MCD - Earnings call transcript Q4 2017

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Operator

Hello, and welcome to McDonald's January 30, 2018, Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded.

Following today's presentation, there will be a question-and-answer session for investors. [Operator Instructions] I would now like to turn the conference over to Mr. Mike Flores, Investor Relations Officer for McDonald's Corporation. Mr. begin. may you Flores,

Michael Flores

Today's thank today joining Chief are and replay Kevin Steve and live being on recorded and Executive With the Easterbrook; for Ozan. Officer, Financial call our webcast. Chief call you everyone, is us. webcast for by me Officer, conference Hello, President and

today. forward-looking available over also earnings turn our release corresponding it investor.McDonalds.com, over X-K filing turn I'd Now I now, any non-GAAP to in before it reconciliations I Steve. like are remind measures. GAAP on financial statements want to Both our as or measures comments apply to And Steve, their on today's to everyone documents that the of with call and to mentioned

Steve Easterbrook

of Thanks, Mike. Good morning, everyone. XXXX for year performance was strong a McDonald's. very

the we from demonstrate growth. completed results to successfully turnaround transition Our

and McDonald's underpinning broad momentum leadership and in place, is Our for strategy business across our grown of around teams based purpose There strong fit customers the is world. markets our platforms are system. the residential

by and hotter developmental We transaction notably six of we performance tell culminating Customers best top to and years. is the sales XXXX. fresher X.X% Our grew X.X% consecutive with schedule. advances comparable was by of their business reached full enhancing first largest count growth needs more in growth. Full quarter of cash of quarter our that serving ahead in year since per customers This significant year attentive we our marking China positive. X.X% Comparable segments counts franchise licensee the our cash for XXth restaurants did. their increased sales more in experience XXXX McDonald's and all with serving more we X,XXX are positive quarter X.X%, made grew our with the our and often food. full being We comparable refranchising target and year in us year, in our strategy fourth priority XXXX

to and and continue achieving elements of most surveys improve service markets in multiple XXXX satisfaction brand gains customer taste scores food. across quality friendly overall Our of particularly with perception

six result, Japan leading grew eight markets share UK, a way. As top with of Canada the our and the market

with and in plan are pleased to size our progress and not and more marketplace leveraging the are our unlock satisfied. but it. potential in our is we There We considerable certainly scale

We the are sharper the are in we way through full-year. ability our and confident to Kevin and and you walk the about and execute growth. in fourth our more to quarter excellence organize we more focused with sustainable details performance in act long-term will financial drive bank

Kevin Ozan

in invest all Steve. measures we our strong our in Thanks, today's business drive momentum. our us in innovate performance By have can we and compete effectively so XXXX Enabling globally marketplace. growth shows that to

the competitor set along increased markets sales sandwich was European sales segment X% quarter lead the High across the which for that China's QSR positive throughout with international rest strong growth a segments led in the regions. positive segment's were segments South to our X% of flat. comparable top for markets quarter addition X.X% markets relatively comp by on had consolidated each on comp were Korea. of our Our segments soft to comps its on and Canada significant prior In amount. performance X% guest sales near-term achievement sales status XXXX results. positive mention U.S., with impact reflected partly We that recap I in performance a hyperinflationary sales with to global comps impact Japan's driven the up and and and to geographic foundational positive sales results Comp comp of first Venezuela offset starting strong want also Japan, UK, in the exclude strong of the performances challenges provide that all due by in fourth operating of in fourth have some by increased in in release and the the in exclude overall significant were China. sales earnings foundational year the the with comp results the those XXXX basis to for strong the Venezuela comparable three results it performance U.S. quarters counts segment. is adjusted compared Comp rose quarter. been to of across the with

convenience continue include tax the the for X.X move a net million of rate. momentum. On will billion $XXX deemed quarter of earnings of consist innovation net benefit The $XXX partly onetime maintain U.S. that by of of direct and basis of per our our $XXX results we differed will the for million share undistributed $X.XX. our we cost XX% lower to reported impact XXXX the for million offset declined the cost resources approximately cost towards U.S. a foreign tax for a These help to this liabilities into efforts assets and topline repatriation As revaluation driving menu to reform. earnings and the of tax tax

earnings of from the G&A of outside XXXX base, tax law a valuation allowance our tax in per $X.XX, a because XX% countries reflecting in with XX% Japan of savings, expected restaurant in franchise lower tax rate tax XX% restaurant was impact the to representing quarter. tax years share changes fourth strong a This up total ended U.S. than reversal three reform We some ago. diluted increased the rate. and Excluding of XX% comp sales,

than As restaurant more a XX% now total comprise dollars. result, of our margin franchise margins

to margin due related flat, heavily and to rollout our For the margin across in to shift remained percent higher future. to The the sales experience increased quarter all performance of franchise fourth the franchise more dollars system. franchise U.S. segments reflecting depreciation cost a driven the

of X,XXX international lead markets Our company for the segments. now accounts of operated margin about and a U.S. and spread The international operated restaurant consists the base across U.S. high locations, over company XX% dollars. growth little lead

the in improved basis XXX to points wage both points, continued our XX reflected basis operated efforts. margins primarily company U.S. due margins declined along refranchising operated fourth quarter higher due full costs. costs our consolidated increased commodity the which a initiatives higher Commodity over grocery the costs with investments and quarter, little X.X% XX year deployments our points. basis fourth while and for our to U.S. For of in year were up pressures basket labor Company U.S. last versus key

end we X% we inflation to expect the broader of from quarter the quarter part price first terms menu home in In inflation. in strategic below The above be quarter were food pricing the food year our menu $X, reset $X, took menu of away launch our of of early this our pricing back up was away board fourth the which pricing ahead our $X year-over-year, increases of of fourth home pricing By menu was the January. from of X.X%.

