McDonald's Announces Cutbacks as Part of New Strategy

McDonald's (NYSE: MCD) announced last Friday that it would trim corporate staff, shift priorities and accelerate new store openings as part of a revamped strategy aimed at capturing new demand, according to an emailed statement from CEO Chris Kempczinski.

In his email, the Golden Arches CEO didn't say which initiatives the company would wind down or the specific cuts it would make but said the plans would be final by April 3. The CEO added that the cutbacks and priority shifts were aimed at helping the company "move faster" and were not the result of cost savings.

"Today, we're divided into silos with a center, segments, and markets," Kempczinski wrote. "This approach is outdated and self-limiting - we are trying to solve the same problems multiple times, aren't always sharing ideas, and can be slow to innovate."

The fast food giant's new strategy is dubbed "Accelerating the Arches 2.0" and aims to help the company free up resources for growth, especially resources needed to open new locations.

"We must accelerate the pace of our restaurant openings to fully capture the increased demand we've driven over the past few years," wrote Kempczinski.

The Golden Arches has been testing new restaurant concepts lately, especially seemingly scaled-back locations that the company can open quickly. Recently, a drive-thru, delivery-focused concept restaurant in Fort Worth made headlines as the first "fully automated" McDonald's. The company hasn't announced a specific number of locations it plans to open this year, but said last year that sales from new stores would contribute 1.5% to sales growth.

Meanwhile, last Friday's strategy shift, "Accelerating the Arches 2.0" builds off the company's first "Accelerating the Arches" plan first laid out in 2020. Back then, the company pared back its menu to focus on key items, namely chicken, burgers, and coffee, while emphasizing the "three D's" of "delivery, drive-thru, and digital ordering. AA 2.0 adds a new D to the mix, development.

To help the Arches execute its new plan, Kempczinski also announced a spate of internal promotions and the creation of several new positions in the email. A new president of global business services will help the restaurant chain "leverage economies of scale," according to the company. Meanwhile, Kempczinski's announced the new role of Chief Transformation Officer, whose chief responsibility will be to keep the company's new strategy on track.

It sounds like they want to reorganize the company into different structures to grow faster," BTIG LLC analyst Peter Saleh, told Bloomberg. "Maybe they feel like they don't have the right people in place."