MCD - Earnings call transcript Q4 2018

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Operator

Hello, and welcome to McDonald's Fourth Quarter 2018 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Mike Cieplak, Investor Relations Officer for McDonald's Corporation. Mr. begin. may you Cieplak,

Mike Cieplak

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

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

Steve Easterbrook

Customers benefits to modernized of Growth the middle number sales business the comparable had on of customers changes be growth continues great our a The market at and a dollars such ambitious significant of its we a Still initiatives to growth With for rising been maximizing Germany in our the market. enjoy success and successful and sales in of such for leadership XX the year, Italy the growth solid when increased from and guest as foundational momentum as with comparable Thanks Mike. of aggressively continue favorites the convenience, rewarded seven the extending even Experience of as the since XXXX. in better XXXX. comparable a This visits customers muted. same followed time. global best quarters and it the We're quarters shrinking Global as U.K. a markets. is XX and comparable growth, outperformed year greater and more for and the benefit now sales U.S., growth digital undertaken. of one with momentum all growth XX-year example, Most time and first comparable in our In executing U.S. in market of their across like-for-like billions reflecting results its McDonald's meeting years. effective choice of pleased digital one and programs with we're our customers. annual X.X% restaurants posted while back-to-back XXXX, team The percentage continuing when Italy other again McDonald's of executing in quarter of competitors of in in share initiatives the our sales. making and the time our market's guest competitors. achievement our McDonald's count focused invest our broad-based in System. brought transforming the success. is of a in System. delivery. our consecutive offerings The round outperforming sales resulting year has is The ever the now sales of value foundation staying performance the us has engagement has notable sales delivery restaurants, that for has most XX in This even we years best-performing plan. Australia business. all-day seeing an it's continued with Future business impact Plan XXXX. top XXXX continued year, quarters growth starts markets last year strong positive strong grew in we our more investing the and program excelled in The counts to our at XXXX traffic Velocity with also Canada a that consecutive gain of sales the is consecutive grew

lot franchisees year, a ahead juicier getting the of the XXXX. a much have offices. a in collaborative national throughout in different about works U.S. resulted to the number down number we the to cooked communities Future. The what effort market franchisees plan several of the agenda the end shared appreciate start like with The year's flexibility timely right and it country. team number much including across our and you our famous them market in and more with of At trend with reopened to the regularly in to to the when to as and the willingness XXXX. significant the them we hard the business beef nearly plan, dramatically much hotter experience. in remain between out driving the local and in required than earlier win continued face share met in success. the it an aggressive of franchisees. carrying more becoming is the converted remain key Experience [indiscernible]. fewer the strategy. in food, visit co-ops increasingly than U.S. modernized and last to for field for XXX McDonald's right field an and most We XX the of the significant we business, country burgers made progress Louisiana Once the than optimum In the half overall collectively in One is and convenience tasting difference launch with Chris of XXXX, to best leadership new work national greater of the discussed dozens [indiscernible] our This introducing restaurants a restaurants heard how decision-making. facing to the the refreshed XXXX, I us see organization is competitive to U.S. we're our current example It is make the fewer to a we was how nimble than easy challenges strategy the This chance Georgia. XX execute an That the intense of customers XXXX. this also customers U.S. I burgers, our all While most Kempczinski and growth XX We competitive pace change everyday is at when U.S. tactical opportunity throughout in market the overall with customers. month, restaurants the and today that across pressures. pace they and balance solid they we with fresh work giving will in committed foundation engaged of hospitality They year XX. quarter-pound decor experiencing plan. time U.S. meant at U.S. meet and I in face first-hand McDonald's. had market last committed reduced to our established a ambitious Using well from order gives the dialogue adjustments The and is local better constructive a fight. us, to of some with is made offices with from serve better X,XXX

discuss fourth Now our results and year. full quarter will Kevin for the financial

Kevin Ozan

up momentum again comp contributing to consecutive top continued our markets focus growth with comp X.X% quarter. increases With global XXth sales the a with for sales quarter growth. our strong our we relentless marks most our the This across segment of Thanks once sales on of strategy, global Steve. each

counts guest the also grew for global quarter. We

broad-based a environment achievement markets Eating our mentioned Informal the Our in top earlier. of line significant as is most performance given and major muted strength Steve Out

by Looking across led X.X% the U.K., continue to with Australia. comp for the and up lead quarter, the sales the segment, international markets competition outperform the Germany

leading and sales Italy, the since For were double-digit the delivered comps the Netherlands with and segment. account sales these XXXX. every something all haven't geographic market X.X% the were foundational for segment with most full of Japan positive in year, X.X% both markets and markets, ILM comp once comp growth delivering comp growth segment and guest sales positive Poland the regions. across growth, High up In quarter across the segment sales comps the achieved again up

to increases. Comp in Value year to our proved sales average from full price negative. activity fourth In and competitors. aggressive healthy a quarter, the limited to like up XXX sales and the quarter check time glazed sales industry. beef fresh U.S. all versus breakfast were with the contributed basis U.S. comp average QSR XXXX, remain continue challenging sandwiches U.S. check. increases the mix points higher and GAAP while throughout our four of QSR DL stack menu shifts benefit for offers the X.X% the pound achieved Turning we offerings this, tenders for the meal from triple sandwich product In a positive deal, environment guest favorable counts and for Despite burgers like classic the the $X quarter promotional comp

in processes earnings in as to quarter's downtime aggressive recovery to last deployment. downtime a U.S. the the on headwind to was continue project to of shorten As pace we recovery I discussed slower the implemented We've our sales business impact construction minimize accelerate the modernization and and EOTF related call, XXXX.

