McDonald's mulls U.S. management change -- franchisees

By Patricia Commins

Reuters; 19th May 1997

McDonald's Corp. is drafting a plan to pare down its U.S. management to make the company more agile, franchisees confirmed, but the task is expected to be a challenge given the sheer size of the fast-food giant.

An analyst, who asked not to be identified, said he applauded McDonald's efforts to cut unnecessary U.S. management to speed up decision-making and be more responsive to franchisees.

But he said McDonald's size makes it difficult for the company to react quickly. "It's like a supertanker," he said, referring to the giant, ocean-going vessels.

McDonald's spokesman Chuck Ebeling declined to comment on the U.S. management plan other than to say, "We haven't announced anything."

Franchisee and industry sources, however, said McDonald's is working on a plan to trim layers between its restaurants in the field and U.S. management.

"From everything I've heard, there is work in progress that will result in some realignment (in U.S. management)," Keith Melton, who operates 33 McDonald's franchises in Florida.

Melton, a former chairman of McDonald's National Operators Advisory Board, said he welcomed changes in the company's U.S. management structure. "It will bring the resources of the company closer to the restaurants," he said.

Ken Clement, a franchisee with seven units in Phoenix, Ariz., said he spoke recently with Jack Greenberg, chairman of McDonald's U.S.A., who said he was considering establishing a few divisions in the United States. These divisions would operate more autonomously than McDonald's current zones.

Currently, McDonald's restaurants are organized into regions, which are then part of eight zones across the country that report in turn to company management.

"Mr. Greenberg is looking at a plan or strategy to develop further efficiencies and increase the agility of the company," Clement said.

The expected management changes come at a time when McDonald's -- with more than 12,000 restaurants in the United States and over 21,000 worldwide -- is trying to revitalize its domestic business.

"It's another recognition on the part of management that things in U.S. are something less than a well-oiled machine," Natwest Securities analyst Damon Brundage said.

In an attempt to build its U.S. sales, McDonald's last month began a long-term promotion called Campaign 55, under which featured sandwiches are priced at 55 cents when customers also buy hash browns or french fries and a drink.

Early indications were that sales after the launch of the campaign were about flat. Many analysts have been skeptical about whether customer traffic at McDonald's units will increase sufficiently to offset the lower prices under Campaign 55.

Melton, however, said Campaign 55 has been a success in south Florida, helping to drive higher sales.

McDonald's stock rose 37.5 cents to $52.375 on the New York Stock Exchange at mid-afternoon.

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