McDonald's (MCD) 30 Apr 182018 Q1 Earnings call transcript

Company Profile

Participants

Mike Flores	Investor Relations
Steve Easterbrook	President and Chief Executive Officer
Kevin Ozan	Chief Financial Officer
Sara Senatore	Bernstein
Andrew Charles	Cowen
John Ivankoe	JP Morgan
David Palmer	RBC
Brian Bittner	Oppenheimer
David Tarantino	Baird
Matt DiFrisco	Guggenheim
John Glass	Morgan Stanley
Will Slabaugh	Stephens
Peter Saleh	BTIG
Jeff Bernstein	Barclays
Greg Francfort	Bank of America Merrill Lynch
Alton Stump	Longbow
Nicole Miller Regan	Piper Jaffray
Jeff Farmer	Wells Fargo
Brett Levy	Deutsche Bank

Call transcript

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Operator

Hello and welcome to McDonald’s April 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,

Mike Flores

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

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

Steve Easterbrook

business grow continue build enhanced Thank you, Mike. visits Good customer convenience. morning. I’m compelling as quarter momentum to performance value, and pleased delicious first with food, with and we our

doing ordered would transitioned year. entire every and Quarter customers we’re aggressive offering our and managing We and the modernizing U.S. crew each am value using embarked new like way. of be of market for our I thousands and beef the to long-term variety. Plan, an projects cooked trained market we’re are McDonald’s our will restaurant Growth the actions quarter our our is Velocity and plan growth. a aggressive The right we’ve every along We’ve business quarter procedures and on in for sustained taking that with confident has the strategy thousands hundreds business position one year, of in X,XXX choice the modernized in the Pound market X,XXX restaurants of significant the introduced fresh improved history. restaurants, and when the And X,XXX This in new the hospitality greater nearly and has to pace that start of to this on our restaurants pace. the in platform, an additional every Since of restaurant Australia setting an our the most bring Future burgers U.S. the Experience transformations

has reduced just streamlining this XX, making be we effective more market approach. co-ops accomplished agile We of while we’re to to allowing shift XXX more Also to from and execution. us becoming marketing decision our in structure. over as a more efficient and been advertising All our around natural

International growth Lead Our plan again our results and of the foundational in restaurants. convenience of customers our strong of segment These and a initiatives. majority once providing are they and capturing delivered markets food, more from their elements value, for potential better executed

modern growth. strengthened platforms which technology potential to low-stress, investments platforms these has and multiple this? the in of kitchens rooted our the appealing capacity with we unlocks menu, both food. to and solid creating a So more delicious that in of in in and more of awareness quickly serve our more restaurant growth more the hospitality Optimized our sustain expanded in a to build layered building layering by of them. brand care serve productive then for these markets signal kiosks, do the us a designs, to work boards, leadership menu that markets deep quickly and service I capability and inside leverages capacity creating customers the breadth with markets customers food running and insights, and business consumer that customers a and environment. restaurants. of of care core and accelerate our foundational capacity experience. self-order and table mobile culture of the quality whilst enjoyable Digital of our time-pressed helping about out, by The These and foundation our have apps about that It’s whilst established with personalized great starts optimization effective value drive our alignment drive-thru mean what strong menu at is the local also Enhanced franchisee strategies,

and and Japan, I our XXth sales The to what rest we into look our service most so markets to grew the we’re quarter of in marked listened comparable our key friendly our I’m positive X.X%, of XXXX. counts these consecutive our fast with results forward XXXX rose increases in in saying and noticeably of and in double-digit getting the momentum better Satisfaction consecutive seeing trends what by seeing growth Globally, that’s count that of positive growth. Guest confident quarter they are We’ve We’re of many satisfaction. why quarter. system. are positive in X.X% us marking in Canada, month guest millions surveys ability Xth global scores the it’s measures sustain telling cases and were customer and Australia, customers and by of each to with food. we’re improvements significant France, the continued in where the great-tasting in

market count gains, which brand are and improving these guest growth. share perceptions, strength we future customer With building fuels growth,

will details the walk more through Kevin quarter. during Now our performance sales you about

Kevin Ozan

Steve. Thanks,

and for by pricing of factors; number to GAAP check, trade-up X.X% as higher consisting part versus comp increases strategic premium two and quarter shifts timing holidays. with products scale put contributed benefiting order related performance Each for X.X% comp sales of higher of transactions. of our growth, sales McDonald’s. talk for Steve board, a Dollar segments about in from were a $X, the increase excluding price reset in of new the of system and our points positive a across sandwich the of favorable items billion quarter. U.S. XXX the menu shift product growth for to basis to of in first the sales and of the it $X the per school Easter also this the QSR To comp was quarter operating broader $X competitors quarter, menu increased a I comp average over Menu perspective, Sales McDonald’s. strong. primary by with mix, $X, Our size equates driven and fueled

customers, market’s One day guest most as competitive the Easter up in XXXX. That’s to the growth our Big U.S. lineup. markets all-day our of the largest consistently successful count first TS counts fun McDonald’s guest market of is sandwiches. segment, since in XXth experienced to its overall focused and counts, through continued And supported Italy. high-growth years quarter is both day due and especially increased China markets. to of the Comp sales all quarter Canada grow in as consecutive Chicken appeal challenges Italy declined best included sales deliver sales breakfast in history, the its of ingredients our posted current digital maintained the parts, on sales and digital growing products remain in in platform, segment, comparable counts featuring when competitive eliminating X.X%. quarterly and X.X%, most and guest comp In Germany to such executing our delivered in the across the were guest UK growth negative. premium very Leading by in industry comp comp the the continued We Mac and traffic Royal value comp our sales growth share Seriously local plan platform, International premium its strong Selection guest simplify on of offers. gain for this count value chicken and up part Calendar as products the offering taking Taste to conscious engagement to our of Drivers decision breakfast our best of the continued a U.S. local breakfast growth. Countdown Lead and Burger. were by promotion with performance guest led markets. well as comp performance counts the segment, and by positive And campaign, actions and featuring XX uninterrupted driven momentum quarter such and the X.X% burgers My Foundational success one sales business. most

addition strong segment’s Japan’s performance, In comp regions. of geographic were in sales positive the to each continued