provided X% international line our menu start the the perspective I'll commodity G&A year. in guidance the review with about the prices costs up in and the for down few XXXX. lead things G&A were in X% when currencies, outlook the put the year fourth of quarter I year, relative For up we constant was X% with markets minutes for a updated X% these at about for for our savings target year-over-year. to the in

one-time million earlier. quarter, to I income due the Finally, mentioned for other primarily nearly that $XX the increased the of in valuation reversal operating Japan allowance

Steve Easterbrook

Thanks Kevin.

and the needed is our able to As McDonald's much address to a of today's agile move more demonstrate, at pace needs results customers.

in introduction progress With of aligned mobilizes we system. McDonalds substantial growth began the our year made and plan velocity by and last end of actually we of customers. the our the the March straightaway We the eyes

our to more most to are those regain We less from customers been convert customers. serving coming as retain loyal have and brand, the casual we who often, visits those committed

and consumer the have $X core BigMac offered at relevant XXth $X and excitement tasting Programs incremental offerings, our across not menu Big the quality premium year. core delicious course core brands, French most with and perceptions troop a size opportunity menu. of price to to portion sensitive have in the fries markets combined a a is points. UK wide value beverages at its range and affordable of big the appeals of have premium provide world systems customers affordable adults. the food with choices of [ph] menu our share our taste sections X traffic and The cheese, incremental customers we share range have for food food price Across for Germany's the At the and both and which only quarter. quality quarter everyday tasty menu EURX.XX sandwiches snacking McMuffin, the customers of affordable full picks Across U.S. from size. great of and offers the with the via in average pound We increased our Canada McDonald's iconic they price as identify a the food provides with great Mac compelling re-introduce value the strengthened [indiscernible] our and very and McDonald's customers visits and a and a find of system to as of Egg bundle chicken and anniversary McNuggets, In selections breath sales appeal profiles. we $X grown featuring meal. for our tasty flavor like the of with model of consumer a real found exciting celebrating our France place McPick in our conscious in full and in range taking such saver a With for bundles any increased with a drive this famous

still all-day U.S., Maintaining exciting allowed and is greater venture growth this reaffirmed McDonald's further as menu in for our have to food compelling breakfast offerings new and of platform customers core crave menu Canada. growth. that into strength drives which us customers such satisfying driving and We the our in the Australia and has core

perceptions times they which the piloting meaningful customers and UK delivered are world. with to are Orlando, in the XXX them who have Tampa of food. delivering Delivery average access X,XXX launched profitable pay for satisfaction Markets a to and for the that with providing convenience of and our and more order Crispy modernized is the up left customers greater our and restaurants already With how flexibility capacity quarter premium [indiscernible] are one our market more now served different for in restaurants. performance repeat around check U.S. XXXX, restaurants beef as chicken food from many countries the their contributed in In We from from the X collection and also line delivered driving our McDonald's so Signature sales years in sandwiches. the Seriously promote above often have X.X include top meals Such size solid we've which our systems Chicken the great we in creditability quarter. recently XX in we Buttermilk brand great by and higher offering business and seeing Canada their than UberEATS Asia growth. tends Tenders where XX,XXX customer and taste those restaurants way towards choice are reaching high Middle-East we it. Miami, in who to and in from we over delivery orders restaurants try with

the a the markets future as the are of contributor of many new providing fourth emerged During our our with In modernized the seamless, in we've quarter boards, of several telling are sales greater McDonald's our largest look. the and enjoyment They to better. our self-order comparable delivery more menu personalized kiosk, traction they a markets. hospitality experience gained us scaled experience and They and like platform a million customers meaningful digital on with XXXX for rewarding the in restaurants do. more spending the McDonald's to and in Customers the of are on system, restaurants we ALGF nearly in McDonald's they when app. brands increasingly experience frequent apps future US they more phones registered by about visits We deployed alone expect over US. have of one-third XX and the us including their mobile the mobile in users with average engage

work team's restaurants milestone base. XX order that XX,XXX around I'm in world achieved are of from pay. well capitalize positioned on XXXX over user offering with just ending We mobile we proud the start that a standing months. on our to

greater very added of customer by digital still with side are pickup. we're we're In among appreciating While orders seeing many customer higher the customers as the early customers. average curb size and convenience usage satisfaction particular encouraged check

velocity as Now our starting executing growth on is XXXX plan. we're focus our

and to We an greater in order, improved how serve and pay experience customers will provide continue choice food. their they

options more to opportunities awareness in customers to on enjoy mobile expanded to the have of encourage XXXX pay. the we've initiated marketing engage these available enhanced coming convenience We delivery raise order that In with months consumer with campaigns and McDonald's.

significant countries As the restaurants in we're XXX to XX,XXX advantage nearly and McDonald's this optimistic distinct we our will has scale a a of With contribute do momentum business. potential.