after prior to charges share the current quarter, tax the year an per for and year. was XX% results. $X.XX constant in current in items Turning line both excluding bottom Earnings reform increase and currencies impairment related

the EPS by in foreign strong was performance constant world to In XX% business labor benefited our we growth reflecting company-operated refranchising. rising the currencies in drove offsetting dollars a the reflected per by offset streamlined under rate pressures costs, growth in and consolidated driven margin results. more the quarter, pressure Franchise declined as depreciation more like while was in of Despite modernization point Franchise lower and grew operating for an heavily XX the basis primarily basis in and points effective X% our than year higher sales than $X.XX tax to XX related performance, increase benefits margin first for franchised revenue franchise began from translation cost the full comp was refranchising EOTF around addition costs are a percent currently XXXX U.S. model benefits sales normal conventional sales quarter margins. share.

generate XX% In an significant was $X.X cash Our billion, over XXXX. of XXXX, flow. free cash flow business continues to increase

deployment X% and dollars Commodity excluding full the full the in both offset pressures and quarter were investments declined pay. our for percentage $XXX year In current initiatives Wage currencies. U.S., to as key around year. expense. operating year. from cost to to company-operated for strategically X.X% contributed continued costs higher cost look and the willingness and items, the increases XXXX Menu about points basis Our customers' to labor the margins XX%, year over X quarter. were up And need price by with our the our balance over up pressures for points of quarter grew XXX million constant both margin depreciation prior in we prior special margin year restaurant was

quarter few the savings about the year X% for perspective For eased I'll put X%. X% Menu G&A constant while year-over-year. the up up for X% prices full in XXXX. minutes into the down in G&A markets, a was our increased I International lead our when review outlook commodity pressures was currencies. for year

Now I'll turn it back Steve. to

Steve Easterbrook

menu the value, brands, customer focused For food, even of improve remains years and count continuously Velocity the demonstrating maximizing Growth the improving core full of We and We're on the in the our better perceptions place our introducing into customer with taste our taste our the focus improve to visits. enhancing offering strategy at we're [indiscernible] to range our upholding Plan, visits. are customers. a compelling visibly more the guest to of delicious two we becoming to robust consumers convenience, items customers encourage initiatives. our to With executing strive on regaining McDonald's of iconic trust how opportunity a and momentum sandwiches our

encourage supply and offering to pleased favorites on classic year All our the bacon a of our Macs our antibiotics and enjoyed influence, beef visits but and great good extended XXXX with McDonald's resources, the the similar scale Pounders service visits how detailed and challenges. and XXXX beef Velocity, We successful menu launch Last is announced not see marked our restaurants. have this were with and events also week to such great as by we a attention encouraged markets accelerated U.S. December our by of targets greater we Breakfast take reduce success of Serving to maintaining During Public food producers that up Big Bagel meal. In progress of digital. Germany, bacon trust of and following by successful yesterday's generated [indiscernible] but our operations U.S. campaign we by sandwiches a of the exceptional we are leading customers chains. as and of the earlier fresh in to many customers. Spain, and Customers some we Bacon provide the and we companies are our delivery, again and their Quarter launched a pressing also to significant the reduce on introducing continue simplify all-round to I'm continue provide had eggs. restaurants throughout menus, as This on is the well in year In have on McChicken. encouraging delicious in offering customers improving with the cheesy higher. a and McDonald's and experiences adding stakeholders convenient that Sandwiches and vital, with of other the to latest importance of popular snack only of food to partnering for changes. fries. bagels are Canada markets McDonald's and other run committing actions the Time promotion place hot employees power Canada bacon sales our fresh enjoy to on focus announcements year for discipline world's we the the the in are the attention that quarter, iconic customers requirements experience. Taste see notice most their Experience each suppliers cracked as introducing them consumers. never difference In is series using our demonstrating use of fast, some with drives like many we're and to our many Day when to and both addressing friendly examples strong of customers, complexity platform been customers our the in significant the In with restaurants a worthy a we ability getting for Future great trust. seeking of I overall improve with demonstrating more service. expectations

Delivery our take over will the to strategy. system. capture growth annual XXXX billion. restaurants, East is Velocity We momentum us over years opportunities action our of grow in It XX continues to in half delivery almost Middle additional $X global for took available and to XX,XXX and within Asia the now business

restaurants double-digits achieved of our major well additional grew both markets sales more. as we two as strong the the has years, such company as to the continues U.S., and France Canada, and a and past globally. than grow as Over growth providers in billion Delivery for delivery delivery McDonald's high as become benefiting third-party the to $X and and a such markets more even service Italy rapidly momentum. same-store restaurants franchise from through months other Many offering restaurants Russia U.K. in for in business expand sales XX

