MCD - Earnings call transcript Q2 2019

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Operator

Hello, and welcome to McDonald's Second Quarter 2019 Investors 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

and for everyone, us. thank morning, joining you Good

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

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

now, And Steve. over turn I'll to it

Steve Easterbrook

morning. Good

to in in year our pleased anniversary We're where you contemporary our speaking corporate downtown facility. urban one today this headquarters from we be to Chicago, recently celebrated

a Returning society business shaping move to the closer to and and customers to was deliberate Chicago our trend today. get

a inspiring our Our evolving a modern new and to be facility catalyst for was environment, designed culture.

a momentum we move turnaround first metaphor since Our plan. for launched building across also we're our Momentum been the is our has business. seeing

mark, recently our thought, we've journey. four-year reflecting to I few the passed important it would on spend a As be minutes

XXXX, including growth, our reset steps our announced rebuild our unlocking financial driving and and brands, business, Back initial returning May our in of I priorities to three-fold to operational excitement value.

to bold our inside and At the dynamics, outside time, knew, to growth wasn't to accountability. Returning to being going We and big, a market is progress McDonald's steps consumer going was change cut by the keenly changing we and eclipsed personal incremental pace knew our greater company aware it. require of we evolve change business. were we pace the of that with had

fast of determined choosing We by slow, sense and perfection, beating knew by success urgency. moving with a would the be over progress the

We of changing financial we faster expectations. out closer the years, cash insights set and a established purpose, greater We point one customers begin journey more and growth restructured and we a to the to operating and was and at consumer drive importantly, to accountability refranchised We we bring returned responsive business smarter impact. become two at foundation, on to a accelerating level. within that the growth faster, growth. where to be local brought strong to shareholders. for to fit Most we could again. place and discipline to increased returned Indeed, So,

That XX running served that in our to rooted fundamentals menu Velocity March better Plan about complementing XXXX. the building so and hospitality and of the launch offering years. Growth our our It's in a convenience with delicious restaurants, have that of guests. plan The food, on over for compelling for Company led well and is affordable of

delicious, good with and our know visits. moments us feel when customers We that reward we every day, efforts for recognize every visit create customers, repeat

complement must also inviting We and of with work relevant that us moves big guests. that we for generations know and keep powerful continuously that new

We and accelerators deployed Future that, Experience to digital the help or EOTF; our do just delivery. us of three

the biggest McDonald's. actions a shortest focused the With to these becoming that most time. efforts, in customers That's have better possible have the the on to path we benefit

Four results. are years in we work energized and by Growth broad-based in, in firmly to we place, did strength Plan and put our the accelerators the the Velocity hard

positive For counts. the growth. sales quarter, X.X%, was quarterly global years This guest comparable comp global four of comp sales which by marks increased full complemented

and seconds restaurants. made make because running gains we still great to our on do, repeat impact is We work customers, in strong matter the to of visits. they decisions so important quarter, service During speed have

responsibility easier menu competitions leverage for technologies improve deploy staffing, seeing. make complexity, take adopt leveraging new And to and employees we're for We're we're the new results suppliers franchisees, crew procedures, the encouraged drive-thru to by for best performance. the system, and power incentives, it reduce and of practices our operational teams to

globally. targets dropped times customer service level year market markets customers, satisfaction across many summer. a have early record that set scores better and providing and this experience They're high with We seeing this for our

the is EOTF the ambitious. franchisees value Here fresh operations. plan deploying U.S., be we change, a U.S. built the we including with knew work. for and restructuring beef, the We need field hard in initiatives, our recognized major spent and XXXX, it’d of platform, Collectively, delivery, new modernization,

on execute and last year. of the restaurants execution of beginning against initiatives results plan. the optimize we the XXXX restaurant a would country, year year, I'm In visits this we be At running the franchisees seeing said focused the around to deployed better with

restaurant months consecutive in Importantly, overcoming cash saw fully June, decline eight average franchisee through XXXX. flow the has we grown

or we’re Operated the winning IOM, execution continued a Plan Growth our International Velocity seeing against formula. Consistent success. Markets Across is

and sales I comp and operational innovations of pleasure Italy count the growth guest with the growth during Italy a for visit on had improvements. witnessed has and firsthand and sales rigorous the to quarter posted double-digit XX count quarters focus consecutive quarter. guest comp now

