McDonald’s Corporation is pursuing corporate layoffs this week despite posting healthy recent profits, as the fast-food giant frees up resources to pursue an aggressive expansion plan.
The Chicago-based fast-food company is closing its US offices this week to terminate staff remotely as part of a previously announced restructuring, with the number of corporate job cuts reportedly in the hundreds.
Perhaps counterintuitively, the cutbacks come as McDonald’s pushes to significantly expand its restaurant footprint in the US and Europe for the first time in years, after saying many locations are operating at full capacity.
‘It sounds like they want to reorganize the company into different structures to grow faster,’ BTIG LLC analyst Peter Saleh told Bloomberg when the restructuring was announced in January. ‘Maybe they feel like they don’t have the right people in place.’
The corporate job cuts come as part of McDonald’s CEO Chris Kempczinski’s ambitious restructuring plan, but will not impact the roughly 2 million restaurant workers at franchised locations around the world.
McDonald’s annual profits have remained strong after taking a hit in the pandemic, but the company is cutting jobs as it pivots to a new growth strategy
The corporate job cuts come as part of McDonald’s CEO Chris Kempczinski’s ambitious restructuring plan, but will not impact the roughly 2 million
A McDonald’s spokesperson did not immediately respond to an inquiry about the layoffs from DailyMail.com on Tuesday morning.
In a memo to staff on Monday, which quickly leaked online, the company said the layoffs are intended to make McDonald’s more efficient.
‘We have a clear opportunity ahead of us to get faster and more effective at solving problems for our customers and people and to globally scale our successful market innovations at speed,’ the company said.
‘During the week of April 3, we will communicate key decisions related to roles and staffing levels across the organization to help us achieve these ambitions,’ the memo added.
McDonald’s is the world’s leading restaurant chain, with more than 38,000 locations in over 100 countries.
But for years, the number of McDonald’s locations in the US has slowly declined, dropping to an estimated 13,515 restaurants in the US today, from 14,157 at the end of 2012.
Earlier this year, the company said many of its restaurants around the world were operating at capacity, leading it to overhaul its strategy to focus more on physical expansion.
In November 2020, McDonald’s had unveiled its ‘Accelerating the Arches’ growth program, which vowed a focus on modern marketing, core products, and the so-called ‘three Ds’: digital ordering, delivery and drive-thru.
Version 2.0 of the program announced in January added a fourth D, restaurant development, as well as the corporate restructuring plans intended to fuel growth.
‘To unlock further growth, the company expects to continue to accelerate the pace of restaurant openings and technology innovation,’ McDonald’s told shareholders in a February report, saying it expected to open 1,900 new location worldwide in 2023.
McDonald’s is the world’s leading restaurant chain, with more than 38,000 locations in over 100 countries
McDonald’s employs roughly 150,000 people around the world in corporate roles and company owned restaurants. 70 percent roughly are located outside of the U.S.
McDonald’s has also hiked prices on its menu by at least 10 percent over the last year as as the company’s commodity and labor costs soared.
However, the price hikes did not deter customers. Restaurant traffic rose 5 percent in 2022, McDonald’s earlier disclosed, as its meals remained less expensive than many competitors, drawing low-income and cost-conscious consumers.
McDonald’s said that last year, global comparable sales increased 10.9 percent, including a 5.9 percent increase in the US, a bump the company attributed to its ‘Accelerating the Arches’ strategy.
For full-year 2022, McDonald’s reported sales of $23.2 billion, flat from the prior year, and net income of $6.2 billion, down 18 percent as higher costs put pressure on margins.
Kempczinski said in a January memo announcing the restructuring plan that there would be ‘difficult discussions and decisions ahead’ and warned that the company had become unfocused.
‘We had across the globe 70 different, distinct versions of what a crispy chicken sandwich would look like,’ he wrote. ‘I don’t need 70 different permutations of a chicken sandwich.’
McDonald’s directly employs more than 150,000 people around the world in corporate roles and company-owned restaurants, with around 70 percent of those located outside of the US.
The layoffs will not include the more than 2 million workers in franchised McDonald’s restaurants around the world.
McDonald’s will have more employees going into new roles this week or receiving promotions then being laid off, a source familiar with the matter told Reuters.
The source said the company is closing its offices this week to conduct the layoffs ‘out of respect,’ and to ‘provide dignity, confidentiality, and comfort to our colleagues.’
‘It used to be that folks would be called into a conference room with the windows papered over and then have to walk back to their desk to collect their personal belongings and leave with their head down,’ the source said.
Shares of McDonald’s were roughly flat in morning trading on Tuesday, after rising just under 1 percent in the prior session.
Though the US labor market remains strong, layoffs have been mounting, particularly in white-collar roles as companies slash overhead to prepare for a potential recession.
McDonald’s has temporarily shut down all oof its U.S. offices as it prepares to deliver layoff messages online to employees
Recession forecasts have been rising in the wake of the Federal Reserve’s aggressive increases to the benchmark interest rate over the past year, which are intended to fight inflation.
Job cuts have been largest in the tech sector, where many companies over-hired during a pandemic boom but met headwinds in the higher-rate environment.
IBM, Microsoft, Amazon, Salesforce, Facebook parent Meta, Twitter and DoorDash have all announced major layoffs in recent months.
However, there are still shortages of workers to fill front-line service jobs, such as those at McDonald’s restaurants.
Policymakers at the Federal Reserve have forecast the unemployment rate may rise to 4.6 percent by the end of this year, from the current rate of 3.6 percent.
That would be a sizable increase of the type historically associated with recessions.