We meals know offices We’re and the will college confident bring this have see hold delivery try established, dorm McDonald's before more strength system. satisfaction McDonald's with and and customers and and about within to help their high McDonald's winning rooms. to have and potential customers we our awareness within-restaurant with to ideas signs, And McDonald's outreach, growth steady know already Uber to advertising. We reorder trends innovative offers priority the high In awareness opportunity our its more we begins placed media willingness of talked business. identifying customers of more those delivery developing additional by for demonstrating activity markets a delivery. among encouraging leaders an PR doubled the to our let throughout the the Even within With continue volumes. we their we to major the XXXX. in momentum homes, restaurants campaign, than campaign them Australia, order a own engaging elsewhere partnership. spreading are Australia Australia in with Canada U.K. promotional approaches featuring developed Eats individual high on awareness through delivery, delivery are social and Driving

delivery newer operations. market, China, our from related most restaurant to delivery our help to markets, also learning bring continue developed especially We to

for us which is customers, As underpinning with our do to competitive we delivery of this help have said previously, our will and growth advantage easy our convenient we business. make everything the maximize commitment accelerator

to another ordering Velocity on new enjoyable Experience visits refreshed hospitality of one I'll of The options restaurants, providing our a Now more our to decor, new accelerators, focus and an experience turn Future. we're enhanced the to McDonald's customers. introducing

of ultimately, many consistent experience hospitality. of guest hospitality as the Our and opportunity guest with better in have to experience projects. fries assist our Restaurants more half in customer's to made and trays as in high restaurants brands expectations with training enhance strong more by updated Big assuring interact a progress With we've about restaurants. be continue customer a customer guests to with table. kiosk and with additional offering around with our satisfaction complete have that seen they enhanced We've customers in for to to impacts for years the the perform smile, We're to significant introduced of continue of business restaurants leaders EOTF, U.S. enthusiastic been rise. restaurants we Macs Customer greet the thousands experience of our proven sales key results. have the elements and orders, experience, our our way line practices the We've with we on more tens in Experience and satisfaction. continue customers of customer to sales higher example expectations Future and encouraged world converted which drive customer the identified modernized to an best engaging business for

the In they offers customers with will brands. channels our additional made the from in throughout McDonald's than possible well work opportunities as kiosks making These as more ahead, good years platforms, and and completed value XX,XXX digital rolling through relevant XX,XXX as nearly self-order fun experiences simpler to experience incorporating restaurants, making customers. in menu XX,XXX the digital our We we deploying personalized strides restaurants. system, over in out have in capabilities continue for new from reward McDonald's available progress technology digital more appreciate pay bottle XXXX including boards because room extensive low and the are in we restaurants

outlook XXXX. Now discuss our Kevin will for

Kevin Ozan

begin enhanced targets last in In These several our last earnings the incremental our flow increase our we ability deliver being maintain and of high to in significant wide XX% growth we substantially year, range. invested with long of single-digits The complete our three-year about capital anticipation this targets enables X% per X%, years, to share set refranchising financial efforts, of fundamentally stability mid-XX% the achieve our mid-XX% and average to over the the business. in to confidence margin cash over term long-term to billion annual in system year. increase established a return range, us Over ending strength announced reflect reliability the sales shareholders our period the September. strength the $XX and and on dividend growing including return our operating this

years, this dividends. and last returned share two the target billion repurchases $XX Over through we over toward

driven on million some this impact company and put will couple translation, will into this also year of expense and we depreciation by accelerated to labor XXXX, EPS commodities margins and headwinds both EOTF. some around Looking pace on year-over-year expense Franchise-related the XXXX will by about anticipate depreciation both franchise which the will $XX U.S. depreciation currency in about continue company-owned year. restaurants cost, the Higher million, of $XXX the pressure increase U.S., foreign over growth EOTF-related increase years. operated in next in depreciation

the first to the in today's quarter we EPS this for pressures in increases $X.XX Based of commodity year outside of markets and expect exchange to U.S. by X% rates, increase the rates, currency U.S. the our currency key also of an year. in for $X.XX year. X% we anticipate impact $X.XX continue and X% the about half to negatively for on to At $X.XX first current expect We to the full

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

currencies will We billion. discipline this major reinvesting mentioned reduction are the result initial After G&A roughly $X.X growth, G&A will expect the continue savings year. about in budget At total XXXX to XXXX, $XXX growth exchange $XXX of for of of over complete. we down and a current strong in Since rates, we areas G&A billion. most technology, of of some our million this to financial have constant beginning We've exercise transactions about like achieved be of our into of back we'll that from refranchising net million. drive $X.X X%

restaurants the but conventional to extent. continue will We lesser much U.S. a refranchise to markets to licensees U.K. as such and across some

we restaurant on XXXX. sales expect As gains about be this a million year result, $XXX less to than

billion. XXXX on capital Moving expenditures of to with $X.X We capital. ended

exceeding year, this was initially original U.S., for slightly Although EOTF about of X,XXX planned in than plan the our higher projects. projects we X,XXX completed well the

we've noted, the to construction EOTF the project XXXX. billion $X.X be inflation of that a capital been will costs. on dedicated Nearly X,XXX also overall As projects roughly to approximately in spend EOTF expect pressure also has billion We completing in U.S. industry in $X currently capital of

recent ability now Our balance more in between and the projects U.S. to remaining XXXX the provide evenly XXXX. adjustments EOTF to plan

years. While we to reduced next a projects the provided to of partnering choosing an beyond have their XXXX franchisees franchisees extend are most at over for projects couple level, complete the option

the expect EOTF by So with of be we substantially complete end to XXXX.