fact, I positive In adopter saw guest Italy greeted has the years category growth for local as which also I have Poland, leaders sales Warsaw, was digital. our EOTF to similar special the saw went nearly made I they feel strong warmth or experience high-performing from Out two and a of quarter. early count with for This impact welcome. and comp Eating market energy posted that IEO hospitality, the outperformed guest guests Italy customers on an In and now. Informal focus when

hospitality, originate to move and markets markets. EOTF start we it one where Italy boats all digital, in another, rise. rapidly replicate are practice rollout, across best around ideas other where market of examples scale or and environment creating an and Poland a operations, great Whether at

it comp Kevin turn by to a deeper over drivers. let Now, market our into me trends dive and performance for sales

Kevin Ozan

strong. remains momentum top-line Our

sales all of back XXXX. our segment the once since sales global As to meaningfully breakfast up sales comp increase our fourth operating also mentioned, launch increased In comp each again, quarter highest all comp quarter the of And for U.S., we with were Steve in grew the comp across sales growth. dayparts. the X.X% contributing X.X%, day

as deals national items, $X featuring well offers. included such relevant Performance & value drivers as menu for for locally promotion, our the core as Match our other quarter and X proven Mix

renewed switching focus our for and results iconic customer confirm the core fresh our resonates our the response burgers was customers. sales ago, strategic menu, on Quarter well right over beef with year Since Pound our Our move. just a positive it

to Quarter of first builds and deal Pound benefit overall sales on the restaurants which sold EOTF the Pounder contributed million our to offers DeLuxe from half year. XXXX. with for compared and the continue featuring cheese In over our classic last Quarter helped to to combination boost modernized burgers of of bacon XXXX, A comp Similar performance, XX our last to line extensions, more we U.S. quarter, expect both remainder sales. we

taking also By we're recovering after learnings downtime, completed and quicker, from projects, successfully reduced sales reopening. we've construction

additional to we quarter, full We restaurants of for the a total a complete about first completed an converted of projects this During X,XXX XXX still EOTF year. X,XXX year. of projects the the total expect to half in for

flow, LTO. seeing the worldwide our from increase continues check, in that Strong to average fuel top-line growth both current mix and and favorites, with average such success offerings cash We're traffic product U.S. pricing our as check

in guest count U.S. returning share. top growth a However, market the in priority remains street for the to fight

were quarter. with Germany the grew results sales comp results all of International Operated within UK, Strong up France U.S. comp grew in the the the segment across the markets and guest sales, and of outside the continued Each segment’s counts. for growth. nearly key balanced the comp to X.X% the Turning markets segment also contributors Strong

comp along sales sandwich such share a key The the market UK versus as menu all innovation, of marked the delivery dayparts. growth market, the bacon quarter Maximizing success for and roll consecutive competition with LTO. breakfast its America Taste burgers across our of factor and XXrd increased was

offerings, with the both platform, France and sales market its market achieve has share. of guest has to successful quarters now burger been with nine compelling and balanced count premium consecutive value high comp both growth. helping record a again France core

resonate from also their all strong is and Germany gained customer with menu And up. satisfaction competitors, share Germany core customers. market contributions are maximizing value messages, of versus our and scores which EOTF,

segment, geographic markets growth the by Results in Licensed with count growth partners, Brazil, largest the Developmental drove segment new double-digit comp by strong comps XX% in in in led increased China, Accelerated our sales Japan guest with and each restaurant three strategic and performance International for quarter in constant growth positive within our system-wide performance across sales segment. grow sales China. the sales strong the currencies. across region the primarily In to X.X%

to accelerators the turn discuss global I'll our further back it business. to driving Now, Steve growth

Steve Easterbrook

convenience by change, more are With consumers of essential. changes Over we've unprecedented from is course, welcoming the Quality, the important service absolutely us. food and four proliferation served in ever. years, this than past people expect delicious today of And global consumer more landscape. seen

our about Accelerators of control pay, their they our giving serve over how food. global how they all they order, Velocity and how customers Growth Plan are more

we've U.S., made our in Future our restaurants modernizing of significant progress initiative. Experience the through the In

over a visit were customers U.S. just than Today, more now X,XXX modernized EOTF restaurants. restaurants much We have to are like year they ago.

New our I At the team opening our new York the honored May, for to of Square end of in join Time was restaurant.

brand service customer restaurant better order on and how and through customer statement three-storey major décor, seamless we're is a enhanced technologies. Our a experience providing pay

and had have to for we’re Our time this unlock Experience markets Future major IOM the of potential. continuing some

York and Australia now European customers their the their are not our major us, be XX% they places our they of customers customize select in how use future, order, markets, in over From to between, New how taking in-store when and meeting on terms For ready kiosks and control today. example, with most restaurants dining of just are served. for Sydney to food

to where two upside. meet speed. terms McDelivery on convenience to a and bold the Driving expectations we're another past untapped great for the top remains largely customer trial on grow with high taking in is delivery food We've increasing Delivery market room their demands priority. made quality significant action and a progress with and for have awareness about area years customers’

restaurants. delivery billion markets, growth double-digit XX more and delivery we've in a than sales to be expect maintained $X our service we major restaurants for for business in offering McDonald's Globally, XXXX franchise the Across months.

which available and sales more of offer In restaurants, delivery. McDelivery the the Spain, that half is now all more than now in Eats than is of accounts XX% greater McDonald's U.S. restaurants Uber with In X,XXX restaurants. U.S. than UK delivery in for

to customers new to continuing deploy announced with recently wherever DoorDash also demand. receive to to our availability scale accessibility partners in and U.S. the customer partnership meet for We a the add untapped us food are. that they and delicious delivery expand allow They're to

to across We with provide partners. with delivery customers quickly of DoorDash will the choice scale U.S. a

offer which strength increased seen We we've from are Multiple with delivery Canada, our of partners our the now national delivery learning second both delivery in partners. Canada, in where in in partners we're SkipTheDishes. restaurants offer driving Russia, orders. and whilst also Italy, incremental delivery delivery In XXX norm many from partner, Spain

in on digital. decision also multiple selling bold in April, in regions Since and to and We're by Chicken improving favorites closing items orders. already drive-thrus logic of orders. menu Yield fries, suggestive increase customers’ U.S. they taking the to the to have in action digital time technology the the by average check across ability other french on on launched acquisition suggestions point-of-sale our we boards day, Dynamic drinks, We're in responded adding based Customers to weather, want their customers what are likely with McNuggets already seeing offer an

of in weeks. the Australia this technology number two technology create using markets. in more in Yield engaging and XXX drive-thrus our XXX% By over using month, We increase today to technology is of X,XXX drive-thrus year-end, nearly to about our experiences to technology U.S., the the for example in next we'll the guests. we both introduced another from This integrate the in of plan Dynamic

rising Velocity Digital years our demand The we’ve our Plan fundamental accelerators is from Growth to and past us, these over of for ultimately the the from expect we're our impact and customer technological transformation. positioning transform it's It's customers by new technology change what The enable not three ecosystem day built infrastructure us the reflection to will to what building expectations, static. us. elevate meet customers us to a opportunities capabilities experience. and support and

over back look a it financial the for turn for the quarter. I'll into Kevin results Now, to

Kevin Ozan

the X% excluding charges currencies both quarter from Adjusted of constant for years. grew $X.XX when and earnings prior current other the and per share strategic impairment in

Revenue refranchising operating comp benefited grew as constant Our results have more strong sales quarter. than from the currencies growth in for activity. the offset performance impact X% our of

points XX versus an Adjusted for the operating year half of the last basis margin was first year. of XX.X%, increase

the past X% our represent margin over growth for of of dollars. margin XX% dollars in franchising years, now operating As margin currencies our franchise constant few of is the a dollars. total of income result the restaurant efforts quarter, With nearly largest component franchise

XXX strong well discussed basis the the XX depreciation as accounting lease I Our impacted consolidated related declined from franchise that EOTF was our points higher margin percent presentation as sales U.S., by basis in performance as quarter. last points change

this our percent but a has impact be As reminder, will margin no the ongoing. change on presentation franchise franchise our dollars, margin effect to

sales Turning as to year, restaurants. costs, XX basis delivery quarter. for company-operated our by flat offset were was and as versus commissions. grew company-operated primarily labor performance margins IOM XX.X% points our Consolidated segment such prior strong to the higher margins other

