So as I think about IOM, certainly lessons there. But on the positive side, France is certainly our most pressured market right now in France — or in IOM, but I also feel very good that we’re going to get that business back on track and continue to have the performance that we’ve become accustomed to in that market over many, many years.
Ian Borden: And maybe, John, I’ll just build on a bit on Chris’ comments. I mean, I think two things. One is, as we talked about in our prepared remarks, we’ve got almost an entirely new leadership team in place in the market, a team that has a tremendous amount of McDonald’s business experience and we have a lot of confidence in that team and the experience they bring, I think, to drive the right catalyst. I think when you have a market that maybe is a little bit off track, what you look to, have you got the right people with the right experience to drive change. And then do you feel like you have clarity of sight to the kind of underlying issues that you need to address. And I think on both of those fronts, we feel good. Obviously, as Chris spoke about, it’s going to kind of take a moment to get momentum going back in the right direction.
But I know together with our franchisees in France, we’re going to be aggressive to kind of go after the opportunities that we exist. And I think we’re very, very aligned in how we’re approaching that with them.
Mike Cieplak: Our next question is from Jeff Bernstein with Barclays.
Jeffrey Bernstein: Great. Thank you very much. Chris, question as we think about 2024. First, I just wanted to clarify, I think you mentioned 3% to 4% comps in the U.S. and IOM. I’m not used to seeing such specific guidance, so that’s encouraging. But I’m wondering if you could share any thoughts on the components of that between pricing, which we get the sense is easing versus traffic. And then just more broadly, the operating margin guidance from mid to high 40% range, let’s say, fairly wide, I guess, 500 basis points or so range. I’m just wondering if you can help narrow or perhaps talk about what would lead margins to be at the upper versus lower end of that wide range. Thank you.
Ian Borden: Good morning, Jeff. It’s Ian. So let me take that. I think as we talked about on the comps in our opening remarks, I think — and we’ve been talking about it, as you know, pretty consistently over the last couple of quarters, as inflation levels have come down and, obviously, our pricing broadly is coming down in line with kind of inflation getting back to what I’ll call more normal levels, I think that’s why we talk about comps kind of getting back to more of that historical norm range of 3% to 4% in both the U.S. and IOM this year. I mean, I think the only texture I’d give you there is, we had a slower start to the year. I think there are a couple of important reasons for that. Firstly, we had a really strong start to 2023.
So obviously, we’re lapping against that. And then, I think you’ll remember a year ago we talked about just the abnormally mild weather that we were dealing with as a tailwind benefit in beginning of 2023 in both North America and Europe, and so we’re obviously working against that as well. I think if I was to think about the year, I think about the back half of the year probably being slightly stronger — slightly stronger than probably the front half. Just again, we had an incredibly strong first two quarters of 2023 that we’re working against. And I think some of the macro factors that were — are going to impact us in 2024 could, I think, be slightly easing towards the back half of this year versus the front half. On op margin, look, I mean if you go back to 2019, I think we’ve had a pretty strong demonstration of what we will continue to talk about, which is, over time, certainly believe we continue to be able to drive leverage and op margin as we get the strong top line growth.
If you go back to 2019, we were kind of in that 44-ish percent range. We ended last year at just over 47%. I think that’s a pretty strong proof point of our ability to continue to grow margins as we look forward on a percentage basis. I think obviously, as Chris talked about 2024, we’ve got some headwinds to work through, but feel really confident about our ability to continue to grow margins over time.
Mike Cieplak: Our next question is from David Tarantino with Baird.
David Tarantino: Hi. Good morning. My question is on the impacts you’re seeing in the Middle East. I guess two questions. One, could you help to quantify your estimate on how much that impacted your sales in the fourth quarter? And then secondly, could you comment on the health of your franchisees in the areas that have been most impacted and whether you think some temporary assistance will be needed as you move through 2024?