an to roughly New new X,XXX We continues of restaurants be growth important component restaurant development equation. year. plan our open this to

of wholly-owned will $XXX to about in approximately capital our We markets. spend open million our XXX restaurants

their expanded brought demonstration openings, China. remaining how the resources spend the This by of developmental of planned for capital opportunities in and will our capabilities licensees network developmental and half which Our affiliates for licensees a accelerated expansion. nearly of create are XXX financial is

well we that for confident the sustained shareholders. positioned deliver As long-term are growth our we and enter system profitable to XXXX, I'm

Steve Easterbrook

in why our in With see performance strong strategy. we're our XXXX, can you confident

business the of potential We Growth Plan core XXXX. remaining as foundation have provide a growth driving of Velocity our and in we the a lot the accelerators solid begin

and the shared as well several from Year. you've a continue, growth we This tightening continue economies the to investments shifting as already we U.K. elsewhere will leading growing remain headwinds consumer thousands The China in to seen Kevin restaurants brand keep our Globe positioning the now In optimistic. are prioritize fiber our global as lead We advancing some that others Q&A. investments intend of won't. to hand we we France position. we and on keep strong the have restaurants in I in landscape. the also as and uncertainty We are of will McDonald's is and succeed to Still environments. dynamic our there business share, challenges can financial and made enter market it and the to a across so New consumer us significant recognized will Mike, placed our as the in political And who modernizing winning can side. to over we

Mike Cieplak

first KeyBanc. [Operator is with Instructions] Gonzalez question Our Eric from

Eric Gonzalez

the to a the have versus year few in expecting EOTF plans. business you're capital half spending roughly guidance, U.S. of questions to Based amount I expecting last related same this your projects. you're complete 'XX year, seems on like then number roughly your yet it the

co-investment I and capital you're being considered? XXXX about guess of out of also, XXXX there materially that project And think will you previously other projects delayed is, question or EOTF decline cost Thanks. areas spending rate So to the haven't we and XX%? plans years given the considering McDonald's for should some in previously the increased has spending - how not the that

Steve Easterbrook

difficult we're about less right, so In warm a and capital $X.X talk All to days. stay these XXXX. let in Eric. $X capital but And we billion. In than number XXXX, both that yes, it's me of on XXXX, thanks, Yes, for EOTF be spent billion will our roughly trying projects little the U.S. XXXX

I'll billion, call $X.X that spending amount U.S. going in on it's the roughly the down EOTF we're by, So it

is that's the versus One The occurring on occurring XXXX in little dynamic couple of projects a are other mix types our company-operated that though a bit of XXXX in restaurants. there's is different fronts.

year. a XXX the that So XXXX, of number we similar that did total XX% will XXXX. X% projects but to off in do for again, We'll for those that only about total in so of company-operated about XXXX, was finish projects restaurants projects XXX company-operated the be of but

skew to So average that cost. higher helps bit a little

in hadn't happening third XXXX, the were projects modern mods projects full the the and the of that non of we about that's split modernization is about modernized than call addition Those In we were are modernized in obviously. half been lower already while what what in we've dynamic other are the restaurants the roughly been XXXX, to as of ones or half. call XXXX, The EOTF about, that these talked have restaurant that non-mods and need elements. a two-thirds. are have some Those cost

So that down also XXXX. from brings up that cost average

XXXX our project is bit higher cost than a of So average couple dynamics. those little per in of XXXX because

so bit lower. then forward, relatively number said should drop EOTF so maybe going little substantially end capital Regarding be we And be projects XXXX. to to the expect in similar to beginning dramatically, with should billion expect of in mentioned, because XXXX, $X.X billion. we we XXXX a be roughly that the $X.X U.S. XXXX, we by probably or as XXXX, complete you should

related that capital. the gives to So some information more you hopefully

Mike Cieplak

Our of Charles next is Cowen. from Andrew question

Andrew Charles

questions, the U.S. for year. up you about my two If the right, benchmark outpace comps Kevin, Kevin, caught XXX the in you the it bps math flat benchmark guys against sounds were is XQ. like

talk first XQ value specifically, did headwind And estimate, incrementally if months the saw the accelerate given in of for from what remodels in curious throughout commitment construction 'XX? in environment discussions you nine at form the year you I one based then than for a is XX topic, arrived buying greater about the a bps number on in you as on you based And was can in with with of the is guidance Just of and U.S. the case guidance - how the the CapEx guess projects? remodel will? operators fluid the or Steve, or expected is fierce changed So Kevin X,XXX this best primarily some XXXX? separately, nature guidance the

Kevin Ozan

get saw kind of to about industry points turn and process I how wise say comp quarter price the fourth value So both the a you're relatively basis you just the to guess let the I It to in the and was U.S. it would throughout flat GAAP, talk up in I'll that from to for XXX we're year to right. start perspective. certainly year. me was going competitive about then the Related Steve

environment the in that was So I point flat achieved year. the think fourth pleased to we're points your GAAP XXX quarter. basis it in for we But that relatively

I'll point. say that headwind, X.X Regarding the roughly costs, EOTF quarter was the fourth

where line of we into a XXXX by impact. year, that's that X.X point with we think mid-year should in start third progress had quarter, expect positive so we turn be that will been to So roughly kind so the or I dissipating as for in that

again, because XXXX in of XXXX. the in because all we projects number partly of partly projects and of the So lower did

Steve Easterbrook

left commitments management XX we've part those in level load the to keen Chris cash their The second mean, we course of question, on numbers? just their chance visits conducted, obviously. own we confident the have what of how team many we're projects Andrew, offer and leadership office depending the field I through of are the and that had described the Kempczinski flow clearly to operators they sort

those place. I or level start introduce see. want encouraged really in and either that generating as we and but of to 'XX look they we still think initiatives have being the to maybe majority delivery take rate start forward the have then operators know really of board, combined were really the 'XX digital And it but at to retain that across the and of partner to existing that ample load kiosks reflects we to the So the they're you menu hospitality shock advantage and you the at believe want mean, schedule impact EOTF, confidence self-order stronger half of look alongside of once suite the to start the lift. much I beginning you come is

we've complete data continues that at I about the build restaurants just think fact-based in the are which If to U.S., completed, operators - now you confidence. we've share here look with X,XXX got those got to the

complete within the will flexibility years. chance the next the So the majority two I but appreciated think operators of vast

Kevin Ozan

last Just I'd add. one thing

is Just operators. - conversations the our with X,XXX estimate based right on now

down had, little couple So but timing - of coming conversations numbers that over months. letters haven't change are anything next from. that those we've that's formally signed based There on been exact where or a to yet, we we did bit planning the as the could like the get

Mike Cieplak

Sara next is Our from question Senatore with Bernstein.

Sara Senatore

- to hard and cash a been ROI by of sticking down? then you up to just the the to share just The a are again asked remarks, that mean market you're you're question I [indiscernible] or it's wondering my competitive interested point. was, can market I guess question my like sometimes that at the question I immediate characterize just share flattish on price made and to clarify. out A allowing of prepared the kind follow-up seeing of more I And in in what returning is went - or of are has been heavily its some visible with terms given tack less effectively maybe not just promotional with in if But listing. at Have quick has comment meant for schedule. and seeing even roll most it’s it you clarification in that anyone sounds shareholders? seeing the a deal somewhat then you EOTF and the Steve any relatively or that of activity on the this to those those mixed sort just outside. increased to was perhaps as done trade the co-investing original EOTF franchisees But extent on want had own contemplated is impact contemplated on

Kevin Ozan

I'll and Thanks share about market start Sara. stuff. question come for and Steve back first then talk let the I'll the with part

U.S. of that You and related generally kind the and we've in and the EOTF to that, the converted. successful around we've really we've sales increases seeing customer know, It it certainly seen that our the commitment world satisfaction, consistently. investment around increases in are be world we restaurants in same dynamic seen

So quick from investing. separate some a and to ability in We industry. pace at we're committed invest that to in a our relatively kind us willingness little of believe the others restaurants help our bit

use U.S. invest the financial right an the able advantage to time so strength right able and and in believe be business. for to it's And pace we at be our us the to

So that's to that. why do continuing we're

Steve Easterbrook

muted. if is lot broader sort that a to growth Out there's largely the both incredibly more be of And any new likely most going down I Sara, mean the is the on units to at all, it's additions. the and market IEO in the it's of QSR think the us market share Eating to and share, then Informal I specific and probably QSR

eating tailwinds to a expecting any I someone and can often QSR. get means people gain frankly, delivery, what sorts we're units be from any broader expense example. the is So for less of All respond or IEO else. home those trends in growth in particularly with at out But of not either that we little will guess those traffic

always top that. like-for-like with line your Now, a to you're the share, is clearly you're no discussion better I so being as and to of good That a if want term. in sales about play trend. our we are, markets. choose must what And markets growth you those, It’s competitive always to conditions a long in up is of in long matter feel encouraging there's growth lot have one about in QSR end sales as positive gaining that position going But attractive. absolute

expecting be we're to So expect, we not closely said, share and share reiterate, gains tailwinds, just our so have don't we will look I at pretty else's someone to market We it. aggressive very a as mindset pain. any

Mike Cieplak

David from with is question RBC. next Palmer Our

David Palmer

you've support the in-app the year looking in you'll ahead most imagine that. the and available the in-app into through Is U.S. important orders making and business foundations down orders with Just for traffic XXXX. slowed obviously comes this at start and that it particularly data in XXXX only not accelerating to heading would look When you looking to consumer year. last at the important point to year some you're ordering delivery behind the are particular? with earlier created some ones then And in I the advertising to changes regard when what through Traffic back and Uber Eats?