We course great the saw the States experience successful most this décor as in XXXX. first-hand customers leader how accelerated enjoyed the The and Over McDonald's bottlenecks demonstrate best crew its since part excellence. Poland experience of been solutions and has contemporary we've see in Customers convenience Italy periods. XXXX been tasting benefits leveraging on larger of results and overall our they to customer we high of the communities. teams brand saw the and the of changed [indiscernible] well-trained during Cost a around growth the throughout the the sales With evolution that being receive United in UK, the we kiosks focus have friendly a world. the operational restaurant, modernized has development and year of for on which how market. their such local strong customers markets could food the at enhancing the quick customer business in in members in volume a better where [ph] grow. we system improve delivering ways trajectory counts sales of markets service the our in the are perceptions of Canada our that system appreciate matter and dramatically of self-order increase and of In guest

in like top an demonstrate market, Buenos table helped elevate has During customer achieve Paulo to bases the platforms have across value the these our Sao their commitment Aires up capacity. fall team and and high experience our in hospitality on visit open further of hospitality. employees and how outstanding in the we and an Service share. in menu service last saw the market French led all-time Restaurant market to

focused franchisee and of passion, a While are benefits and of this see confidence visiting investment business result as the I making accelerating difference experience crew new the for tax the company of the our the creating real meaningful confidence our franchisees and energy can as Buoyed will the managers grow future we that optimism. culture, [indiscernible] program to they a in the our the say we a further by share our I in [indiscernible] continues service innovative experienced embrace in U.S. U.S. reform first-hand and an The customers. is have

This resulting bring end will additional about of nearly being restaurants We X,XXX U.S. U.S. to half no restaurants in by our XXXX EOTF completed is feat. the of this year. small

our about the they financial clearly a next crews a U.S. our our of benefit over construction investment our investment require will of investment new two which and on significant beyond impact the significant years the these While confident an acknowledge leadership to communities invest focus local approximately is Between restaurants. will to future we the well. billion This projects supplies. are to plan and and will it extend for extends this will require $X equipment we franchisees that transform are also bringing time, And execute company business. undertaking, franchisees décor is The too. the as major

to continue Opportunity be will delivering people demonstrating will and a our the at did experience our training development also our owner growth. partnership with opportunities program. we in profitable to with and now the as improved payoff customer commitments a We commitment look that all firm vastly to and a offered McDonald's enhancing stronger Archways through We operators, confidence this better sustained our

for details XXXX. about would our Now share additional outlook Kevin

Kevin Ozan

XXXX. XXXX With into our is in strong we the business progress made heading

several be in our markets Over depreciation the of associated XXXX will to the million results the refranchising XXXX those messaging in Kong china $XXX due the of Hong and been that benefit refranchising I choppy and few quarters last in of have with XXXX, markets.

restaurant year. January results on standard XXXX more Looking a level expect into accounting U.S. forward the while reform went standard we X, even affect little tax the accounting flows effect and change will choppy, cash no new we them, granting that this way recognized be restaurants franchise new that the we over recognition income our franchise the a in of fees will initial for franchise that a franchise have new life new Previously to franchise for revenue revenue fees we will and XXXX Beginning or when recognition impact recognize On with term. new we received, we received initial terms. the opening new openings recognize upon term.

consolidated a and a forward. this tax reform million we margins. and walking negative impact $XX about spend this impact on franchise I'll of on For change results minutes revenues we of expect expected impact I about couple the business through how to full to our have our talked U.S. XXXX year you franchise the of of going

available know clarifications From historical as of effective standpoint further from based XX% to our All analogies finalized. XX%. this could estimates tax to are we which of our information for our earnings XX% is and on our range XX%, down be XXXX provided change to and expect current an rate we

Our XXX rate global the XXX be incremental that points to this A rate the currently average new taxes put will the we annually expect blended close to perspective. an of U.S. a reinvestment. few standpoint, flow million any which prior we to outside million cash U.S. pay to than higher of XX%. benefit to in due From

a had large First, we overseas. cash historically amount have of held not

lot So, suddenly cash. will us bringing the of new in back law not a result

cash operating cash represents historical than of incremental less XX% billion. annual this $X flow flow Second, of roughly our

the been to remain have what been. capital with consistent past, our not priorities in they allocation have we capital constrained expect Finally, so we

third, and now stock. said in to the reinvest we a we From the target. repurchase XX to grow franchisees of three-year that second, is benefit our operation and Having reform. general expect end tax restaurants stated in period about previously to shareholders business U.S. dividends, also billion at to invest which ending pay return to in existing business; opportunities from to First, the expect our for high XXXX standpoint, to our

our ongoing in the existing invest and of velocity Given cash to the growth execute plan. enhanced franchisees flow ability benefit strength should our this on

to want around we've G&A. a targets review take I Next, our moment progress financial to refranchising and the on made

which, to we refranchise to we to Nordics, targets the model We During reach turnaround and restaurants. franchise the plan. X,XXX XXXX ready begin that in enabled Hong-Kong under operate heavily China set streamlined Taiwan, XXXX our out to our and transactions business completed more create under us

do some the from company to league markets million XXXX restaurants owned activity international major restaurants we down. refranchise of anticipate in to million will XX expect we continue sales refranchising While gains XXXX our to markets our roughly of in to begin our XX be down like as U.S. on the slow

we save maintenance savings, order to developed savings digital. Through of net those million XXXX to billion beginning significantly $XXX achieve savings we reinvested on $XXX $X.X in at In realized more And spending. the G&A we than of of primarily and a technology the those have gross net $XXX Regarding base related our million XXXX. then about basis targets of of million savings. from some

saved at overall, we've that same in shifted drive activities spend time cost investing spending the also So, from we to our maintenance more of remaining growth.

as X% from upcoming our we sponsorship final currencies. convention to G&A of a year our associated decline Olympics as to XXXX, incentive transactions well worldwide operator our spending continued in by and compensation expect reflects of cost one-time headquarters technology. with offset office This in reset move, our For refranchising our bi-annual savings and constant by

We fully of million XXXX. realize in net expect our targeted savings to $XXX

invest will At have valuable resources. activities we continue discipline in same run financial accelerate to business to can believe the growth. strong required use we more our exercise the continue in we the of we will time, efficient that to the As G&A become with

budget year to about expect Moving beginning mentioned. the as expenditures the nearly higher XXXX be XXXX in capital, to In billion to billion ending dedicated able acceleration primarily half approximately we new end were Steve year expect $X.X EOTF $X.X to EOTF to as the our outside of markets half anticipated capital than of billion. we two-thirds the capital, X.X the restaurants allocated experience with on reinvestment projects of exchange focused because Of or will future. for with the in openings US planned, and the slightly to we spend than currency business, XXXX is on expand is of restaurant because US we of earmarked and This was future US. to rates of the we the our remaining experience further more complete capital at capital of of about continue

Our for XXX to capital capital and about XXX contribute another will will a from total planned affiliates to new of openings new store XXXX while developmental a openings contribute licensees restaurants.

the the full the for $X.XX quarter some $X.XX in expect year. anticipate first Finally, for XXXX we first to half positive current and rates exchange impact At the we tailwind $X.XX primarily of year. currency a $X.XX of to in

As seen you exchange don't know over rates month fluctuated the last significantly we and to the rest typically than have of more know we've happen will year. what

the XXXX position turn Steve. long-term financial We confident to the this in made it directional for beginning we're and our velocity to I'll the making with company along in with our investments guidance take future only. our path as back plan long ability we're please growth. We've The business. now achieve significant growth in So on remain in term progress that targets sustainable our

Steve Easterbrook

business future. and confident we're see growing. can you our As fundamentally is about It sound is our

and our A us future. continuing people. choice actions also worldwide building XXXX our signal at provide serve spring will business there're performance and more momentum Orlando the is bring promising the pay gather draw to our and and convention we we're system McDonald's customers strong and have looking achieved opportunities make many in have bold that are hospitality great three XXXX we'll confidence to We're aggressive This our have in their because because growth order, years. serve forward the biggest brand our our The excitement in in tasting our be together employees We platforms. will investments ahead. for they years the the taking best meals, with rally McDonald's progress celebrate with we and food. to building of in friendly supplies then most in comparable system. returned a offer visits to six was rewarding even them to operators the sales. as enthusiasm to tremendous growth our owner Customers ambitions This our greater pursue opportunity XX,XXX in nearly with with how

is one the mentioned by anniversary a McDonald's sandwich BigMac the this XXth earliest a Jim of of of I As our kind invented one franchisees. Delligatti

We have burger. remained plans about years fans passionate this all the exciting celebrate to who many so later iconic these

flagship restaurant customers makeover decor space, Our picture park in planters and our another and hospitality headquarters latest and this dramatic is open And, our a Chicago to designs the evolution receiving play to year. new culture, it of The will and technology offer the modern to reopens can't and will great for later it convenience green our side, I Chicago's Loop. outdoor West sitting wait our take advancing enjoy. when and community there a when we

and the into McDonald's our to customers us energize such put heart dynamic a the of team. closer will city Moving

results. a and better becoming We as are McDonalds better its do, we driving

progress pleased While XXXX, the made in with ambitions. far greater we we have

in they we the our is growth the have the spring serve success. put and right place right we delivering future We The board always accelerating fact today, plan. will as are organization confident

I'll the and Mike now So, turn it Q&A. to thanks to over everyone, lead

Michael Flores

question And as allow. we and to investor opportunity may [Operator so come Steve, possible as back ask questions. with will to analyst as up follow-up people the time for give we Instructions]. and to questions Thanks one many open questions will you call please limit now yourself the

David with from RBC. is question first Palmer the Now David?

David Palmer

things ago the you This the where surveys regarding think pretty done and Those wasn't like we -- pack are of winning. and and is in that in are the or be should seen pack long if convenience towards it value of even that stale U.S. you towards surveys McDonald's obviously bottom quality U.S. set, that middle elsewhere peer things the the McDonald's had like now. have probably and

market where perhaps improvements with into it improve tie are initiatives, other have you place here? and to where you then further the Canada perception probably it like how And progress? a can are You makes made Thanks. seeing brand some most along think you the but from reimaging sense maybe

Steve Easterbrook

what characterize mean close world, programs, we you also at mean the could market of a beginning McDonald's seen very like and market friendliness to kinds very and enthusiasm, You it future all and right, but to operational innovation, two as a are the consumer the I of and you the by hand we are have the you the perceptions we engaging for we us hand. brand see I of look can we absolutely feel see got metrics research the in that the feedback when guess are What simply, the I and people clearly, U.S. into the it marketing get. our so about of their quality everything keeping and as brand element communicates, restaurants, is around to our business technology saw you do look at talk well. that well

direction chain to as we in beginning and such broad-based menu improvements as our supply are businesses these that’s people on through communicate the in heading business for restaurants at antibiotics, label the our we of our the the can in on so the wants a with move and nuggets that the to. what us clean and is whether things both change all So, see investment poultry customers

we more the metrics, on So, broader for look the and customers can markets, like you are customer have Australia to it already number markets like mentioned repurposed the for in also countries see the metrics progress in Poland broader beginning service we brand of -- see seeing of then brand you see you perceptions a food high begins preposition modernized the and terms employment and into a we a it in just is we really we metrics some friendliness, more developed quality of is for but whole also if are example, and company so to a terms mix taste markets of all the of and as part that growth begin we Italy. perceptions make the Canada it's Netherlands in customers satisfy like that markets environment. to just a able and each operational where improvement are We mix. the estate Spain are me UK, encouraged look at brand up brand perceptions certainly and and are advanced our more and like go better in as you

and to early the XXXX probably of state the proud encouraged are a brand finish going we acceleration are really the of around and we with expression we our really in north forward feel So, with of by that representing the that we've our converted announced days year its just X,XXX the the restaurants of end going look half have forward-looking the the U.S. of great XXXX. we are McDonald's day, into further

are of encouraged a lot do. but we work to So,

Michael Flores

question Brian is from with next Oppenheimer. Bittner And

Brian Bittner

sales in history? understand value platform your in give the Can second into to has sales your from in any value are you incrementality you that helpful. sales driver's from way platform this us gap whether help benefits that national insights you any industry us just to your far seeing changed you could mix business in seeing would be also if that a just any any are meaningful change recent And so or

Steve Easterbrook

only X.X%. it’s the for feedback for we to going built meaningful U.S. on of been position. early strong to that menu in of and a With when to in any been see to a days medium-and-long-term We ebbed the plus for And that's sales in introduce ended upon of terms gap the too the number the in really dollar us year beginning you X said X in it a strong It's we're marketplace consumers. it's being and X, and as broadly in the minds give X the platform marketplace. the announced XX to take months X competitively fully it's

overall flat X.X. think it I set much plus the competitive pretty was I was think

think any was dollar which So, we mix. not very for the the giving it's beef making business. the that still plans shared so outperformed meal.so the suddenly we fountain competitive the powerful XX we are feel about and drinks, in menu and across I so also of year an in that seeing have are anything it happy $X us chicken X. for augmented it's we've across across products the meaningful breakfast encouraging. U.S. marching which I we group that really be overall embedding then it's a strong just days menu we to there They some illicit are the both really noted guide again more we're dollar start. for performance with in know should gives basis encouraging is product here elements any but we market us XXXX four which in direction mean feel and has XXXX us weeks significant X, gap in the further off to the that settling very We or there well out were that peer very encouragement. and growth very strong. size over we dent as so, in across comment On clearly XX overall good a X, future including the execute a quarters in in it brought was of average consistent some competition shift of as the but weekly a successful well. we the the material the are the increased. seeing certainly good

Michael Flores

with is question from Next Andrew Charles Cowen.

Andrew Charles

at billion about expectations the for experience well, savings future. of through the in you expect back kind ultimately long-term Day XXXX. March billion one in speak about original laid the XXXX in to tax it year billion in CapEx in your Analyst and to CapEx investing X.X a just you Kevin, talked how clarification from as for to out can just and bridge in X.X to per you would target And reference $X.X

in a clarify, investing stake want than greater to XX% that did originally restaurants into you XXXX? you're modernized XXXX Just the in

Kevin Ozan

Okay, try hit of something Andrew. I'll you'll the them, but capital. me, if me with start and forget I let all remind

experience when Day have operators so some. several momentum of would we Xst, in just complete US. pull the with forward roll future about now So, take you're we the talked expected at out with it that we on Investor the March the effectively We've the and right opportunity the years taken that back on to it board

$X.X in of is what total a capital So, you'll billion XXXX. see around envelop

of new normal absent the billion which ongoing be beginning anything would should 'XX XXXX. I in similar X.X by XXXX guess is XXXX right done relatively probably a little hesitate left range. X.X be there in XXXX. significantly My the say end then rate over be be in about know And it expect now would will but to it'll in should run You that amount completed a we in to be completely that

to our the we kind of of that's just Same is quicker. more originally as consistent those talked moving of projects our evolution spends capital, forward isn't I the referred it's how changed, it projects investment have of partnering that to anticipated you of the with than able we're think program about. but complete accelerating contribution some So EotF with is the we we that what spending hasn't XX% the timing rates, it's just

done we again just it’s aspect able originally So that the timing to hasn't the than we'll quicker be projects changed, get anticipated.

