Shares of McDonald’s (MCD) are up 3.81% on USA President Chris Kempczinski email announcing Corporate Job Cuts, Eliminating Layers.
In an email message sent to all U.S. employees, suppliers and franchisees on Wednesday, McDonald’s USA President Chris Kempczinski said the company is restructuring regional offices around the country.
“I recognize that change is difficult, and that eliminating layers within our organization means some employees will ultimately exit our system,” Mr. Kempczinski said in the memo, which was reviewed by The Wall Street Journal.
In a video message that accompanied the memo, he said the layers between field consultants and Chief Executive Steve Easterbrook will be reduced to six from eight, according to a franchisee who watched the video.
McDonald’s has been working to turn around its struggling U.S. business for more than three years. The company conducted a major study in 2016 that found it had lost about 500 million orders in the U.S. to rival fast-food chains in the previous five years.
McDonald’s has had some wins, including the rollout of all-day breakfast, which helped fuel a sales recovery for a while. Low-cost food and beverages also have helped boost sales, but in April McDonald’s reported that customer visits in the U.S. fell in the first quarter as rivals offered competitive breakfast deals.
Today Corporate Jobs, Tomorrow Robots
The latest reorganization is part of a plan to reduce administrative expenses by $500 million by the end of 2019. The company has already cut an undisclosed number of corporate jobs.
“Some employees will ultimately exit our system,” said Kempczinski. He would not say how many.
McDonald’s said it will will reinvest some of its cost-savings in technology, such as digital ordering.
Hint: Robots.
Mike “Mish” Shedlock
I would guess BK selling Woppers 2/$6 and chicken nuggets for $1.49 has hit their bottom line more than anything else. The food is trash but kids love it and parents love feeding their kids what they want inexpensively. MCD should price big macs 2/$5 as a permanent price.
They need to bring back the Mulan Szechuan sauce permanently.
I had a coupon so went there a few days ago. The kiosk ordering system was in place. They had an associate walking people through the ordering process, but then I wanted to pay cash and that meant taking the order slip up to the cashier and then she completed the transaction. Not really much of a labor savings.
Used a McDonalds kiosk in Houston last week. Ordering is simple and efficient. Getting the order took a surprisingly long time though. There were four teen age workers and none of them were manning a register. They apparently saw the kiosk as a license to goof off. There is much, much more automation that can be done.
The CEO is just finding out that have too many layers now? What’s he been doing for the last few years? If I were the Chairman, I’d know what the first layer to eliminate was.
You have to wonder how many layers are really needed when data can be collected at point of sale, formatted in the cloud and then delivered to the upper echelons. Demand, supply organised with minimum human touch. Motivated people at the coal face don’t need many layers above. Most layers were probably there to cover upper management’s ass. I feel for anyone going through life changes but who can be surprised by this development? Where McDonald’s goes others will soon follow.
People bring an enormous amount of baggage with them; robots, not so much.
McDonalds never had any need for middle management anyway. It’s not a complicated business model and actually most middle management activities can be automated at a huge cost savings compared to functions like digital ordering.