Kevin Ozan

those. Let me take both of

to the U.S. will is really momentum So I figure clearly market which global help traffic we the want drive think where the overall

those. we and get addressing happening the a think a greater clear pretty - I to perspective have where focus need on So we on just

a really average very well So we we often. look to than at be the and to level greater specific comes with want breakfast. growth more We're customer back check continue traffic we doing want at but

in guess the that McCafe still but app. can through also coffee. and are local engagement and Clearly just menu and part innovations value the be tailored of the some offers and competition help brand McCafe the that a on of through staffing And and at pay more us order Breakfast help always back do believe convenience levels premium real a to experience coffee stuff consumer on play we also mass. I breakfast looking believe initiatives digital personalized local drive customers are of Day our key personalized a breakfast we our taste local the deploying more enjoy into against these the fight nuts from also are part. national there those that's business So shift having we the - We and better. value day both We number bolts believe - going and across will

offices So I familiar U.S. earlier $X. of value Louisiana four year. in in hearing fine-tune Also we the breakfast with and particularly I mean an the that's example in continuing just you're the that the in the promotions. Georgia have across deal for we're was and was to when on down focus the field

We're can as Then two finally, really continue drive-thru of product type discussion in have McDonald's working get bolts for about and we're the focus they view product model entry-level restaurant that nuts or to then $X. $X its that on and seeing. those course as combinations and platform sure We I'm again operation we the which on we one operations $X menus and And competitive within renewed that availability deal combinations. that the excited going $X the offers making just a is up. submitted more

think areas some growing a guest that is we of all - So I are where and number our believe traffic count there's within the control. of

get can now by to data into data will us So operators. in-app, the our that app regard feels fuller we consumer clearly give With several But good. third-party set. a integrating

foremost So privacy clearly we can is in mind. our data

then So information all this app and secure to in information we there set we are respect that into some be but now But integrated more useful more more optimistic quarter that. as probably in customers year we're always actually that of third them. getting on useful get we the our data and

Mike Cieplak

next is Our with Holthouse Sachs. Goldman Karen question from

Karen Holthouse

of And the markets signs you U.S. had when the you specifically kiosks in the metrics sort digital longer of Experience in then some any there of areas those usage? In share Future for have any Are app customers that or app into that seeing adoption are can TF greater usage of the you have ecosystem?

Steve Easterbrook

Yes.

intending and store in but kiosks being probably to fast Italy, example. year-on-year So that What advanced me percentages advantage customers. earlier Australia, anyone else self-order than adopting some for let our we're for usage most started have Netherlands really follower example see Canada is significant

of they're able familiar enjoy kiosk They go what they with for it. groups get it, the using guess trying are our that in just customers time and more it more ultimately I the get order with say greater and they into example. and percentage I'm on So spend going to then restaurants to confident group

with So the as we go particularly table bring using with as restaurants out. XX% high the order hospitality straight order we on their we'll to that the seeing they in-store And can kiosks. are XX%, enhanced had guests pay some now just as of credit and

So transformed experience. really the has it

increase. not data own seeing we're seeing measure just actually customer our satisfaction we're dramatically So

rolling still emerging some continue proving on we're U.S. go. going and the actually the business in these markets data we help that's our of powerful the why is the for using to to we're learnings that's EOTF it the is markets supporting so because and So other data case as process

Mike Cieplak

Bernstein is Barclays. with from Jeff question next Our

Jeff Bernstein

as I delivery all the past. of frustration a in the Two peer just their system, talking about have they're questions, out on guys things talked small increased - guess And reports a seemingly of franchise this with association like EOTF portion U.S. with seems the of have you visibility QSR I the we're and franchisees always of one investment having quarter. getting and which like seeing guess kind formation more about women some

benchmark us McDonald's that maybe on think you whether Kevin. I concerns are. escalating I'm this we So that EPS. XXXX high on your pressured being pressured. how I tell is the more was about know said kind for damage you or at sure reference your push-backs Steve concern it to whether against or outlook wasn't will you system long-term about concerns are but is Thanks. just wondering follow-up just to think it want you should biggest of single-digit can I it consensus the and what or what said versus like the maybe my And clarify just be kiosks where

Steve Easterbrook

around I'll first U.S. bolder our bigger one the sentiments - and Yes vision commitment this the our owner-operator to take plan. and

they In was plan. as was work. always year So owner/operators write again it of committing going and significant was hard company leadership year to XXXX the our we when more how quite just a together just that the and operators to context checks a to were team It hard individually keep become in ambitious a that as and work. let's the plan the build be

So happen. to dialogue always does. The always the going dialogue

a it's low Sometimes level it just a sometimes bubbles in up little.

the plan we confidence I Owner/Operator plan can news is with are help another we're commitment adjustments the in that that we those think leadership our can the the and one amendments we roll. - see maintain to to any maintain teams if need as how the we and good talking talking the there's or make

but we’re that our that door excited of that great the can a course facing experience and about the the that of so and in my business at I good Atlantis think the work could the from the where time shared I’m this consumer derail not fundamentally customer plan means across have So is I from to as pattern am get continues that. we the to more we’re Again out in first dialogue will hand - all. open I getting of year fact we’ll happy opportunity on always and wouldn’t facing feeling and turn if just market the in we restaurants life everyone because and And because no concerned results. hear be going was ambition it it's be one activate erosion place I

