File picture: Mike Blake
File picture: Mike Blake

Shake-up by McDonald’s will add $130m in expenses

By Nick Turner Time of article published Oct 14, 2016

Share this article:

New York - McDonald’s has a turnaround plan that includes a push to sell more of its restaurants to franchisees - and it will add about $130 million in pretax expenses to its third-quarter results.

The charge will amount to 12 cents a share after taxes, the Oak Brook, Illinois-based company said in a statement on Thursday. Results from the period ended September 30 will be reported on October 21.

McDonald’s, the world’s largest restaurant chain, is selling 4 000 locations to independent owners by the end of 2018. The process, called refranchising, is being embraced by much of the fast-food industry as a way to lower risks and expenses. McDonald’s expects to eventually save overhead costs of $500 million.

The changes were outlined in November of last year, part of a turnaround plan by Chief Executive Officer Steve Easterbrook. In addition to the refranchising, he has revamped drive-thru ordering and added all-day breakfast in the US. Though the changes have helped fuel a rebound in same-store sales, the comeback showed signs of sputtering in the second quarter.

Growth slowed to 1.8 percent in the period domestically, compared with 5.4 percent in the prior quarter. Analysts estimated a 3.2 percent increase. The deceleration is part of a broader slowdown for the restaurant industry, which is relying more heavily on discounts and promotions to draw customers.

The stock rose less than 1 percent to $115.41 on Thursday. It has been down 2.3 percent this year, hampered by concerns about McDonald’s growth prospects.

Bloomberg

Share this article: