Industry Analysis: McDonald’s Makes Big Changes To Its Corporate Reorganization & Marketing Strategy
Going into this weekend there was a story that just barely slipped by in the world of international business news
CNBC was the first to report about McDonald’s raising royalty fees for its franchise operators in the United States market on Friday. This announcement came directly from the American fast-food restaurant’s U.S. President Joe Erlinger, who told the public:
“While we created the industry we now lead, we must continue to redefine what success looks like and position ourselves for long-term success to ensure the value of our brand remains as strong as ever.”
Ah, the beauty of a massive corporation’s ability to carry out an efficient corporate re-organization and marketing strategy, which is, in part, thanks to a sprawling global footprint and brand presence.
The CNBC report on this news story emphasizes that “the royalty fee hikes probably won’t affect many franchisees right away. However, backlash will likely come, due to the company’s rocky relationship with its U.S. operators.” CNBC
How is McDonald’s balance sheet looking these days?
The figures from the company’s Q2 results were impressive:
- $3.17 adjusted vs. $2.79 expected (Earnings per share)
- $6.5 billion vs. $6.27 billion expected (Revenue)
McDonald’s reported its Q2 earnings and revenues statement on 27 July 2023. Apparently, the company is doing quite well at its US fast-food chains, and, it was reportedly a result of the company’s latest marketing campaign: The Grimace Shake.
Don’t just take my word for it, that’s what McDonald’s CEO Chris Kempczinski told investors on the company’s conference call, too.
“This quarter, if I’m being honest, the theme was Grimace.”
There’s a lot of content about The Grimace Shake phenomenon online. Watch a quick YouTube video about “BEST Grimace Shake Videos” by accessing the link below:
This phenomenon has generated a lot of controversy in the public circles, since the famous McDonald’s mascot revealed himself to be dead after drinking the newest Grimace Shake from McDonald’s this summer. The video was originally posted through the company’s Instagram channel.
Needless to say, TikTokers were all over this marketing campaign.
But let’s not get too carried away with this social media phenomenon, since the C-Suite at McDonald’s are quite literally “shaking” things up at the corporate level. Read more about McDonald’s corporate reorganization plan and marketing strategy below.
A New Corporate Structure
In a memo sent to McDonald’s corporate offices around the globe, CEO Chris Kempczinski and the executive team will review corporate staffing and evaluate measures to cut down on an “outdated and self-limiting” corporate structure.
According to BBC, there’s about 200,000 corporate roles, with 75% of them located outside of the US, that are at stake during this reorganization process.
While there’s been a massive amount of layoffs in the tech sector, multi national companies like McDonald’s have went under the radar during this tumultuous time for the global economy.
Writing for FranchiseWire, Mary Vinnedge explains the rationale for McDonald’s reorganization plan according to three main points:
- capturing increased demand in global markets
- adapting to disruptions in the food & beverage industry with digital programs and offerings
- investing in local consumer market preferences across U.S., Europe and Asia.
These main points are critical for McDonald’s investment portfolio. That’s why shareholders and other investors should be carefully paying attention to how the company’s strategy for expansion unfolds in the near-term.
On the New York Stock Exchange (NYSE), McDonald’s stock (MCD) responded to the news about this reorganization plan on 6 January 2022.
The MCD stock price was at $262.16 on January 5 and then increased to $269.47 on the January 6. It took a few bumps and slides from January 6–12, but regained its momentum by jumping from $266.69 on January 12 to $274.11 on January 17. It then dropped fiercely to $263.58 by January 19.
Even though McDonald’s reorganization plan isn’t the most popular topic in business and stock investor’s news — Tesla (cough, cough) — the existence of the golden arches has been the close attention of some of the latest geopolitical scenarios in Russia, Ukraine and Kazakhstan.
Sanctions on Russia have taken its toll on several American and European companies operating in Russian markets.
Anton Krutikov covered the story about Russia sanctions and its impact on the golden arch’s post-Cold War legacy in McDonald’s in Russia is Back. Now it’s Even Better.
At the beginning of the year, McDonald’s also announced that it would be leaving Kazakstan due to supply shortages during the Russia-Ukraine conflict.
These geopolitical events reveal how McDonald’s must re-focus on a new corporate expansion into global markets. As they wish to open new offices and restaurants, thus expanding their brand to new consumers; this is the ultimate strategy to successfully capture wider audience engagement through global footprint.
Accelerating the Arches 2.0
For McDonald’s, international marketing is a key feature of the company’s success. McDonald’s launched its original “Accelerating the Arches” strategy in 2020. The first pillar of this strategy is to “Maximize our Marketing” followed by “Commit to the Core” and “Double Down on the Three D’s” — Digital, Delivery and Drive-Thru.
In order to accelerate international business growth and consumer acquisition, the Accelerating the Arches 2.0 strategic plan unveils how McDonald’s intends to carry out this acceleration through “Development” — the fourth D — by which the reorganization plan comes back into the discussion. By cutting jobs, the company can invest more in technology and digital marketing opportunities. This is essential to keep up with its international competitors, of which they could easily lose an advantage over the local consumer market preferences.
In the lead up to the reorganization plan, there was also a shift in corporate leadership. Morgan Flatley was named as McDonald’s new Chief Marketing Officer (CMO) in August 2021. Flatley famously oversaw the “Famous Orders” campaign featuring musicians Travis Scott and BTS in 2020. Watch the YouTube video by accessing the link below:
At an investors presentation on 27 October 2022 McDonald’s CEO Kempczinski attributed the success of the company’s Q3 2022 earnings to the marketing campaign, saying it was “an important growth driver.” He shared a story about the McRib Farewell Tour and Happy Meals to share how important marketing was for the future of the company’s growth story.
Technology investments in the UK were also paying off, as more and more customers in UK are seeking digital channels for their McDonald’s purchases. In fact, McDonald’s went viral on TikTok when a customer posted that he had been given $5,000 in cash along with a breakfast order. This digital channel is a big part of the upcoming generations’ engagement with brands and consumption. Just look at the responses on TikTok provided by FoodBeast.
The TikToker, named Josiah Vargas, had this post put into the Good Samaritan Handyman category on TikTok. If you upload the videos from this category, you will see a variety of hashtags, but some of the hashtags include religous themes such as #christian.
McDonald’s not only is committed to its digital marketing channels, but also continues to find ways to compete with customers in the U.S. markets.
Chick-fil-A, eat your heart out!
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