EOTF-related with performance refranchising, U.S. points partially company-operated margins continued offset and grew higher XX along XX.X%, and strong reflecting sales by commodity basis pressures, depreciation. labor to

the the the the ease U.S., to segment, amount basket costs up still in our big year. somewhat half of up to a In markets. markets full these to X.X%, across about year quarter and pricing pressures five was while the for back expect X% commodity we U.S. commodity IOM similar and grocery in Second X% be the both for expect up were the

five up expect we the a full cost commodity increase X.X%. year big segment, IOM markets to be the For in roughly

G&A relatively currencies sales of as and constant technology the flat to the still currencies. X.X% G&A in we in remain invest and digital We to last capabilities. flat for prior was quarter year to expect versus continue full for system-wide year, year in constant

we XX.X% the was and between continue quarter, year XX% rate expect to full a and for rate tax tax effective XX%. Our

second to further foreign QX. lessen given the dollar. the $X.XX with quarter U.S. Foreign by into $X.XX currency our of strength for current currency easing exchange to negatively per results impacted we translation $X.XX share, QX the to At expect impact rates,

$X.XX to Our at headwind remains estimated full year $X.XX.

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

back Now, I'll turn it to Steve.

Steve Easterbrook

The begun our people; to transformation. building my apparent seek of morning food. remarks our are the I've momentum apparent this industry we're watching and value about to who observers convenience by momentum. customers tasting great apparent is talking McDonald's our it’s who It’s to

And face results the to we macroeconomic work around these to sustain wasn't industry to performance need continue we hard world. Getting easy. and as to uncertainties

environment, food, unparalleled confident strategies, rewarding modern we we're remain to and a for making us are great convenience. the While in our investments customers them hospitable tasting offer and

the and relevant companies, communities That's Plan our it potential want focus as us and and to We all see organizations to where with continue unlock continue we're these and our brands strive to us, be that And associated of technology Growth that This we of successful, fun, innovation are version the accelerators. success. engage you'll and and on is brands pipelines. why brands inclusive, to that inspire large. improve Velocity societies headed at is

that better our we with We're a and long-term as to that growth. culture passion, focused our push focused is Plan a better and This a culture and of a restaurant innovation culture commitment. sustaining building strong is employees ourselves McDonald’s experience, customer mindset of strives execute of Velocity for make Growth urgency, on the accelerators jobs sense the to easier, a on

that, open up for With we'll Q&A. it

Operator

Instructions] [Operator

Mike Cieplak

from Our Charles first question with is Andrew Cowen.

Andrew Charles

the most lift as the as lapping But, I from initiative have stores Steven, Thanks. seems have to are outside wondering to little growth on can growth you $X the more be forward. Great. drive-thru any continue lifts the the mix, added as traffic. last look continued, $X adds outperformance more initiative, sales, driver been the ability pay so occasion the that have Yield Certainly well a Dynamic customers’ once give far, tangible year to consistent breakfast in be accelerating? you that's or to particularly the to sales In in ticket varied? investors about the that up, may absent U.S. experienced lower XXX we of Relatively, helps. endurance, $X the context think the mix Thanks.

Steve Easterbrook

Andrew. Thanks,

As sales how and is of in balance build gives that you What think I is encouraging It's check U.S. say, for the comp that clearly, a this platforms. check-driven sustaining growth built. more us us confidence the is we

So, we're price. and two-thirds improved about mix one-third improved product

So, healthy that's balance. a fairly I think

play I kind of helping it, drill elements you this. of so mean, that When into in number a with it, there's

Worldwide and is the incremental with Favorite we the look menu has activity if which co-ops the exceeding which of We've Filet-O-Fish for lift. Easter and us targets at incremental the our and for there quarter through an some instance, promotion just worked, way business. this giving was or local pleased promotion, promotional development a So, co-op on that's initiative, gave activity maybe menu us beating the one initiative, particularly good period -- been the

we -- the business, kind realized works Meal cheese with to different platform, on that heart of we and lettuce particularly Pounder continue with of the also along we've innovate actually As around the Quarter reestablished relationship tomato, around the group the Disney. options the with lift now Happy

