During the company's investor meeting today, McDonald's Corporation President and Chief Executive Officer Steve Easterbrook and members of senior management provided an update on the Company's Turnaround Plan and made the following announcements:
- The Company reiterated that it expects positive fourth quarter comparable sales in all segments
- Sales, Operating Income and One-year Return on Incremental Invested Capital targets for 2016 that are more consistent with the Company's previously stated long-term financial targets
- Global refranchising target raised to 4,000 restaurants through 2018 with a new long-term goal to become 95% franchised
- Net annual G&A savings target increased to $500 million - the vast majority of which will be realized by the end of 2017
- McDonald's Board of Directors increased the fourth quarter 2015 dividend by 5%, bringing the new quarterly dividend to $0.89 per share
- Plans to optimize the Company's capital structure and increase the cash return to shareholders target to about $30 billion for the three-year period ending 2016. The vast majority of the incremental cash return of $10 billion will be funded by issuing additional debt
- Decision to not pursue a REIT spin-off transaction
"The cornerstone of our System is our powerful and enduring brand. While we are still in the early stages of turning around our business, we are gaining momentum by focusing on our customers and what matters most to them - hot and fresh food, fast and friendly service, and a contemporary restaurant experience at the value of McDonald's," said Steve Easterbrook, President and Chief Executive Officer. "My priorities for McDonald's as a modern, progressive burger company are three-fold: driving operational growth, creating brand excitement and enhancing financial value. We are taking bold, urgent action to reset the business and prepare the Company for the next chapter of its history."
"Our turnaround depends on this: we must run great restaurants each and every day," said Easterbrook. "We're leveraging our competitive strengths: iconic menu items that customers love, a unique franchise model that empowers local entrepreneurs, size and scale that makes operational investments efficient, and a global, well-diversified geographic footprint. Together, these brand attributes provide McDonald's with the foundation and capabilities for continued success."
New Refranchising and G&A Targets Announced
During the meeting, the Company provided an update on the financial areas identified earlier this year including ownership strategies, capital structure, asset optimization and overall spending. Specifically, the Company provided the following updates to its financial targets:
- Refranchising - target raised from 3,500 restaurants to 4,000 restaurants, which accelerates the pace of refranchising and increases the global franchised percentage from the current 81% to about 93% by the end of 2018. This positions the Company to meet its new longer-term goal to become 95% franchised. The majority of the refranchising will take place in the High Growth and Foundational Market segments.
- Net annual G&A savings - target increased to $500 million, the vast majority of which will be realized by the end of 2017. This reflects a $200 million increase over the previously announced G&A savings target and represents a nearly 20% reduction from the Company's G&A base at the beginning of 2015. These savings will be realized through our refranchising efforts, streamlining across corporate, segment and market organizations, primarily in non-customer facing functions, and realizing greater efficiencies in the Company's Global Business Services platform. This target excludes the impact of foreign currency changes.
