While he was talking to Wall Street, he should have been talking to “Main Street” and the former definitely noticed the absence of the latter, as McD’s shares took a slight tumble after the announcements.
Easterbrook’s idea on how to get the “company” back on track is to sell of a whole lot of corporate stores to franchisees (3,500), and undertake a corporate “restructuring” with personnel.
In other words, the plan is to boost revenue with the store sales, and boost profit by letting people go.
No idea on how this will get more people into the restaurants, increase sales, and set the chain back onto a growth pattern, and apparently Easterbrook doesn’t have any ideas on this subject either, since he’s taking the lazy way to a solution designed to do only one thing: improve the stock price. According to Time Magazine... “Easterbrook said the benefit of more franchise-owned restaurants was that it provides McDonald’s with a more stable and predictable cash flow all while shifting accountability to local businesses. In all, the executive said this would save McDonald’s $300 million a year.”
When I wrote about McDonald’s ills a couple months ago here and on LinkedIn, over 20,000 people read that post, and I found the comments very interesting. The one that tickled my imagination the most as a comment that suggested McD’s doesn’t really care about the food, that they buy the land, build the stores, and lease them to the franchisees, effectively making them a real estate company, not a restaurant biz.
I have no idea if there is any semblance of truth to that assertion, but by largely getting out of the restaurant operation business, don’t they become a company mostly in the business of holding intellectual property and receiving fees from others that are utilizing the IP? (Kinda funny, eh? Like the world’s largest rooms company (AirBnB) doesn’t own any rooms, and the world’s largest taxi company (Uber) owns no cars, and the world’s largest content company (Facebook) creates none of its own)…..McDonalds will be the world’s largest restaurant company that doesn’t sell any food!
Here’s the dope, Steve:
- Create great food, at a good value, and people will return….over and over again.
- Don’t try and be something to everybody. You can’t.
- Don’t SELL stores. BUY outlets back from franchisees. Demonstrate that the company itself has faith in its brand and believes it will succeed in the future.
Talking to Wall Street and trying to boost share prices instead of trying to woo customers back with announcements of product improvements is a good demonstration of what’s wrong with a lot of American business these days.