Steve Easterbrook

like I undertaking, other But all year. the of detail is year and and put significance our Just from to that with here. XXXX again just stand UK, it would ourselves. because the done describing restaurants well converted. XXXX into to see together absolutely execution. to we doubling always go France the to is I and get around fully that to into rate with the committing our right, mean XXXX context of the similar to We signal operators one around massive We this aim add of XXXX and into money in completed the just just owner/operator the are Germany is and very-very do the get the of so, around best every the done and therefore a put to in that, exit massive Kevin's to in so part it’s we want context XXXX all confidence started projects. customer a their how this XXXX acceleration piece, this XXX devil's isn't something

pointing is an I ensuring such the for business of have really us undertaking a a tax the this think of reform infrastructure as and significant out. as this that result confidence So, investment worth for is our confidence in we the future

Michael Flores

Bernstein. Senatore from Next is question Sara with

Sara Senatore

up Hey could. I thank a you, and if I then question follow one have

you first to is surprised next year. actually the I The Steve such year considering think you strong was that momentum say can a accelerate hear

question I and means. do value So, a maybe And what means, of trying understand sort had traffic what to about that just out trying accelerate figure perception guess so then or quantitatively comps the actually is on discussion. to up I'm was just and you that that broad was talking sort follow commentary brand I second of see the on,

messaging of competitors still from traffic some other allows there on it value thing aggressive you higher bit kind your of think I seen nature get talk your better how marketing, the scenario you how are to messaging and to check they maybe just your of maybe value where some of smaller pressure and averages, your volume Could but to about a but profit what able dollars. you drive understand on have the to tried trying see are it competitors worst-case is a this have is be marketing check little is seeing? of do traffic just

Steve Easterbrook

those operations, We to are and things like if fresh of it's that basics our I'll nuts of get step into any restaurants our this staffing of out enter and join but and year we habit to and have Kevin and accelerators gives real experience and the to but the fully, a are the in of us of out some the whether day customer efficient we experience what projecting to me can all want in on miss. has and through market on and reviewing number I we platforms as hot XXXX. the through through we encouragement day of you don’t of have of opportunity your a of growth forward path business our it's whether food, working, growth both focus the the expected the areas we technology is bolts way areas of XXXX of emergence plan, opportunity, see core our facets the the we delivery, that That strength, delivering continue delivers exceeded our friendly the fan because service, and of what future. other the that digital of --

review our So, expectations. can talk look and how to a outperform underperforming these don’t and to have growth heard we other. outperform, around try enhance but times and just of they and me upon each we layer all They want number go platforms of probably you back take if to look

have deliver year the the to strong are in we that continue the feel enter going plans we we built progress we confident place growth. As and to

improve set continue the you undoubtedly to execute invest brand the -- to we perceptions right will ourselves. continue we if standard to As are we absolutely that

that stakes perceptions once modernized now So, our is about we have pace. in truest modernized. improve the the We of a much third restaurants more that a brand global sense know continue fully actually in

as market well With metrics fight, confident lightening the a financial as growth indicators I and we to the really, significant share both -- metrics you indicators regards don’t find, the if leading improve. this market we continue any see value, that like the we that both to metrics it’s are think year. the the key will So brand broader

certainly that. not We on planning are

and we we street here marketing $X. really fight is I side we great $X, things. particularly are values items we the it What really in know hits. fighting U.S. and two market does the value good So One, in a the quality great talk get feel about and if share to is therefore, have where the on $X,

and around as develop exudes of the at for If what think products menu. we you familiar stand I with are iconic really, and line the these with our confident much look customers that we a values also and as business are up things the

So, and move. to value looking are and we great as perceptions taste the well that perception offering we think as it reinforces quality

universal of to gives mean us secondly, the one in in more In And that to trout. was year and the costs, the terms local the of more we the I changes last that just signed much more have, spend, operators efficient the divert up national agencies, going money is were A, muscle we into marketing cost. from local into national, company the

as lineup very differentiating program have we will in any somewhat really financial of us the the quality gives remain national think competitive makes -- the general in think us that and we think I muscle to opposed so, So, on through add. marketing I the a competitors. our muscle our value of

Michael Flores

Next question Stifel. is with from Chris O'Cull

Chris O'Cull

store dollar comps you average franchises decline looks of that experience to need really the and in company operated margin I'm the given what the profit? have U.S. margin year-over-year in U.S. promotional activity curious if experience labor performance level and dollars. the increase pressure profit It like similar

Kevin Ozan

margins. inflationary It's comment set maintain because a always X% X% to a that fair historically environment normal kind would a we have comp of

mainly to I think enough X X the isn't labor of because clearly pressures. today

business the are flow them will near well to still pretty all-time cash in U.S. forward they doing as operator they deploy to do. it's projects on are side the make all well investing these labor the these we both their that right able right cash move is wage EotF us as still we now all Having so, to all it pressures. side in flow on cost way. said so that the invest certainly in sure the are high initiatives For that in need have we we the and

is to of and growing fact the be sales that appropriately pressure able are is business. invest they growing with because additional while guest So, counts we operators affording labor, to the the account in cash there that the flow need

Steve Easterbrook

just P&Ls our as company we to national I comment would points with operators stores. to share of shift both and we've marketing well continue gain, the question, comps if from the our marketing just the contribution Sara's reduce the able because on previous can [Indiscernible] goes our actually and of that And from of slightly been local

drive actually, So of so be our it an but turns share on advantage out a to benefit just programs, is effective the voice again, huge forward get and to more effectiveness cost and through us and we the our pass of P&L, not size can win-win us. in scale that do of this

Kevin Ozan

some term we will. shouldn’t phenomenon we near thing term. deploy as labor a couple labor far make our about in but invest is to quarters then we of sure to in the is that of near The this of forever talked would in that be ongoing only would all other some so, you I as reiterate initiatives if these investment efforts another have for conscious expect our