Steve Easterbrook

Kevin. Thanks,

traction to scale Velocity us This Our as what’s the our Growth across business we’ll with momentum we we’re system strong the illustrates broad-based working. drive continue Plan. gaining gives confidence performance

leadership serve, have provide. value offer, the customer and strong based local greater we impact experience relevance the have plan and effectively which the We insights, driving we with we food teams market adapted on the

leadership Mac. Big product year, elevating system, and innovation core the offerings. are of our Anniversary serving reclaiming around This through the and XXth great-tasting burgers we’re We celebrating the

The Big brand potential. are the ordered and growth Grand Pounder a iconic this our with rekindling quarter this when reenergizing the the exceeding with extending Grand in limited another the U.S. far classic UK, sales was and Mac. this market. launch customers sandwich time We’re after of key the iconic core Big markets going a the with Mac, have Beef, Big for Mac with national quarter, any Fresh Many for the promotional a driver passion Quarter in burgers. delicious Jr., offering big previously sandwich. next is trio right of tremendous In pound cooked burger Mac line, offered The week is way the our in Cheese beef and

tried buy serving menu our the made encouraging. the and for initiatives, breakfast business. chicken scaling remains the Dallas, driver they’d notion of select Canada, in the our who Australia said our In we’ve them been the these been growth XX% on already response strong to have reinforce burgers the and core customers has core sandwiches throughout in We These and markets of our again. U.S. all-day pilot of top very of improvements products a markets that

premium with the plan. integral in our Australia traffic part value Additionally, Gourmet and check to and markets like strong system, business offerings, Angus an McDonald’s and our most Canada. foundational burger grew Mighty is Across in Creations of growth

relevant Our the anchors of $X, Menu high-impact during $X, the U.S. the and value The in and strategy is that drove Dollar platform deals $X platforms strategic value our brand quarter. traffic iconic

low €X and an of offering menu taste customer high as multiple market and and successful P’Tit Menu count line simplified share price of with check $X France, approach, McFirst. France market. varied meals Dej’ growth Kevin the the a quarter. price In in introduction in average the with all-time for as With mentioned, at McDonald’s consecutive Dollar lunch per guest the It’s expectations at was key IEO at year, under in continues complete menu to the and, a With quarter variety providing with the grow we’re this Xth is factor start great achieved customers $X, a Menu performing awareness of for higher points. a $X, this choice

with continued expansion During accelerators. the brand sales, drove also and velocity our we the quarter, traffic, of excitement

France. UK self-order deployment to us perfected of and of provide average enhance works. capacity, have experience is mass at pace and there the drivers rapidly a unlock we Canada, the Germany and France, Lead learning to and what experience be the about the International delivery, well markets. that about guest what digital their enhanced are in half Table with scaling U.S. Canada customers being program, and most in we’re for We’ve build on in of from more customer on developed was our our Experience year-end, important approaches helped learned Australia, which critical As way restaurants in deployment to greater frequency, the convenience check. Future, our year-end XX,XXX by initiatives, and our This service, by customer leader satisfaction. and and to to in kiosks achieved best of the which critical potential hospitality, have has integrating was The proven at POT the of remains we’ve POT market’s

is awareness, app active more base we most our other is our accelerators, mobile more usage. repeat continue a optimize building to delivery building awareness, than most now delivery. closely partners Whilst participating downloads, importantly, model, driving Regarding major Germany. restaurants, career customer pay Eats to to and satisfaction. of already another in our and, we’re and frequent meaningful overall orders, over restaurants, Uber sales. and of focus the we’ve our XX,XXX active more example and of In now One comparable great to XX,XXX markets, working this the With contributor customer and expand restaurants with order of turned encouraging trial, offer

count it mobile significantly and in drove McDonald’s we’re different As system and Kevin results: had only in reinforces as Countdown days app app. the of we seeing generated available market success already confidence most compelling million X the in and increases great Easter potential previously making with over This Germany in straight across it Calendar, an app success growth offers offering through XX best double-digit our the downloads, mentioned, sales the the February, years. downloaded XX guest have it that still my The comp the business plan. more launched

sourced we’re teams for impact. Our and works are on what market to leadership focused execute

for highlight financial quarter. will Kevin Now additional the provide

Kevin Ozan

Thanks, Steve.

EPS As we Earnings a impacted quarter around reform. our share reflects for growth some XX% of to $X.XX. I by for mentioned earlier, constant XXXX our per comp in world. currencies the for recorded grew in strength the sales adjustments amounts quarter tax the $X.XX broad-based result to as was

EPS Excluding few benefits $X.XX, XX% from this a minutes. rate I’ll the was and currencies. of activity constant cover of refranchising an Sales drag offset we in FX, tax impact, saw which a increase in lower leverage and

want As we of those third year. review results, remind to half and comparing this last that Kong operating the everyone to prior year, quarter Hong I China our we’re the refranchising results for against markets in first

nearly our XX% around anticipated, the benefits we’re model XX% beginning we As it last the heavily year. quarter business margin, of see more in first franchised in this from to grew to our operating year as

drove of now in franchise the XX license sales margins, in that XX% developmental of growth, over refranchising, this represent of positive the the with the be components comp most franchising. Where significant impact point basis refranchising will at XXXX margin, year conventional increase coupled fees, which most margin was dollars. of refranchising expect a we Looking operating activity our

this expect the half activity in most of We the that occur first also year. will of

we beyond, refranchise that have model. and few markets XXXX the license potentially we’re developmental to at a still Looking exploring via

the margins XX% company to XXX the points most for wage comp margins due XX.X%, along of of margins. with sales, by costs increases Kong lower wage activity, XXXX quarter, along in the declined quarter. transaction to Moving China/Hong major operating in higher In Consolidated which helped rate, to markets. driven operating our company XX contribution advertising primarily to impact positive rates this the refranchising points a us overcome and and basis U.S., commodity increased basis

and higher were the that quarter last for were pricing our mentioned I U.S. quarter. of food in just in costs They pricing home was inflation year. to away commodities, below Turning over U.S. the from first year-over-year X.X%. commodity versus up the X% slightly

half grocery U.S. We about continue to half pressure International the X% back less expect to the back Similarly, markets the reflecting X% year. commodity of full to in of commodity increase our the for basket Lead expect pressures the to in XXXX. year, we ease in

about to increased to in While quarter X% continue full first for commodities costs the year we expect about increase X%. the year-over-year,

to constant X% was down G&A for prices in the for just International up first Lead menu quarter. Our Continuing the on the markets were quarter over in currencies. G&A, X%

and G&A We convention And May. quarter constant second currencies. in expect about G&A in a corporate related around decrease as to X% of headquarters full-year the increase to costs X% our in we result our to expect worldwide our earlier our this continue move to month

Our reform adjustments the $XX that a effective mentioned of tax for I million XX% tax as about was reflecting quarter, result of earlier. rate

around adjustments, XX.X%. these was tax Excluding the rate

rate range. evolve, year While we tax this full-year as adjustments our in may expect on the additional to tax continues have to reform guidance to XX% XX% still we the be

share. foreign translation benefited for foreign full the quarter, Turning currency $X.XX anticipate for we from EPS $X.XX to and to At second lower currency a by rates, about quarter the slightly currencies, year. benefit for current foreign the $X.XX per

as only As will the remainder usual, year. rates of because guidance this we through move is directional change the

now broad-based I’ll reflection we’re that of back power the turn growth, will today drive actions and Our our both Plan long-term. to a strength of Velocity to is we’re Steve. continue the And the for and taking Growth it confident

Steve Easterbrook

our Studies, Live and between Studios, balanced of innovative the customers. offer most With collaborating beyond Walt Building initiatives new brands This our beef series more is of target of actions more families emissions. where Disney build $XXX we’re example elevating Happy Opportunity and Meals, a movies McDonald’s the our suppliers, sustainability select Animation for million of setting framework, alliance most our our managers. our beloved recycling, we partnerships, related greenhouse and Good industry-wide that to we restaurants Disney we stakeholders. beef. a across on With intended employees, other Good month opportunities the and two is to by and we’re it’s operating quarter, other crew fun responsibility Studios, McDonald’s franchisees, environmental and announcements announcement from to to the to embedded prime a excited developing Walt such reach. Lucasfilm. campaigns will growth with supply can offices, for thousands issues extend it us With for collaborate our but quarter convening maintain address combines working global stepping major cross-promotional to possesses climate and Good involving the energy-efficient goals believe sector. goal initiative restaurant Action, change. Scale power a an suppliers, separate and to our we’re announced chain take more matter restaurant alliance with to longtime up help Animation with global producers. During with over gas customers. McDonald’s in like rather our trust Archways create on commitment nutrition, goals address We’ve priorities franchisees, Marvel producers sustainable bold difference Disney Disney and iconic made will and Last and to and significantly approaches Pixar program. set other reduce customers, Scale direct a and five drive we our Scale that change increase not social nutritionally by McDonald’s our make the and for and greatest Company. a increase is group no for for our we McDonald’s Good, education Scale to packaging as are of and years will reduce platform, investment to real or with first Whether the expanding And during in our and the in A global is company to engaging to support up raising kids’ corporate company we strategy.

Over ambition. for personal the us appetite of you’ve greater past calculated about couple risk, talk higher growing years, our accountability, and heard

lot of everybody in system. a asking McDonald’s We’re the

for As ambitious it It’s is work a case what is year we’re lot our we’ve going on the at taking an past be to certainly where the with U.S., and in for keep our plan up This markets hard when results fit customer to system franchisees. pace over once. executed the takes developed the rising we’re get and challenge, strong with seen other expectations. better. to we’ll we’re today’s We’ve the plans is McDonald’s The about the have confident continue and purpose, U.S.

me Let Franchisees, energized tell about you enthusiastic and why. corporate and suppliers, are future. our staff

progress many of with convention at our to an maintain McDonald’s commitment our determination was of and sense guiding in restaurants. the convention by for in the system to to of strategy people our amount entire customers talked share and worldwide and them business best the attending momentum. future. two top-performing the The convention a our the learn over our years eager were their large I reflect As of our approaches robust deep Florida, I markets recently Orlando, struck on our past occasion XX,XXX to and was The

throughout stronger. of we and world’s one system that with Growth even confidence is growing the the Velocity brands the have We Plan, it make can powerful McDonald’s most

and ambitious potential unlock our hungry even remaining We’re in to greater plan.

corporate it McDonald’s. are to to and ahead, the we’re position. we leadership confident crew McDonald’s is becoming maintain engaged, Q&A. track franchisees our we’re a our members fully our from customers the to how strengthen And day pace Mike look that, to in every to on we in quarters restaurants showing we’re lead turn with I’ll The As over that our our better this aligned staff, to suppliers to system committed and

Mike Flores

Thank you, Steve.

call We [Operator And from and now for Senatore analyst now with Sara Instructions] the open investor is will the first question questions. Bernstein.