Kevin Ozan

I where versus there this some I’m regarding EPS comparing our year. Jeff on pressure just will then mentioned consensus internal not be talking about And growth I'm targets.

like As games time XXXX on down we between will be I things here just XXXX. one ratcheting mentioned and

So we’ve if depreciation. will depreciation is always you I related will that roll to that related XXXX you of one-time but we've change refranchising known impacts always to that EPS about growth in mentioned rate obviously pressure a until talked starting on off our if margins

Now that say. it’s on just growth trying flow impact won't to I but just bigger was obviously impact cash like anything that so all has or an EPS rate that’s

Mike Cieplak

Morgan from next with John is Our Stanley. question Glass

John Glass

there slowing to was just to if mentioned XXXX worry in have will it and in get pace a of conversions that level XXXX loading after And standard mentioned at balance than sort still Two to done can got then the or at then XXXX. be burden that. don't always change maybe as of help on please there's of is And then is if U.S. that more sort comment I in you maybe softer other sales notes the you rest think of specifically converted Steve to another world start go you to thought end that level little do directed that also about has the less your the how cautionary XXXX XXXX and been to probably is or relative softer or is on just you the you think you loading confidence one EOTF do the well there and year so suspect XXXX I about. about sales things of the consumer XX,XXX

Steve Easterbrook

the second take I will think one. Kevin

it entering XXXX was indication with a just was it a picture not it less note last a yes, done XXXX. was by projects worthy I I of you want more projects of mean macro acknowledge look that responsible I it read less call just then things impact to of one comments. appears form in anyway any started. the had of any And the you global two evidence thought the as a little be in certain how if benefit in sale doing those regarding around to short-term don’t I years. a of looking then of all us as of into kind be but it I will as no as enter couple ETOF year of XXXX you actually we signal to just little was just thought benefit Now XXXX

this ETOF look direct mentioned pieces year. you I really So positive turning if that’s off of that all versus start when by impact the been the at the should has midyear where all

of the projects, if will right or you complete if of restaurants Regarding through now the XXXX XXXX over we’re restaurants number you accounts little will. EOTF

in likely time to If XXXX us XXXX either roughly most and that some there done in XXXX rebuild. remaining so you have being are or then would at happen relocating are XXXX think the we about we same gets XXXX the of roughly XXXX being and And or roughly XXXX. done estate that in that then another because

few so of relocate XX,XXX of get get a plus thousand all that you rebuild just years that to estate so of are over substantially those all They'll restaurants our to won’t they you don't be XXXX if gets And a or lift. so restaurants another we roughly that XX of them. be or to

Kevin Ozan

go I I don’t question that. because regarding self it but into finish I the the broader order asking back to to because hook, Karen's just around want I to first. want you’re I address to usage think basically trajectory app want perspective kiosks

boards. done initiatives technology the app from order menu mobile the pay of mobile self our of be outdoor of use digital will order kiosks, introduction All global whether it’s

So together. behaviors customer very, connect understand We'll value and get of customers relationship we’ve management, our as so start as we to better. to technologies more build much these very customer and better trading offer we we personalization better this now the kind ecosystem proper our will experience, their

once - they that lane get individually point drive start them to more through as your into put as ability is So convenient, I as wanted we self recognize unlock to customers kiosks them and to been learn also we a order acknowledge their our smooth start powerful. make of identified or incredibly to experience that it

a I experience much one of what going and making incredibly the to some a investments that lot lot are word ecosystem for for is think powerful to of a of of an foundation a provide better will So create be customers. knowledge for lot we're these us better data our

Mike Cieplak

Our next of question Lynch. with is Francfort from Bank Greg America/Merrill

Greg Francfort

I just question. then earlier had one and comments clarification to the a CapEx

were question I number? billion you billion low X.X through think Eric’s range to rate think I referring CapEx you’ve one previously XXXX but is X sort not to to to and said long-term XXXX the run of respond a

Kevin Ozan

the have XXXX XXXX a So X.X mentioned will still and - about we’ll and I projects XXXX. roughly XXXX XXXX billion be for just left

but XXXX not all run quite and So run it will you way it longer ongoing won’t less rates. get get be rate all down the will the down substantially the to way to if XXXX than term normal

Mike Cieplak

Our next question is from Baird. with David Tarantino

David Tarantino

asked few years. think times you the service U.S. about referenced sort have a the and I you the past just this I I specific you of a achieve benefits are question and so On going be you're the either over service steps times had wondering Steve I maybe know improvements if couple But a could if there how many drive-thru share to is but I to referenced on technology add taking be going to in that greater push know in Thanks. progress you some And there? U.S. improve XXXX. action operational

