CEO Chris Kempczinski Plans Corporate Staffing Cuts While Expanding Globally
A McDonald’s reorganization will trigger a corporate staffing reduction as the company adds new restaurants of various models worldwide. “There will be difficult discussions and decisions ahead,” CEO Chris Kempczinski told employees in a memo released Friday. Workers who are being laid off will be informed by April 3.
Kempczinski said “certain initiatives will be de-prioritized or stopped altogether. This will help us move faster as an organization, while reducing our global costs and freeing up resources to invest in our growth.” He didn’t provide specifics on which initiatives would be discarded or de-emphasized.
“Some jobs that are existing today are either going to get moved or those jobs may go away,” Kempczinski said Friday in an interview with The Wall Street Journal, adding that he has no target amount for savings with the staffing cuts. McDonald’s has about 200,000 employees in corporate positions and at corporate-owned restaurants; most work outside the United States.
McDonald’s Reorganization Aims to Satisfy Demand
The memo to employees also said McDonald’s was expediting the development of new restaurants across multiple continents. “We must accelerate the pace of our restaurant openings to fully capture the increased demand we’ve driven over the past few years,” Kempczinski said.
Four executives received new assignments as part of McDonald’s reorganization. Andrew Gregory, global franchising officer, will lead global development. Morgan Flatley, global chief marketing officer, will oversee new business ventures in addition to his previous tasks. Skye Anderson will migrate from the company’s western U.S. zone to its global business services. Spero Droulias, senior vice president of finance, will become the company’s chief transformation officer.
McDonald’s Pivots and Miscues
In outlining the need to reorganize, Kempczinski said McDonald’s needs to adapt quickly to market changes such as increased drive-through lanes, digital ordering, and food delivery prompted by the Covid-19 pandemic. He said McDonald’s must be nimble with its decision-making and evolution to maintain its competitive edge.
But McDonald’s decentralization has at times held it back. In his memo, Kempczinski wrote, “Today we’re divided into silos with a center, segments and markets.” He criticized this situation as “outdated and self-limiting … [we] aren’t always sharing ideas and can be slow to innovate.”
In his Journal interview, he said, “We were solving the same problem multiple different times.” Kempczinski gave two examples: McDonald’s had 11 loyalty programs globally but should have offered just one, and the company once had 70 similar types of crispy chicken sandwiches, but the successful one in Asia could have been adopted and promoted system-wide.
Expansion in U.S., Europe and Asia
Kempczinski said McDonald’s plans to add restaurants in the United States, Europe and Asia. Some of the locations will be traditional restaurants with dining rooms, but others will be designed, equipped and staffed exclusively for takeaway meals. The latter could include more units like McDonald’s new automated franchise where customers have no face-to-face interaction with employees.
In addition, in some countries, McDonald’s currently operates kiosks that specialize in coffee and desserts. In The Journal interview, Kempczinski disclosed that McDonald’s has plans to debut more of these small standalone locations.
How McDonald’s Reorganization Affects Franchisees
As this McDonald’s reorganization dawns, franchisees could understandably be nervous. More than 10,000 of McDonald’s U.S. restaurants are franchises.
Some are still smarting from the 2018 reorganization, when McDonald’s eliminated 11 of its 21 field offices. Franchise owners complained that the action eroded corporate support for their units’ operations as well as compromised their efforts to adhere to local-government regulations and to McDonald’s standards, which have recently been stiffened. (The company announced that it would raise the hurdles for franchise renewals and increase corporate reviews starting this month. )
Franchisees also have been upset – some filing lawsuits – about perceived racism within the company. Last summer, franchisees voted in favor of a civil-rights review by an outside auditor. In December 2021 the company announced a $250 million investment to increase diversity among franchisees. McDonald’s has purchased some franchises from disgruntled owners with the intention of selling them to other investors.
But Kempczinski gave reassurances about the new McDonald’s reorganization, telling The Journal it would minimally affect franchisees. Asked whether McDonald’s would again reduce the number of its field offices, Kempczinski said, “on the organization stuff, it is frankly about getting our own [corporate] house in order.”