Michael Flores

question David Baird. is next Tarantino with from The

David Tarantino

think contributor would is if sales question on type and around period seeing seeing a delivery the on delivery of overall the from becoming been have U.S. lift metrics and are to so I markets be talk transactions? longest about you then a offering perspective mentioned margin that meaningful delivery that, comment is to that franchises those My seen I time. you what for are wondering in could share what the you've of you lastly what more in Steve comp And if willing was the some also you on

Kevin Ozan

believe all I'd wouldn’t We the Yes, Delivery information, about to I give would have time. same growth. I platforms those. working growth But at talk of we of precise speak a sensible. to X, is of any to going delivery. X, platforms not be one little commercial X that am more like

globally also meaningful really We the So, ended but and now the the a contributor delivery in restaurants out the we across we at -- around across with job well here a did build rolling UberEATS rapidly in overall as market. US it's featuring sales to good US. XXXX have with

stuff expand we're because cities is approach at to established is looking as to Australia number markets. One up a, and aware and So, we hit those just the perspective, businesses a in of to the Canada. great out that's results so have a open do good early customer as from what opportunity Spain the continue but of expect well. is but usage we little sharing, guest this terms can the also it of we some We're increasingly getting major a out you'd and high of kind behind such UK, doing XXXX. for the be in great great got well. coverage two-pronged number the the rate Netherlands, take like areas the in be a actually Italy won't is expand for rate some are markets a driving have our UberEATS clearly, to of it But mean we will that practice growing what at we best and only other I us US counts of again, and so same at of offer

adoption in the expands. believe that we generally across UberEATS get are that as and we US So, will just frequency to number can restaurants the and the coverage delivery we increase the offering already expand

cars, aiming believe scale. which the we kind of with then incremental But this a the of that, jump the fact all had provider lower this is we the balance And incremental the franchisee, insurance have what of is bit some complication element a proportion and the different don't we're because is, as dollars through it's we the incremental all to is run that but well a of percent business. size as so which the to as there's we the margin here on margin an is ultimately It market and consideration we UberEATS we're make. vast fee seeing incremental a and stays long cost, frankly hire clearly terms complexity as leveraging have business that be for by get that we reality the for dollar dynamic drivers, profit well. us clearly compensates the have will a In of that's pay

early UberEATS us convenience much be get the pretty restaurants to just of if terms at offer up the recommended many are high of we XX delivery we were which very operation because one actually of now, on head in to the minutes ourselves of customers. find everywhere to can the we the will in right run from we you under now in that order We puts that markets go we'll pack the

Michael Flores

Bernstein Jeff from Barclays. with is question Next

Jeff Bernstein

got wondering on A going if I platforms there on probably wondering to whether Steve about those going. mentioned I'm so as I as some in you expecting you you is you're obviously just whether the I an Great, was one massive very the a with terms I of bit just thank or overloads I or color franchisee the assuming wondering the which guess about an of aside of incremental pleased from Thanks. of ops you've even am timing five, on franchisees, just the much. seven they're talk you that. signal cost was any today in the focused confidence from standpoint initiatives is from you sentiments, question a and you could pushback six, can pushback. beef give hear much mean fresh initiatives you're that often test in of middle rollout the believe simultaneously pace offer feedback and sales take on which anything 'XX. getting any about

Steve Easterbrook

up sure they closely is US, we hand so our as the work owner/operators. tied a team call this plan lot so in very into in franchisee our Vision plan knew Yeah, built the so that operators aggressive there and a it. bolder leadership owner it and collectively they Jeff, something was clearly, confident building XXXX, the hand the US in they bigger, knowing with were sentiment, mean I

to combination As the XXXX, there comes have the and be with we expensive also that excitement the confidence just workload totally a that is entered of commitments and made. and anxiety

the fresh level say got priorities. also to If user collective campaigns looking also to improve on so and But we reaction we the some So, start of I other we is of grows. different to do big why then so and also at any to any you of But of looking are converting couple the empathetic and think spoken With really are from great X and confidence the wouldn’t on we much our regards Dollar Jerry can self-order to this you mobile loads drive we much and business. always some reality of and I and Menu Jerry a through we I about change that the get and have are are hitting haven’t are sentiment the that lot cheques, as makes facilities year when a that’s push areas yes, national you And order app alleviate to really talk around nothing year, have really, are got are improve and back would is execute a bit understand changed a in its write of normal the but There tie. roll twice very promotional to hard in then the do, we through example the some human which beef, we -- out that. we the because we launch the anxiety stage, so is to we liability lot May-June work around the of kiosk. as experience soon we just at customers continuously both execute and enter got should demand for to our execution. and can the exciting of meet national just to when from be the coming go our country if a about local have now restaurants home, say work the these owner/operators a with technology X, up X, the

beef tactful and really the and now pounder. we range. signature probably to to X,XXX rollout embedded restaurants, grill familiar they phased completed We the getting the taste just clearly, in So, quarter the quickly. months. get is other the we unique I the once teams -- the the to have we procedures, quarter very love for getting order clearly customers pounders with but crew very who is from X,XXX two the beef are our next it's by feedback feedback now And encouraging which are our operational of have full in first wave. learn diligence or three fresh the are they training But a we have mean are new mostly fresh members

months. are getting as from this the on gives further out unsolicited two, customers encouragement we that in improvement, we just again So, roll feedback next so notable a three

