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McDonald's cuts another 100 as restructuring continues

Oak Brook-based McDonald's said Thursday it continues to restructure the global giant, laying off about 100 workers after it announced yesterday that its chief executive will be replaced.

McDonald's said it is “moving with a sense of urgency to improve our performance and enhance our customer focus,” said McDonald's spokesman Terri Hickey. “This includes a hard and thoughtful review of our current organizational structure in the U.S.; adjusting how we invest our time and resources; and eliminating some roles while adding or changing others.”

Earlier this month, McDonald's cut about 63 employees. Then on Wednesday, the global company replaced its CEO, Don Thompson, who struggled to hold onto customers and transform its image.

McDonald's, which has more than 36,000 locations around the world, is struggling amid intensifying competition and changing attitudes about food. Customer traffic at established locations in the U.S. fell 4.1 percent last year, following a 1.6 percent decline in 2013. It's also trying to recover after a supplier scandal in China that damaged its reputation.

“We recognize and are grateful for the contributions of all of our employees and are committed to making this a smooth transition for those affected. While these are difficult decisions, they are necessary steps in our journey to energize our business and meet the changing expectations of our customers,” Hickey said.

The company said Thompson, who has been CEO for two-and-a-half years, will be replaced by Steve Easterbrook, a company veteran who rejoined McDonald's as its chief brand officer in 2013.

On Wednesday, McDonald's said Thompson will retire March 1 after nearly 25 years with the company. Thompson, 51, was the first African-American to head the company since it was founded in 1955.

“It's tough to say goodbye to the McFamily, but there is a time and season for everything,” he said in a statement.

With Easterbrook's promotion, McDonald's is continuing its tradition of promoting from within, noted Darren Tristano, a restaurant industry analyst with Technomic. That could be a drawback for a company that is struggling to keep up with a rapidly changing industry.

“Sometimes, you need fresh perspective,” Tristano said, adding that the competition has been “evolving faster than McDonald's products have been.”

Despite the pressures McDonald's is facing, Thompson's departure was a bit of a surprise considering the numerous revitalization efforts the company recently announced, said Richard Adams, a consultant for McDonald's franchisees. And he noted the CEO change leaves open the question of whether McDonald's will shift course on those initiatives.

“Is everything going to change, or are Don's plans going forward?” Adams said.

Here's a look at the challenges Easterbrook, 48, will inherit as McDonald's new CEO, and the changes that are already underway.

McDonald's is trying to shake perceptions that fast-food is cheap, greasy and made with mysterious ingredients.

To dispel myths about its food, the company recently launched a campaign inviting people to ask frank, sometimes squeamish questions about its menu offerings, such as “Does McDonald's beef contain worms?” and “Do McDonald's buns contain the same chemicals used to make yoga mats?”

Part of the problem for McDonald's and other traditional fast-food chains is that people are gravitating toward food they feel is more wholesome or made with higher quality ingredients. And newer places like Chipotle and Panera are positioning their food as just that.

Mike Andres, president of McDonald's USA, said last month that the company is looking at shrinking the number of ingredients it uses and employing different cooking procedures to enhance the appeal of its food.

“Why do we need to have preservatives in our food?” Andres asked. “We probably don't.”

McDonald's has conceded its menu in the U.S. has gotten bloated. In just the past decade, the company has said it added 100 items to its menu. That slows down service because it takes customers longer to figure out what they want, while also complicating kitchen operations.

It also increases the chances that orders will be wrong.

As such, McDonald's is rolling out a simplified menu that reduces the number of Value Meals, and trims items that may be repetitive, such as variations of the Quarter Pounder with different toppings.

Pickier customers

The ability to customize orders is gaining popularity. At Chipotle, for instance, people like that they can walk down a line and dictate exactly what goes into their bowls and burritos.

In hopes of giving customers more flexibility in adjusting their burgers, McDonald's rolled out new prep tables that can hold more condiments and toppings. It also has more dramatic plans in the works.

McDonald's says it will roll out an option that lets people build their own burgers at 2,000 of its more than 14,000 U.S. locations later this year. The food takes a bit longer to prepare, but the company is hoping customers will think it's worth the wait.

A major attraction of McDonald's is that the food is supposed to be affordable. But prices have gotten a bit high for some people.

The popular Dollar Menu is one reason for the skewed prices. To offset the deals on that menu, McDonald's has admitted that other parts of the menu got too expensive.

In turn, the company has said that prompted people to “trade down” to the Dollar Menu. And that left many customers associating the McDonald's brand with its cheapest items.

Affordable food is also more widely available elsewhere, with convenience stores and supermarkets expanding their prepared food and coffee offerings.

• Daily Herald Business Writer Anna Marie Kukec contributed to this report.

McDonald's to cut 63 workers

McDonald's CEO steps down as sales decline

McDonald's Corp. has tapped Steve Easterbrook as its new president and CEO to succeed Don Thompson, who has helmed the burger chain about two and a half years. The company plans to lay off about 100 people. AP Photo
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