Sara Senatore

much. very you Thank

customer of new also priority. the $X, to driving day in orders in U.S. some maybe it’s not comp, sounds There just maybe existing terms customers. a but softness Just average out pointed $X, you since I like the may, on Dollar it if check, Menu, it’s adding $X the part. traffic in that is breakfast And bringing was

of could the be you’re understand Is value making. So you the where terms to not, I to in of talk of it about customers? it if breakfast, maybe trying the you was do to the comp. might the on it And, think Is shops? other coffee wondering kind you complexion tweaks U.S. side? Is QSRs? if losing Just

Steve Easterbrook

start, I’ll Sara. Sure.

is I down. think the is footfall reality

So sitting share thinking I’m going any particular competitor. fight to market not here overall. It’s share there’s a that just

sharpen most years. want for we’ve say, significant So going the this as more value And had platform, value plans. the launch about, to continue we’re is example, platform you to you ten if talk to in probably than our

seen, menu. know average $X, the items can understanding previously. got And, were value getting very customers at we’ve the and customer it But buying better how build as And a it with the that of as And are $X. come new get well. to we’re for items four more three now So dollar we get from single familiar a takes at just while we’ve check, customers that real we yes, selling than to order $X, in we’re or keen menu. per we’re also end so still each

So on we’ve Meal, got can like range I have. knock-out products we actually But $X sure absolute continuing example. make you’ll our us we our highlight some see to for and $X, the think just that Happy $X

keep finessing we’ll think there. it. I There is So flexibility

We’re changing weights. media

items the with out pop have We’re we’re at. stronger as on just some of bit where little work to we’re creative changing more some well But customer from better perspective. the satisfied side, of a a the marketing

Although made we again piece we’ve get and don’t guest moving any to count that. never want secret of the

Mike Flores

Andrew Our question next from Cowen. with is Charles

Andrew Charles

Thanks. Great. my parts to question. Two

diagnosis relative lead test What’s softening question. this the I sales $X a you’re what to first lift And $X, fresh two $X, in to morning prepared your promo behind soft follow-up timing you the in you sales then test beef the the markets, know Grill, day the did the but year? to did a morning backdrop with initiative meet markets not Breakfast part? a rollout the discuss this $X Just for off of in experienced given and Hot perspective, the the lift from on Thanks. earlier initiative saw from faster the expectations

Steve Easterbrook

the really for is U.S. the to which encourages do want something – the me, first now Breakfast system meal $X is highlight thing is. nimble two So was I that how

a We going. to slow market been change to where bit could the competitive. have the be able little sometimes guys effect Breakfast was was and see

the the owner/operators, we’re competitive a more that. part $X device, With us satisfied. that they for And think makes enthusiasm created I We so for two can much deal. in continued the breakfast day see

we it weight fresh beef, For have any not really advertising put behind yet.

the in of operational fantastic. so markets, more consequences, we our customer best level what and train people, certainly we test absolutely was restaurant feedback a getting at So could was understanding were the of the the

sales marketing to state. we the dollars it behind attempted drive entire rolled across haven’t with now out put so that’s going this the we’ve we to it. yet So But soon haven’t change that

Honestly, a got And difference you’ve go. tried haven’t and it. It really tastes Pounder noticeable customers juicier it’s to and it makes. it, if enthused are about the great. try to ready hotter just you We’re Quarter

Kevin Ozan

thing Andrew, talked about the only breakfast until for that that other go in as mid-March. just didn’t Hey, perspective say you I’d $X is, two

quarter. And on related meaningful an quarter so of it have first really second to didn’t results. have really impact a more impact It’ll

Mike Flores

Our JP next question with Ivankoe Morgan. from is John

John Ivankoe

Hi. Great. Thank you.

where we in can that of is rollout a sales was what would the secondly, a various terms markets initiatives question, performance? we of for a highest? then learn shift the If collection that calendar U.S. of terms International for could be much indicator that which be benefit, where I ahead think suspect just main and of it couple how would Lead, comp you International be the future could from And leading may particularly the in U.S. highlight International First, I versus U.S. Lead and are Lead to to

Kevin Ozan

start the actually and Germany, learnings talk the with obviously a related the are but Easter of for I’ll places shift market. example, then U.S. Certainly correlated. impacts, had more by different like impact bigger than bigger school about timing, from one to they the Yes, calendar IL. the actually holidays It’s Europe has can than Steve

that if the was benefit see certainly you and in a will, in second quarter. the it benefit, we’ll So first quarter reverse

Steve Easterbrook

John, you’re I’ll second right. Because absolutely the take one.

markets. plan what’s to Lead has we’ve all a and really the put with they’ve what think seen the confidence bold for been together seen U.S. I such created business our what International

So the is, projects quarter – and we change benefits is I management rolling we have project it as thousands are of a exercise. per out do exercise now here so, phenomenal one mean, management of really

learning get have that details We and UK, Things now, much advanced, like so most we particular, Australia, Canada, the the the nitty-gritty of in sort from and perspective. a helped into can from now U.S. learning share real which stuff. the

them self-order the what’s restaurant, example. about in but the for kiosk self-order you position just customer-facing important is kiosks, with the So not really interface user where a actually physically

customer a the counter. flow. for another ordering customer apart It understand from So can option front better provides you

the detail, of house like do and hospitality. kitchen front devil you investing both things are. also the But can the and we Understanding the training we’re much we as rapidly train expand in crew as way best So as we as is and as programs.

of our is of literally just So of we have business, pick up to, and And initiatives can the what some part the Experience share to U.S. the get markets there’s committed we will International Future. best of we more of Lead still the practices. out think

is U.S. what it we think some as So learning continue confidence any need as gives we to make of can. of it squeeze of made But hard days the us mistakes out these early we’re the that going really and we’re the doesn’t to of get I much initiatives. as some to in

just get now excited X,XXX projects and proven we’re going do we can to a for and We of model what have quarter a the business. that into it’s about groove

Mike Flores

Palmer, David RBC. is Next

David Palmer

$X, highlight your markets. Thanks. strong. congratulations there. a make outperforming wide you’re tough leadership where just you one I’m question weather particularly there, the $X, a understand from conditions that on on by so on Good $X, a But Perhaps is that eating-out market UK one. the this phenomenal morning why such on market, I separate coming and momentum in that would you’re can about to margin. particularly the trying heard We’ve imagine

Or and that performing innovation going but with the was tweak that Are will the premium the continue is this that build in help $X, line traffic same it’s coming? keep the the said $X, You on think it forward, negative you’ll momentum Thanks. that you to architecture of acceptance you you along with the in quarter. something that way? to the of some in expectations probably have do confident $X going

Steve Easterbrook

David. Thanks,

the they’re UK, they’ve momentum. And some because on them from roll. fantastic do time So, really call we time a gathered real to out

ultimately are what tough competitor position is of in facing well and owner/operators think which good yes, well. in It’s share. but the I that just a But of the brand, are beginning really in really they’re taking at on plenty all as They’re to benefiting a into the very we They many in is And, attention as benefits in challenges societal investments building the a dominant McDonald’s the really face UK. investment core It’s the and as they’re great. reap it sustained market would to restaurants, be cylinders just many to for they they be bring brand long-term think very we the have business. of putting actually motivated years, the of competitive and challenges business from elsewhere our I been world. the not marketplace. firing

think see the architecture, you Menu, $X I expect pretty $X, it could much the the $X, Yes. to same. For Dollar

rotate it? have items understanding part the platform new with on about talk we’re fresh we’re about. say, influence keep But so to customers is. of Overall, what we fundamentally role always – is overall that guest down. we’re with satisfied absolutely, I was But not and it a we Could and they are it it more and we the our where on always got satisfied two being one plan Dollar see. want off something can from mix has where Menu be. the product it buying how or value to plays the Yes, way the counts and it As

Mike Flores

Brian is Next Oppenheimer. Bittner,

Brian Bittner

guys. Thanks. Good morning,

must question provide of this there Quarter on rest beef But it simply anywhere all? tested where a risk Or perception it? you’ve not is you surely a have seeing I your any it U.S., that the the with are Pounders. at in shadow quality tremendous beef fresh the with menu puts is, of just Just your the

Steve Easterbrook

good whatsoever saying you. customers shadow that Brian, things way better, you in It other on we good the we And it’s there sort established any doing. sure we of, actually actually menu. to the for place. But Pounder of if the us really taste first Quarter the not mindful wanted they rest help as was you create are the were for were we concern They a wasn’t of just one very question. any make what even of or interpreted make the reflection test say, when did could the in

You’ve got backs. our

got a XX we so months a about us we on mean, robust see basis to So this saying just good I didn’t good they’re a to you. now. for cause have concern. from did we’ve been customer really XX anything And any test. why read That’s we’ve testing

better just it on. you then If bring taste this can make

Kevin Ozan

in test lineup but of what went actually saw markets overall our sales was sales up Pound And our of burger we increased. burgers Quarter also

fresh weren’t test that saw increase using of beef burgers markets during in the the Tulsa even our Dallas and an phase. test pilot So

Mike Flores

is David up Next Baird. Tarantino with

David Tarantino

morning. good Hi,

the on question a U.S. QX comp ordering. Just and on clarification then mobile for one

clarification, a was tough I the U.S. you don’t first, the the pretty but weather like calling out winter So know in issues

from the an you so, do you but impact an where modest Thanks. I could better the So guess drive that? on what’s give I if and a you’re on And so on to wondering, did if you for fairly unlock view the plan us Steve, far weather adoption just pretty mobile ordering, are adoption in rate update and, my big throughput? that secondly, the comp estimate was could then QX seems It seeing for that U.S. given be have

Kevin Ozan

start then stuff. with and Yes, I’ll the weather digital can Steve take

would during negatively weather. specifically It us. it impact about of first did quarter. say generally because big Europe, the impacted a first quantitatively. Europe, a certainly much We call I’d don’t quarter right. weather little or the you You’re surprisingly it But an of how But not impact plans in minus we’re quantitatively generally over that’s be it calling I rough had for impacted us out a But actually too, half to plus like some follow, of weather. also. had And approximate point maybe those guess who kind here.

Steve Easterbrook

We’ve had a prior couple this of winters to gentle relatively as well.

the to So way pattern on I of across it little just it is. just get typical more weather a It’s think bit this so with it. was just got a we’ve

adoption mobile low So ordering, for actually, pretty current David. is

reliable. restaurants the user platform from just is our the We’ve more training to we’re the relatively But technology teams things our got improve still the is adoption and getting trying in the end, perspective still experience low. reliable. getting more on So and

emphasis curbside that to most seeing continue benefit the put seeing that a we’re are favored it. work massive certainly promotional, for going customers the behind, anything in example. to from away terms being on anything But of it. not we’ll pick-up We’re It’s

that us a our as think customers will business a phones. it’s with their brand inevitable through I as However pretty increasingly engage and

So we’ve decent of at business we’re the fact excited moment, moment, lot that’s the seeing a drive think the I we’re that it significant the for out at upside. but, us. there got a potential And there’s not about product

Mike Flores

with from is Matt question Next DiFrisco Guggenheim.

Matt DiFrisco

you. Thank

you is are in question Just is more far company wonder in difference a the sounds then is a as that be if of And far the launching follow, to as I how good mix? bookkeeping Or off side, U.S. as as that favorable. that guys a Because just the U.S.? would Did from experiencing, stores? specify franchisees a the value look you wanted that like you’re the to margins store on then question the at and U.S. it trend much looking the just margin at menu what in fall delivery.

Given to statement, favorable would what franchise the if to methods check the through that it’s the income done be margins? other and

Kevin Ozan

delivery comp contributed quarter, the first delivery to We sales continue won’t in hope I’ll would U.S. what the that side. of quantify it expect certainly Yes, and say the year this. year. We grow as last take delivery – grow to exactly the as I’d on to did at the end

definition meaningful comp. the of couple you which On the comp to brings most things the with is to positive a guest on the comp mentioned U.S. the One, all then and just side, it through, margins, the margins. contributor on bigger or of really So certainly this, check, a effectively margin driven it’s flow price by relate a but a impact by from counts. because you get than

we’d the to it not way long-term. that’s Although work want

comps that that us margins. be is the driving fact and the is helping franchisees helping the That advertising also. lower that would So also check franchisees margins. we rate mentioned, The helping contribution would both be

U.S., One year is of really piece specifically the those the us. franchisees done, labor that than helped the was piece run other then us that over can that we to the restaurants, And better last as add both sold underperforming of some impacting are we’ve can. generally that some in Obviously refranchising margin. the wouldn’t wages we the things where franchisees certainly

significant Again, that also which, margins we saw So, they them. to be that in general, realize. benefit in other the wouldn’t was would refranchising a benefit helping benefit most of the us, than

Mike Flores

Morgan with John is Stanley. Glass question from Next

John Glass

in mentioned of Steve, on rollout My very much. it accelerating Future. the you And the question U.S. you’re of is the the Experience Thanks

able closed distracted? maybe short-term? of you crews a the are long-term, all prior same Can frame potential sales talk you’re this units just it than year, quarter, On to impact if done it it question doing first on year So, is or Is would the units thought. did get you in first about and acceleration, seems business this is the as X,XXX I either guess, maybe this all, impact next you thought that at store where the like, pace be? faster maybe is another risk or X,XXX the the an somehow you you or might be there about to therefore how about this restaurants are versus

Steve Easterbrook

upped we pace little No, the have John. a bit,

we earlier the well. it think last spoke as I over quarters – actually about

next I think have in got basically a our lined we benefit will amount so we if the with the XXXX. orders two and you reform, and enabled XXXX seen some like, from then. headway us by to of And of substantial years, to, we’ve the the frontload complete it expect significant have project make tax up estate we

long on And project And terms the I mentioned the X,XXX a does of back – because lasts. impact, like-for-like should depends depending how earlier. hold projects. have looks In really does yes, it it sales – currently the the restaurant it’s how we’ve bit that got those how little the of long one dictate

scheduling International Lead benefits is the these can One seeing pretty getting of you about good the downtime. we’re we’re so from the restaurants markets minimize

of for can XX be the the downtime. effect customer, investment. maximum can get you the days So more But significant restaurants for to the the XX shut for minimize days some

a the benefit little bit, be. the to us have. upside quarter, doing believe hold the bit But a the what price yes, X,XXX like-for-like. on playing So, current But next of on once XXXX. slow quarter long small that does for we’ll It’s will We game. we side this fine routine start the the X,XXX year-on-year it little back comp another us into first we be will know be a year, It’ll say, can yes. as another I pay because the we’re get to business

Mike Flores

Stephens. question from Will with Slabaugh Next is

Will Slabaugh

could sort goal the the your but check that growth level of I on in realize either longer-term and the are number, a thank check, pricing Yes, well, in And globally average level you’ve check pieces size? U.S. you of just lot increase talk considering there with could about business, your of wanted rebasing across think, with you. increase. And looked just I in U.S. I the is or like comfort to and X.X% what comfort for ask that a running the an moving think as globe there about we that globally, done, in any generally that globally?

Kevin Ozan

take Yes, that. I’ll

Some of the obviously U.S. and that outside U.S. is that’s of some

of within what on pressures, kind The costs. tiers market, optimize biggest that at based other goal based general home, market. is or prices that’s including each from is various look inflation across any labor whether we menu price to our all or will on within competition. And market, Our customers thing food food factors things away like other accept a cost

skewed and check about on talked the it’s the to we’re balance versus right than growth really check in count growth. more average average a And guest I want. would like an so side bit And attempt now, U.S. we little count guest

get and like that So as stay an the we count below try guest we But, make sure kind of food general, overall growth. bit inflation little to guide. generally in we’d a

Steve Easterbrook

of a some the what perspective customer-facing, are once means we adding Kevin’s number kitchen Experience to just another range offer what is investments as which well, business. in particularly Future, of end doing the seeing, said. different also at of the we’ve can to and the we’re to firepower we’re but made a the Just What those add particularly clearly Signature the

markets restaurant, So hospitality, as consistently part that’s with of what average lead great driving our ranges we’re invested we’re better seeing and across launching premium also check more well. a is,

hospitality and run So great get table service, more a restaurant, it’s well. looks there’s are a on great product – the permissibility mix we as piece. to But it’s great, little pay you then is if price willing and welcoming, a it people

a bit helping. we’ve got of I that So think

Kevin Ozan

aspect, year newer last be half so check over one is size times kind I’ll the or and say, would to in-store Delivery of generally regular then delivery. And our two the other one check.