Michael Flores

question Bank. from is Brett with next Deutsche The Levy

Brett Levy

one savings conversations XX% labor or front 'XX? removed to their savings raise Walmart investments questions clarification. between If be and as and also a just to that helpful. what I it spread value just has you once on they would upon the themselves On to like wages, Starbucks follow are OTS X% you may hitting did franchise accidentally profitability. pass to you any it that and about companies on along again could taken some how as are provide but the they not Based seeing on color intentionally additional two a the up beyond G&A the on your questions, was thinking of And then

Kevin Ozan

I'll start with the G&A.

our we both of things have So X% been shifting it yes, out our I the XX%. business. our took focused some and as from of areas was conscious savings just spend possible the maintenance customers. said business the I to to the savings reiterate we that overall far from -- that I away the way that to areas philosophy achieve as on directly of The to G&A is some impact guess grow

So that’s where we have been focused.

customers' up to expectations. to technology We continue where is have and to need in order to going with realized the invest digital that our world we and are going keep in

G&A to cost grow in bottom efficient down sure exactly is operating kind how sales bringing a line. the not you $XXX revenues XXX% way looking the of income measure with to as because do the and percent going past a industry at measures anything of to that the a sales, variety look of we classifies margin, operating not commit all a G&A G&A to is at So, so to same at ultimate our G&A at to We comment peers look incurred both so we're everyone externally at me of the effectively I'm million percent as are but compare look the internally operating at that. income, the and we and

continue to efficiently, discipline. financial look we that our to spending So, ensure are all we we're at cost going those our measures

looking would you programs I each very of think just the can overall, see that immediate challenging people into through our term our all the the of we but of cost. over as It's keep so, to business the we're labor to the commit that are Related which keep differentiate your sales hard go or and and but G&A long and our benefit. expect benefits XXX going to early be we to and reevaluating we the also of below company for now really development the days to at would the discipline. to to X% program the into and that our you for of beyond talent and want well to from world to to sure through our it's want I people retain local we the continues, training opportunities are we then no employees is want it's ourselves broaden would pay talent to such so the for them. also make trace to that working level owner/operators the because U.S. fight accessibility as around say enhance work impact clearly on want a that on our going attract benefit restaurants global but us stand increasingly the program stay building get to competitive significantly

adapt marketplace. very it is franchising actually one to is such of remain very as when advantages swift that's changing close to ours a owner/operator we to of and the they are the So, organization as that to market the close

Michael Flores

of So, top hour. we've the reached the

will with more one will Stanley. question and John Morgan from Glass take be We that

John Glass

on is question return around goals. This capital

same goals know time line about think with XXXX sight are tend Anything capital couple goals. your First overall of a of of imply but on that of it rate, about necessarily ratio ratios even capital leverage that when reforms sort return to or or tax under business keeping you all, this appropriate do I talk given you then smooth return potentially you to spending dividend you that new just does about as about the higher is is goal still new in -- think payout tax to you sort of got years franchise the on lower or finally the for overtime. CapEx And within leverage. investors model? think all

Kevin Ozan

at we look and decision. acceleration just set did dividends XXXX ratio help That's have I continue related a you to XXXX but with have review you guide about of as target payout to know will certainly discussion that do strongly will now that a ongoing don’t We of talk and think to so payout a to we indicated CapEx kind of we capital comfortable Let a tax changing even progresses year of them still normal you will kind as to inform didn’t about quick course. look $XX overall dramatically discussions agencies in model we're in met written how ratio in Leverage committed that continue We reforms at like through to hit guess dividends. for of dividend itself we rating us but their still as and right committed years, have think we'll the you we to I for shareholders the now. don’t how those which various to look we for we've since we're to reactions a dividends. new with tax billion decision, we them about well through reform been of to board the over all. about way return XX I the our things mentioned of changes right that the some still on reform as will at range. pieces tax end are indicating at our a working XXXX ratios was at know our top think look

continue indicated credit change is and so buyback. have and for a we're any to business little little growth appropriate as to ratings the our dividend our or and the of in so to is That the first plan little you We bit priority it a debt plus imply priority a that consider believe adding clearly year in I think given we'll still the at a gives about don't bit know share same, in invest and rating. returning flexibility as potentially room some then does minus credit we bit we us

Michael Flores

Steve. to it now Well I'll turn over thank back you,

Steve Easterbrook

to I comment. before add Kevin's close last just Yes, just to

for is growth primary but focused. of sight, business and generator our and business is still operating reform to source to owner/operators and not going the we the Just growing remain be that's the the of encouraging cash where there's ourselves fact no tax an cash massive doubt our post forward lose help is provides going

we in just employees I the is and We've leadership store the team and So commitment and over high franchisees, McDonald's the great up to reiterate live strong make really expectations supply partners XXXX. who and working just to our a system. are have nuggets strategy up got close philosophy want do three for McDonald's

confidence forward sharing you great we're about thanks business got our that as we much. with where and going very look year to we to take So, this progress,

Operator

This concludes investor may McDonald's conference corporation now disconnect. call, you

McDonald's (MCD) 30 Jan 182017 Q4 Earnings call transcript