McDonald’s to simplify structure, focus on customers

NEW YORK – McDonald’s CEO Steve Easterbrook says he’s stripping away layers of bureaucracy and increasing accountability so the company can move more nimbly to keep up with changing tastes.

During a 23-minute video message posted online Monday, Easterbrook said the company’s structure is “cumbersome” and said it can no longer afford its “legacy attitudes.”

“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 based on the maturity of its presence in the market: the flagship U.S. market, established international markets such as Australia and the United Kingdom, high-growth markets such as China and Russia, and the rest of the world.

Previously, the business was segmented by geography.

McDonald’s, based in Oak Brook, Illinois, also said 90 percent of its more than 36,200 restaurants around the world will be franchised over the next four years. That’s up from 81 percent, and will mean the company will rely more heavily on franchising fees and move away from the daily work of running restaurants.

The organizational changes will contribute to $300 million in cost-cutting targeted by McDonald’s, most of which will be realized by 2017. The company said it’s too early to say how slashed costs will affect jobs.

McDonald’s stock fell 1 percent to $96.65.

The “turnaround blueprint” comes as McDonald’s fights intensifying competition from a variety of players and shifting 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.

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 said he wants to turn McDonald’s into a “modern, progressive burger company.”