global a helping on basis. of also average drive kind that’s So check up,

Mike Flores

Next BTIG. question is Peter from Saleh with

Peter Saleh

around I you. Future. come the Experience Thank of just back wanted conversation to the the to Great.

year had now restaurants, in you I and and performance comp digit But sales and performance critical first the think discussed the two talk internationally, domestically a mid-single of historically can about that lift year. margin in both a the you have you beyond? mass

Kevin Ozan

for is lifts hadn’t U.S., can of the we’ve that those And start year when talked mid-single and the of two in most you what generally yet. that after two that it in convert also comp But that. beyond. it wouldn’t see internationally, the of growth in about the put to historically year sales Future Certainly digit markets rest the maybe Experience we’ve compare market to we I seen restaurants on that. have Yes, continued

what now and we seeing it’s where what in so a consistent digit two. projects not the earlier right for don’t itself. of the is the kind year builds internationally, digit we’re full we where you kind modernization, and is The right that’s early certainly modernization U.S., we’ve but it’s ones remodel have So around we the only internationally, if already mid-single EOTF that days lift. a smaller even on in have But sales the In components, full one-time which obviously that similar is lift, with full of in the we benefit EOTF, all we’ve days, much projects the lift seen now do will. a components, where that been have have But add which add to mid-single EOTF and X%. more modernized what it’s seen

Mike Flores

from is question Jeff Next Bernstein with Barclays.

Jeff Bernstein

you Thank Great. very much.

your Just to maybe margin a you and two-part remarks. question operating that worldwide refranchising the prepared ultimate referred in the on

quarter looks side, million $XXX number of in first it in close On XXXX. had to in the like the it the quarters most from hasn’t far in off that gains been you and that refranchising

is innings as So gains impacts very margin. just wondering broader the therefore continue these should part I’m now the gains that operating whether are refranchising we or moderate? just of the the we related of the type And late assume should in and

first Thank the operating refranchising refranchising and was done mentioned type was but right of as points, settles I now quarter. once in you basis XXX the you off where up refranchising wondering the growth which we’d your that. Presumably think and of that’s what margin that just ultimately I’m is that you. you think wrap is assume rate at XX%, led by up

Kevin Ozan

Yes, Jeff. thanks,

in I more will activity developmental certainly license a of I lot will conventional our the more most versus half the be we’ll have XXXX in that last we And – mentioned type conventional the of of that remarks my in refranchising had that mentioned year. of also year. I that happen the think first

it’ll in the million bit in maybe – $XXX to the a second lower off in bit year. would fourth to this half little about of of And point, time similar, a little a because we a seen bit the be So the it’ll the year that get expect third quarter. I bit relatively quarter. in to little first first last we and start then have easing than By gains less, the we it your what expect we is little would had of activity the full-year, most be year.

earlier, said So in $XX quarter, last I million to we think less. about the $XX million

more But last year. gains be a than seeing kind $XX next on may bit year. little less less will that so ratchet it bit should year it actually a then of be then. only million out last than transaction higher little We’re turn down to each And it than

Sorry, margin. operating the then

operating what couple you things. a So in seeing are margin,

you’re operating last we of rest benefit that, You’re benefits that. converted in operating of in as our year big G&A the goal track refranchised XXXX Kong of long-term being the to certainly of then transactions. starting about our P&L. the see in benefits also on it margin. the management in When beginning mid-XXs We’ve seeing refranchising still margin and talked And our and we on China/Hong for the we’re mind certainly

Steve Easterbrook

company that add that the we’ve think the growth, only as still. Kevin’s International those to ourselves who with well because our to for us. restructured markets, restaurants markets selling piece business high the actually ourselves owns important want I Leads the would our franchising thing as I a way would are we an our which to typically and operate now, was, with and We given comments literally a very restaurant clear by have, plans, we restaurant, have understanding of be we keep that’s

very to down country now by forward now. really guess, drill clear look country we have very can franchising I and, have got a we strategic So and a looking granular very, plan

Mike Flores

Greg Next Francfort America from question Merrill is of Lynch. Bank with

Greg Francfort

Hey, guys, questions. two

macro weights you forward the is? How you think the $X the there or question spending your second up around I know are talk do on pretty then lot think, not during – and in maybe on you on what’s sustainable then side. the the hearing, a about and that markets weight quarter, how there’s that about and that U.S. talk And is sustainable whether marketing is. one you Can whether going can pulled think my backdrop Just marketing European you any the there. or we’re substantially. $X, I $X, industry margin is not

Kevin Ozan

a is lot there. There

Germany, we I very So want important two to at seeing France, look markets what mean, Europe. where typically we’ve for us. clearly Europe, we’re mainland got do

of really the great Netherlands mid-size some getting is the and There years restaurant momentum after not are Brexit good we we’re back. the a tailwinds. to feared. seems XXX calm perhaps seeing from any be any like of disruptive But of strong. as Typically particular be a of bit getting little as decision Italy The of quite markets, Spain. kind people We’re appear out it growing kind has nor entered the markets, some doesn’t but to of maybe markets headwinds style the shock couple

movements. and seeing differences see There’s labor across migration well. the we Europe are We going here that less as in U.S. on in

because just of choosing but, what really some in it’s fairly I’d do So business aggressive to our each those there we’re calm are dynamics and a say to we’ve and got we’re markets. into pace environment, is success as being of

actually spend sure what quarter there we really the But at Menu that. on lot we shift to of was what I to we terms wasn’t think did U.S. shift good more media in just our items, bit on than In a Dollar the The in But, yes, quickly. menu levels items – the here that awareness wanted the – so emphasis quite of quarter the of we little $X, of did some the was the make lot a we of Customer the of competitive awareness yes, the wanted the $X wanted as well. weight. we get $X, awareness a

if pretty then throw We’ve can certainly through plenty good as over we others we well spend, their I out So they’ll something that’ll of gunpowder a feel we think I got tough and, deal with. guess that struggled quarter. the battled be have

Mike Flores

Stump Next is with Longbow. Alton

Alton Stump

or good course, on get of out roll value higher morning ticket afternoon. when the It Good just I question. to a new you platforms. difficult, a result. guess Congrats isn’t

else through off $X selling walk well that? driving the that $X, higher presume of is or kind items on just means there what that I bucket you are ticket anything is $X, the that driving can there is $X? So going

Kevin Ozan

things. Yes, can start A of talking I about couple that.