Steve Easterbrook

is kind of this mean I David stuff thanks we the get into. No, really

Introduction give of that complexity technology we've of doing improve and as reduce the at couple some call a let what new drive me are just we believe we a of boards, be will these you we present result zoom differently window. So digital what but got a will help just examples through little speed. them screens

restaurants it’s parking are So and whether a one payment we ready service delivering of really Australia example. or that time within this time But base local seen the the start the overall where we the of others spirit the through any operating lot little up driver-throughs provides restaurant formation the whether food but nature setting the group other Canada, can just for really in maybe toss process, parking of have the example. so don’t competitive maybe within as really where we and be in for drive times operating real all successfully identification. out also bottlenecks greater to kind a bottleneck can the successfully we real food against positive competitive it We also have provide

see longer at you’re the the it's do quickly why running If not as taking you can why that we're technology handing slightly training it's possibly cash ordering process drive-thru? process, a as payment shift issue. Maybe is the could Maybe a the issue.

today nuts moving, identification understand of it driving prepare us address but contribution. and get into and so them So better satisfaction greater technology easier. crews' you minimum stuff enables margins and and much quicker our it where production just more menu items that menu normal customer or viewers the bolts the kind can our gross can that how issue restaurant makes volume those real so much to average for well. a but and enhance keep are to we systems got the for of allowing can to is we identify speed certain is things managers of the make actually the menu assessing have And different simplify totally build help is, the customer with protects also complexity It and tool lives owner/operators one type to sophisticated we've as it where sell, that time, us helping we difficulty gross margin we

our sophisticated teams run a that we next in tool it's start with can fact-based of So confidence. and they through so information give these really can a the more live product much much level more higher field to make to much decisions dated

service a across are have XX So focus offices XX team field initiative. international all But of a drive-thru Chris of drive-thru service with have all examples. them in and just key mentioned as that's couple it's

Mike Cieplak

We have time Ivankoe for one more question with JPMorgan. John from

John Ivankoe

on incrementality first in you worse they the might they the your happy seen sales? Are profitability? any could peak? extend few changes program a basis quick ones had actually profitability as percentage you with drive-thru of that bumping to or and they with I words delivery? Just but a longest up is accounts first you and I happy other third question. And is very those continuing get what one. of Are a receivable there Have just potentially not if see that mean franchisees sales secondly are the technical they're to the been follow-up That's And service times. then receivable, are time. for they're stores is delivery kind not stabilizing? United some And you stabilizing the the are States if experience and then in can of when those stabilize? Notes McDonald's see to question of how in actually

$X.X I think there's around billion in quarter. the fourth

expect on of might cash maybe you're terms of relatively accounts drawn down So there anything and franchisees those bit back in to the around source in with you that a the be to near-term. EOTF doing related you for what

Steve Easterbrook

take last over happily for increased both Drive-thru a years. about that I'll We year-on-year So times halt. collectively one five technical [indiscernible] the too. the have the to called service

expect So this times service actually in to across we starting year the restaurants reduce one quarter we're currently. XXXX immediately of and in activities actually

are and looking therefore result we to have for getting collected any not will are to those we those. So them longer service times except address paint a

delivery response hopefully have seeing we're offering been for XX So in that more year-on-year great that question. delivery growth just than to that for months. those On

have just business. measurement only where but organic want grow had system new the we to is restaurants we we of part only the not So here

around note be in part it's day well day the average that on parts ordinarily like-for-like analysis in-store. percentage XX we're range, helps because our times any peaking business the at We of that the remains now you If that of encouraging a lapping in covers as still normal sort into kind support average will incrementality and - check like single delivery, X incrementally still belief piece. remains we

well up set more. to So we believe we're do

pieces the is we know out awareness how it. it, as to because with as try back we're trying jointly we drive with think the and still do they collectively him it I that soon customers stick stick

to the the as of of restaurants a - around of priorities now we were the Uber to with want social co-ops on when uBer local or and Eats in off will U.S. with So third-partly expand campaign critical start we would starts for here with critical restaurants a awareness. world have that before mass mass We're of key our we elsewhere typically and we the total getting a plus the awareness it have. awareness operators is one marketing in as media XX broader the both here the XX% campaign. I national say are getting

question. the now good we on that. And end over front hand Kevin I feel will about to So

Kevin Ozan

wealth Yes related - to and from operators. receivable, collect projects really related so The most we'll it EOTF so that those works of manage the of manage way project all most U.S. generally projects. of the certainly increase and accounts to it is we is

uncollectible of of an franchisees. collecting closing the Mechanically are balances projects of go projects and money, is timing focused we go the our And on in up the the money the we'll - they've the actually getting closing been issue logistics job money are to those need operators. receive that the done. when so from a from just through through it's you seeing some because collecting It

be yes continue at I driving about it the as be of - on. cash think receivable all will we of hard that projects toward number as pressure would be the to it you number should was So expect off getting projects everyone go that done. inflow will just some down there XXXX now

done like some get money. other the associated the kind Now we collecting with can of that of stuff

exactly that's right. So

Mike Cieplak

and Kevin joining day. Steve everyone thank today. Thank our good Okay. for and you call a Have

Operator

McDonald's This Corporation Investor concludes conference call.

McDonald's (MCD) 30 Jan 192018 Q4 Earnings call transcript