Following news that it would trim its corporate team, McDonald’s outlined its upcoming U.S. organizational changes in a memo dated June 11.
The company said it “has made changes to its organizational structure in the U.S to improve the way home office and field employees work with owner-operators to run great restaurants.”
McDonald’s is eliminating its region structure in favor of field offices and removing layers from the field organization while increasing resources in key strategic areas, such as technology and field consulting, it said in the memo. McDonald’s added that, collectively, the changes are intended to create a more efficient and nimble U.S. organization, and to help franchisees succeed. The company said its U.S. operations would be fully transitioned to the new structure in the third quarter of 2018.
These organizational changes will result in McDonald’s recording a pre-tax charge of about $80–$90 million in the second quarter, mostly consisting of severance and other employee-related costs and costs associated with the closing of certain field offices.
McDonald’s did not detail how many employees would be let go. According to The Wall Street Journal, McDonald’s has cut an undisclosed number of corporate jobs in the last two years. Those being laid off in this change will be notified by June 28. McDonald’s USA President Chris Kempczinski told employees in an emailed video message reviewed by the WSJ that the company was reducing the number of layers between field consultants and CEO Steve Easterbrook to six from eight.
The moves are intended to boost efficiency. The structural change will create a single point of contact to help each franchisee build business plans and obtain the corporate resources they need. McDonald’s field consultants will be tasked with helping franchisees improve their business, and asked to spend less time on prior tasks, like ensuring cleanliness in restaurants. The company is creating a new position as well, chief transformation officer, to lead the changes.
McDonald’s, which said the organizational changes will help the company reach its previous target of net G&A savings of about $500 million set at the beginning of 2015, outlined some of the intended goals of the restructuring:
- More consulting and support for franchisees
- Better communication between the Field and Home Office
- Aligned incentives with Owner-Operators
- Improved speed-to-market by managing complexity and improving decision-making, and
- Deliberate capability building & faster career progression for McDonald’s employees
McDonald’s posted comparable same-store sales gains of 2.9 percent in the U.S. and 5.5 percent globally in the first quarter. McDonald’s solid showing marked the 11th consecutive quarter of positive comparable sales and fifth straight of positive guest counts.