Chris Kempczinski: Hey, David, it’s Chris. Just — I’ll do a couple of things and then let Ian clean up whatever I missed. But we’re not going to get into specific numbers on the Middle East. But suffice to say, as you see in our IDL results, you can infer that the impact is meaningful, as I said also in our employee note at the beginning of this year. And then in terms of health of the franchisees, we’re really fortunate in that we have some very strong, very well-capitalized franchisees in the Middle East. But as we have historically done, as we work through challenges around the world, you’ve seen us in partnership with franchisees do things to support them during difficult periods that sometimes can be deferrals, sometimes it can be other forms of support.
And so those are ongoing conversations that we’ll have with our franchisees. We believe that working in partnership with our franchisees and doing things together through good times and bad is the way that we’ve been successful over time. So it’s going to be very much a situation-by-situation approach that we have in the Middle East, but certainly, the impact right now is significant. And Ian, I’ll pass it off to you for anything else you want to add.
Ian Borden: Yes. Thanks, Chris. So maybe just a couple of builds to that. I mean, David, you know that, as I’ve talked about before, I think we’ve got an incredibly resilient business model. Obviously, if you look back over the last several years, we’ve had to work through a number of different external challenges, and I think the geographic breadth, the size and scale of our business and our financial strength means we’re in a position of strength to kind of work through any of these challenges, including the one that we’re currently facing in the Middle East with the war that’s going on. In regards to kind of support for franchisees or DL partners, as I’ve talked about before, I mean, providing support is part of our business model.
It’s obviously how we work together with our franchisees when conditions outside of their control warrant support. But when we do that, it’s always, as you know, targeted and temporary and designed, obviously, to go to owner-operators or partners who are most in need. I think as Chris said, we’ve got some incredibly strong partners in the Middle East, the majority of those partners have been with us for 20 years or more. We’ve worked through a variety of challenges over the years. And I think we’ll continue to be focused on supporting our team members in the region, working with the communities that we do business in and working closely with the DL partners to get through this together. And I’m very, very confident that we’ll do that.
Mike Cieplak: Our next question is from Eric Gonzalez with KeyBanc.
Eric Gonzalez: Hi. Thanks for the question. I’m wondering maybe if you could comment on China specifically. I know it’s not a huge part of your profit today, but you do have some big growth aspirations in that country. So if you could comment on some of the macro challenges that you’re seeing and how they’re impacting results in that country? And maybe talk about how the brand is positioned to gain share in that market. Thanks.
Chris Kempczinski: Sure. Well, overall, we had a very good 2023 in China. We were happy with how our business performed in China. We’re seeing strong growth there. We also built 1,000 restaurants in China. So we’re very much on track from our development aspirations and we would expect to do something similar in 2024 from that standpoint. So overall headline is feel good about what we’re seeing in China and the progress in growth. Certainly, in China, as you’ve read about and seen it with a number of other companies, consumer sentiment in the country is a little bit more under pressure right now. And that is leading to — in Q4, in particular, we saw the environment get more promotional. We didn’t necessarily follow that, but certainly the environment is getting more promotional.
And our focus is on making sure that we remain competitive. So we’re going to do what we need to do to maintain our competitiveness in that market. But if you think about the overall macro trends in China, I talked about this at Investor Day, we certainly think that we’re going to continue to see good comp performance in that market as consumer wealth and GDP continue to grow mid-single digits. We think there’s going to be an opportunity for us to continue to build out development and penetration in that market to many places where we don’t really have McDonald’s presence. So overall outlook on China for us continues to be very robust, which is why we increased our stake, as Ian mentioned.
Ian Borden: I might just add on a couple of things to Chris. I mean first, I would just acknowledge the team and our team in China, we opened just over 1,000 restaurants in 2023, which was an all-time high for us. And as Chris mentioned, as we talked about in our remarks, we completed the acquisition of the additional 28% to take our stake to 48% at the end of January. And I think we continue to remain really optimistic about the long-term opportunity there and our ability to have an increased stake in that long-term opportunity with that additional stake acquisition. And we’re looking forward to getting that market to 10,000 restaurants by end of 2028, which is, I think, a really important milestone as we look forward.