So the a we’re Menu variety of use $X in $X, seeing ways. people $X,

will $X, some from people $X, meal items $X using Some a Dollar create the Menu.

on isn’t as add combo meal $X, Menu then Some $X, $X the that people an $X item a $X, will buy add-on. an from $X, Dollar

use So use $X in of the – seeing ways. we’re the items we’re Dollar Dollar seeing people that Menu various people is And $X the $X, use when $X, in one the $X, things that transactions for those is Menu, helping our $X Menu. $X, Dollar when $X, those than per don’t That drive items higher is average average transaction transactions. people check $X,

general, And like about that we’re that’s, as talked menu. of And what in so seeing. the Steve we earlier, construct

so awareness the good. all ways. And people allows general various of make specific are And, in it people use the again, but sure it the menu need we to aware is to of menu, in pretty items

Steve Easterbrook

close pretty when we’ve you something launch stayed this. customers clearly And to like

as We’re important from obviously scores which us. well getting satisfaction to Menu, value and Dollar is perception high the

the that feeling of and playing little a support value back clearly yes, customers above are checks point from helping average us. to So, about view, a are good it is run business. higher perception But

Mike Flores

Miller And is Jaffray. our next Nicole from question Regan Piper with

Nicole Miller Regan

morning. Thank is commodities. My question you. Good around

the factor value those contributing to removing So persists, U.S., you about that differently? of what that talked are, to earlier? closer any value address if that to that will in cogs basket deals some X% Thanks. X%? And And local pieces was inflating you up

Kevin Ozan

that plans XXXX and Right increase plans the increases mentioned, enough we’d right in chicken, in first year. – the our it looks would we marketing are quarter for product U.S. the change now, would lines. of was the now, Like the the or quarter anything categories like increases those expect that that or main you those I would aren’t Most for it along the highest be first of increase probably see expect: Yes. primarily. that any beef

plans or goes So to of isn’t year. for in the a driving as it’s dissipating anticipate product change level year on. increase any that we But marketing kind where it the

Mike Flores

Our with next Wells question is from Jeff Farmer Fargo.

Jeff Farmer

Thanks.

reflect the half level I that and XQ wage those out of inflation guess both labor? on from will rate up in does margin, back restaurant your following investments further the Or the into fully the headwinds the year? cost margin Just headwinds build U.S. and XQ

Kevin Ozan

Yes, question, reflect a bit. for the have is started I’ll to What to starting does cost, initiative some dissipate wage labor say. be Jeff. seeing, certainly investment rate, thanks the is It fair, of the little that we that

for as that of to now related fresh seeing so got kind dissipate. that rollout of and ready we of coming that the Some labor training upon we’re starting we’re beef to training that, investment some

to dissipate will fair that it’s – year to will that So as piece continue goes expect on. that continue the

Steve Easterbrook

kind the minimize hard to other add a well, working really piece turnover And guys out I to as is crew as well. there, shout to think of the out is this operations

little really good costs we’ve level that’s bit. turnover the the a So can got XX-day down moment in at where sometimes turnover a of to because if come hidden gets out hand

we’re but and the also our we’re while investments that the beginning side hard with really education in change well well. lot with managed the a as guys on to turnover of making working we’re being in side and see training and the both pay So the for managers, restaurants, crew the field, the there’s

Mike Flores

last that will We’ve one Levy and Bank. got Brett question time be for Deutsche of

Brett Levy

much little seeing a other doing of what how and from also Thank bit irrational Great, thank competitors’ on rational coming of you’re Greg’s If it IEO you. competitive successes solely bit a words, we how you. from what terms tailwind? growth of question you if behavior. landscape share seeing are you’re can McDonald’s in might much In can Europe on of and the detail be revisit and or in little a what more we’re

Kevin Ozan

just gaining in. big, is that chime seeing all we’re major of the And markets What and I’ll international Steven most actually I’ll those can Competitive markets, by Yes. varies are start say. of market we’re about share. market. landscape in certainly

IEO more Some say a markets than are in of most muted. little bit those competitive of relatively overall countries the market others. I’d is

countries. gang seeing those any in of growth busting not You’re

have And improvements seeing share. those in which in muted relatively it market it’s our market competitive makes gain are of to share. to we So most

Steve Easterbrook

new is only fight, really it’s think we a on Italy, would there new is if game. estate. the our it’s a add I And because literally all, prioritized Yes, lift. bit I I the of I we all those a more typically But macro sum us additions any thing is, of existing think at growth is There none that’s It think, zero the the been units. little modest in sector on market in have Spain, markets whether Australia, that tailwinds it’s markets. share helping have in Canada, major market, no UK, one reinvestment

We’re just hard, and literally working scrapping share. taking hard,

pain. think is gain typically else’s So someone I our

Mike Flores

hour the and our that want great sign of top questions the to call. so reached thank for we’ve concludes Well, we’ll off. your I everyone

Steve Easterbrook

Thank you.

Kevin Ozan

Thank you.

Operator

Corporation Call. Conference McDonald’s Investor concludes This

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