McDonald’s Corp. is reportedly cutting jobs across the company, possibly leading to hundreds of layoffs and wage decreases, according to The Wall Street Journal (WSJ) in a follow-up to their earlier report that the fast-food chain was closing corporate offices in preparation for these cuts. McDonald’s, which currently employs approximately 150,000 people worldwide, has been dealing with slowing sales and increased competition in the fast food sector. The company has initiated a multi-year plan which involves leveraging more agile and sustainable resources in an effort to regain its market share, cut costs, and increase revenue.
Recently, McDonald’s has been facing several substantial market challenges. The company’s sales are slowing down as customers increasingly seek healthier options or opt for competitors such as Panera and Shake Shack. Additionally, labor and food costs continue to increase, negatively impacting the chain’s bottom line. In response to these challenges, McDonald’s has implemented various strategies to transform its image, including cutting preservatives from certain menu items, sourcing cage-free eggs, and creating a mobile ordering and payment system.
These various strategies, however, haven’t appeased investors or led to significant positive results for the company. Shareholders have been demanding more action from McDonald’s CEO, Steve Easterbrook. As a result, restauranteurs such as Steve McGarry, an owner-operator of several McDonald’s locations, have been chosen as “principal operator partners” focused on implementing changes to McDonald’s’ operational structure.
The company’s ongoing reorganization plan involves cutting costs, enhancing efficiency, and streamlining operations. McDonald’s has declared it will reduce its general and administrative costs by $500 million by the end of 2019, as part of a larger goal to save $1 billion annually. In an e-mail to WSJ, McDonald’s stated that the restructuring includes both job cuts and a reduction in the number of layers between the corporate field consultants and Chief Executive Officer Easterbrook.
The company-wide cuts will impact U.S. field offices, as well as McDonald’s headquarters. The extent of the job and salary cuts remains unclear, but they are expected to be significant in order to achieve the company’s financial goals.
Easterbrook has been candid with employees about the planned cuts. Earlier this month, in a video recorded for all-company viewing, he stated, “It’s never easy to make changes like this…especially when so many of our people are involved.” Moreover, in a recent conference call, Easterbrook described the restructuring efforts as a way to “deliver top-line growth, capture market share and improve profitability.”
One potential impact of the job cuts, apart from the direct financial savings, would be to make it easier for McDonald’s to extend its ongoing plan to re-franchise its company-owned restaurants. This would entail a re-direction of restaurant management from the company to independent owners within local communities. This move could improve the business by reducing costs, leveraging local knowledge and intelligence, and incorporating new cultural and demographic aspects.
It remains to be seen how the job-cut plan will affect ongoing sales and revenue, as well as other company objectives, such as its recent investment in renewable and sustainable energy sources. Last month, McDonalds announced plans to reduce greenhouse gas emissions by 36% by 2030 through the combined efforts of its facilities, suppliers, and corporate offices. Delivering on this target will require a substantial effort from the company, in addition to overcoming current market challenges and operational changes.
The ultimate success of McDonald’s restructuring plan, including this latest move to initiate company-wide job cuts, will require the company to balance its financial goals with its broader corporate missions and obligations to stakeholders. The implementation of these changes will undoubtedly prove challenging for the company in the near term, but could prove beneficial if it is able to regain its market share, better manage expenses and competition, and mitigate its various market challenges.