The biggest U.S. fast food chain is planning some corporate job cuts even as it pursues a nationwide store expansion.
In a company-wide memo, McDonald’s CEO Chris Kempczinski announced an internal reorganization designed to refocus the chain’s priorities, citing an “outdated and self-limiting” approach currently in place, CNBC reported. He said that the impending job cuts will not be made to reduce costs, but rather to help promote innovation and efficiency.
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Plans to accelerate restaurant openings throughout the year are intended to “fully capture the increased demand [McDonald’s has] driven over the past few years,” though the chain has not yet stated how many more restaurants it intends to open in 2023. McDonald’s plans to communicate specifics around layoffs by April 3.
In an online discussion last week on RetailWire, BrainTrust members like Gary Sankary, retail industry strategy at Esri, found reason to believe McDonald’s move could be a good one.
“Are they trying to drive efficiency by fire — reduce headcount, increase the workload on the remaining staff — and hope they develop better processes?” wrote Mr. Sankary. “Have they somehow recognized that they have a lot of ‘fat’ in their organization and will address it? McDonald’s is wildly successful in marketing and did a great job pivoting to new ordering and fulfillment models during COVID-19. Now they need to drive sales and grow financially. I’m sure they have an excellent plan for that… I would never bet against McDonald’s; no company that’s been as wildly successful for as long as they have has done so without excellent planning and strategic vision.”
“No matter how effectively run a corporate HQ is, there is ‘fat’ and ‘complacency’ present,” wrote Mark Self, CEO of Mpro5 Inc. “So, if they reorganize (and compensate) effectively, I think this has a high chance of working. Time will tell…”
McDonald’s has been discussing a move in a less-siloed direction to better meet customer needs for some time. In July of 2021 McDonald’s made similar statements to the recent ones, in conjunction with the introduction of company veteran Manu Steijart to the role of chief customer officer.
At the end of 2020, McDonald’s announced the launch of a comprehensive strategy for growth called “Accelerating the Arches,” according to a press release. That strategy touted three growth pillars: “Maximize our Marketing,” “Commit to the Core” and “Double Down on the Three D’s (Digital, Delivery and Drive-Thru).”
This month the chain announced the launch of its “Accelerating the Arches 2.0” strategy, which makes a few additions to the original strategy, including a fourth “D,” for “Development.”
Some RetailWire BrainTrust members saw positive signs from the initiative already.
“McDonald’s was the most downloaded food and drink app in the U.S. in 2022, overtaking Uber Eats for the first time,” wrote Tara Kirkpatrick, mobile trends analyst at Apptopia. “I see that as proven success of ‘doubling down on the D’s’ and therefore view the corporate reorganization as a reaction and tactic to support financial goals further.”
“It is a sound strategy, where more restaurants will be needed to serve guests via the D’s initiative,” wrote Patricia Vekich Waldron, CEO of Vision First.
While the corporate job cuts planned by April may not be cost-cutting measures, some of the other moves the chain is making are striking some as ways to save on labor costs.
At the end of 2022, McDonald’s launched its first automated restaurant, putting robots to work handling order taking and delivering customers their food on a conveyor belt, according to a Yahoo!Finance report. Online critics expressed concerns over mass job loss due to the roll out of the concept. The chain said that the store would continue to have a live crew on hand to help with food prep.
But for some BrainTrust members, a plan for more locations, automated or otherwise, raised questions.
“More stores in the U.S. — really?” wrote David Slavick, co-founder of Ascendant Loyalty. “Where are they going to find prime locations that aren’t in close proximity to existing stores? Global expansion would appear to be a better option where density and competition are less intense.”
“The biggest opportunity McDonald’s has to grow its business is to make its food taste better,” wrote Ryan Mathews, CEO of Black Monk Consulting. “This announcement makes no sense to me. They want to expand by cutting heads at the same time the industry is suffering with high labor costs and worker shortages? I get that many of the cuts will come from headquarters, but the real problem is at the stores. Opening locations in secondary spots that are likely to be short-staffed isn’t exactly the path to success.”