McDonald’s Corporation (NYSE:MCD) Q4 2022 Earnings Call Transcript

Page 8 of 12

Christopher J. Kempczinski: Yes. It really just goes back to the pillars that we have in our strategy. It’s marketing for menu and now the 4Ds. I think each of those still has quite a bit of runway of growth. I’m encouraged by what we’re doing from a brand standpoint. But there’s a lot more we can and will be doing on that to continue to strengthen our brand and marketing excellence. And we’re still not as good as we could be around lifting and shifting great ideas around the world and so we’re going to get better at that through this Accelerating the Organization effort. On core menu, chicken for us is a big opportunity as is coffee. I think on burgers, we’re very well developed. But chicken and coffee, in particular, offer us, I think, a good growth opportunity.

And we’re going to be focused on that with some very specific products as opposed to having that maybe be something in the past that was a little bit more left to individual markets to kind of chart their course. And then on the 4Ds, I think all of those for us have growth. So it’s not a different playbook than what we’re talking about with Accelerating the Arches. It’s very much the same playbook. And what we’re adding into the U.S. this year, as I mentioned in my comments in the opening, is on the operational side. With PACE restarting, I’ve been very encouraged to see how PACE has been driving customer satisfaction when we put that in, and we’re seeing improvement around service time. So you take all of the top line-driving initiatives related to the MCDs and you overlay on top of that improved operations or improved execution at the restaurant, and that gives me confidence in the outlook.

Mike Cieplak: Our next question is from Sarah Senatore with Bank of America.

Sara Senatore: Thank you. I wanted to sort of just ask about this — some of these initiatives in the context maybe of McDonald’s history, which is to say, when — you mentioned, Chris, that it’s been since — 2014 since you had unit growth in the U.S. As I recall, unit growth had picked up a few years before then, but same-store sales slowed. And so there has — historically, it seems like there’s maybe a trade-off there. So that was one sort of piece that I wanted to ask about and how you think about that balance? And then related, Chris, when you joined, there was an initiative, I think, around reducing some of the management layers and really streamlining and making the lines of communication clear between the markets and the headquarters.

I guess, what’s happened since then or it feels like it’s maybe a renewed initiative to do that, so if you could just compare perhaps where you were to what you’re doing now and where the reinvestments might be this time versus the last time? Thank you.

Christopher J. Kempczinski: Sure. I think on your first point around unit growth versus comp growth, we have to walk and chew gum. It’s not one or the other. It’s the two of them in combination. And I think the big difference is when you want to be growing units is when you’ve got strong comp sales because that reflects the underlying health of the business. I’m always very leery when I see someone out there putting a strong unit growth number without strong underlying comp sales because that’s historically not been a good recipe in our industry. And so for us, I think we’ve got, as you’ve seen in our results, strong comp sales. I feel very good about the outlook. And so that now gives to me permission to put on top of that some unit growth.

Page 8 of 12