and announced that it would be removing antibiotics and hard-to-pronounce ingredients from its chicken in the US.
But franchisees appear unimpressed by the changes so far.
"The system is broken," one franchisee wrote in response to a survey investment firm Janney Capital Markets. "There is no leadership, no plan, no respect for operators or their investment or bottom line."
Another wrote: "The future looks very bleak. I'm selling my McDonald's stock. The morale of franchisees is at its lowest level ever."
The franchisees were surveyed after a summit at which executives from the company's headquarters in Oak Brook, Illinois, unveiled plans for the company's future.
More than a half-dozen operators said the summit was a waste of time. Some said the turnaround plan would fail and eventually force operators out of business because of the costly equipment upgrades it will require.
"Instead of acknowledging and solving the real problems facing us today, they chose to pretend that everything is normal and to look at what the restaurant of the future will be," one franchisee wrote. "They did nothing to address what the REAL problems are in our system: significant financial problems for owner/operators and menu complexity ... It's as if they have NO CLUE of what our world looks like."
The franchisees' six-month outlook for the company's US business was the worst in more than 11 years of the survey.
