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McDonald’s CEO Takes Pay Cut, Brand Reduces Capital Costs


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McDonald's is pulling back on its remodel plans in an effort to reduce capital expenditures as it deals with the impacts of the COVID-19 pandemic.

“The decisions we make through this unprecedented crisis will define our system for years to come. We are taking a disciplined approach to all decision-making, including reviewing all investments and reducing our spending where possible.”

So said McDonald’s Corp. CEO and President Chris Kempczinski in a note to the McDonald’s system as the company announced several new strategies as part of a COVID-19 business update April 8.

Kempczinski will cut his salary by 50 percent at least through September 30, and other top executives including Kevin Ozan (chief financial officer), Ian Borden (president, international division), Joe Erlinger (president, USA division) and Jerry Krulewitch (EVP, general counsel) volunteered to reduce their salaries by 25 percent.

“These are unprecedented times, and simply put, I felt this was the right thing to do,” said Kempczinski, who was named CEO in November after Steve Easterbrook was fired.

McDonald’s, meanwhile, will reduce the number of Experience of the Future remodels across the U.S. and also cut the number of new restaurant openings in most markets around the world, two moves the company expects will save about $1 billion in capital expenditures. Those remodels, of which there’s been about 10,000 in the U.S., included upgraded drive-thrus, order kiosks, new furniture and other changes to complement the brand’s delivery business.

Same-store sales dropped 13.4 percent for McDonald’s in the U.S. in March, while global same-store sales declined 22.2 percent. Across the industry, restaurant customer transactions dropped by 42 percent in the week ending March 29 compared to same week year ago, according to NPD’s Crest Performance Alerts, a weekly view of chain-specific transactions and share trends for 70 quick-service, fast-casual, midscale, and casual dining chains. 

Nearly all—99 percent—of McDonald’s restaurants in the U.S. remain open, but internationally that number falls to 45 percent as several markets, such as France, Italy, Spain and the United Kingdom, have fully closed all restaurants.

“We entered 2020 in a strong position, but of course the world has since changed,” said Kempczinski, pictured at right. “While our January and February global comparable sales were strong, changes in consumer behavior and the various restrictions in place by governments around the world have led to a significant decline in sales.”

The company secured $6.5 billion of new financing and suspended its share repurchase program to help preserve “financial flexibility.”

McDonald’s is No. 1 on the Franchise Times Top 200+, which ranks the largest U.S.-based franchises by systemwide sales. McDonald’s global sales topped $96 billion in 2018.

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The latest news, opinions and commentary on what's happening in the franchise arena that could affect your business.

Laura MichaelsLaura Michaels is editor of Franchise Times. She can be reached at 612.767.3210, or send story ideas to lmichaels@franchisetimes.com.
 
Beth EwenBeth Ewen is senior editor of Franchise Times. She can be reached at 612.767.3212, or send story ideas to bewen@franchisetimes.com.
 
Nicholas UptonNicholas Upton is restaurants editor at Franchise Times. He can be reached at 612.767.3226, or send story ideas to nupton@franchisetimes.com.
 
Mary Jo LarsonMary Jo Larson is the publisher of Franchise Times Magazine and the Restaurant Finance Monitor.  You can find her on Twitter at
 twitter.com/mlarson1011.
 

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