I of given the that or platforms to through has embrace, in but have while building us now marketing to just a menu that piece deliver results. and consistent there's -- more elements operationally us a is So, think, number on invest beginning taken

from average an seeing, convert as through where we’re sales self that, of some checks order will here, the lift growing EOTF use and as restaurants we're which of we mentioned come increasing getting we we generate Also higher before. the kiosks incremental

becomes remember, delivery average Alongside twice well. typical delivery much -- on our a very part don't large the about we’re seeing -- business, the as as of order forget that delivery, still check

encouragement. we've to that us come years single a last through it’s or three are or So, look the lot is which the two culmination. beginning giving if initiatives the think together, I there's a number of business, been you the not investing contributors. in right contribution, across It's of one A

really three be to culture, getting of Dynamic sort in, I'm both the integration with a pleased. we've a say restaurants. Dynamic as months been On into the more capabilities and going also, but of frankly, company as Yield, pleased couldn't Yield, our

know So, restaurants days that's seeing certainly it now existing been to works, the can We're consistent the dayparts, running across XXX months. rollout. different menu boards. XXX. across trends different our our accelerate support with and digital of best of encouraged half course, two owner/operators, of technology significantly we've We for plug those outdoor we the And into quite us of a part across week, the

kind go from this to going would reason of are but we're believe rollout. And to time, see, have not across at X,XXX So, XXX going kind weeks’ no to of the is -- beginning we to to I'm fantastic. we go which and expect obviously seeing in accelerated by lifts two to lifts those into expect we're moment, time, about we now that see the to details, we the continue

been have management a ready both very menu our for have works also platforms, Dynamic the want global able that quickly much to all and Yield front, product Dynamic really quickly Yield. which the international What’s and We've -- is content been content very, technology this into from XX that which kind can the get in which U.S. system, taken first encouraging into but the really to subject on us because Australia. they important we've too typical it, one I digital indicates very that's to that it’s very, that we market reason of to after restaurants produce The And it to on is brain, expansion. boards. don't work, and gone prove system, the show another. the data, XXX has on the Internationally, holds management works

great. we business the the the manually easier because technology a the But, just results process to or strong. over crew of to most careful on is the is you. one of rewarding managers well. the it. quicker have The we of does suggest rewarding one the be of and order-taking it don't skis the And little And is restaurant sell, pulse in elements, makes we'll the probably most for it life don't as is owner/operators excitement get So, that our market

initiatives, international the we’re the almost is I we long But focus on drive-thrus, are seeing way, not markets, that of which a running support here just put variety quarter, of that in the U.S. answer. about drive-thru all major the by -- least our spoke last actually times and better. plenty as dropping The of we’re notably helping well. And that. So, fact wide the the restaurants

about So that I'm going talk more later. maybe

Mike Cieplak

next Our with is question from Tarantino Baird. David

David Tarantino

of guess, your Hi. I but at having focusing Good talked Steve, service, a step morning. just on about while overall focusing philosophy you to of not change guess subject the wanted And I incremental speed opening the in we're strategy. of remarks, I ask, on more changes on

traffic the at it fairly so the wondering, just and on U.S. did accelerate in speed seems in And change if end, understand level? shallow then you're traffic I'm can decline mistaken saw on the perhaps to from but there's wanted QX drive-thru that or or that. it's remain I just clarification around one growth Thanks. same you seeing? So, progress I'm something maybe far, what It the the like Did been that QX.

Steve Easterbrook

kind understand, can Well, had knew the And And we XX to get clearly of X years, XX strong areas need managing going one. whilst we’ve together, across a markets. performance for that we there at sustaining year, way but the leaders directors let our strong, probably with of our our some at the for They've really X Once we me markets together reasons collectively business, And top we know on drive-thru where that March. of around the of we of are the the wasn’t take were wrong including do drive-thru years most from more been of a the as white the added better. And or X XX, the we our trend. a it's X start to to going some service world got eyes last we March. so we conversation been times. we emphasis to renew a start agreed

talk it week-to-week-to-week. improve. about will I improvement get frankly, incremental in So, progress We to drive-thru, want the mean, you when

a here the So, things each seconds stuff the that have a time comes times, local all many few U.S. later, the a day down from initiatives roll would some late of in was difference. done. market menu, the centrally the some simplification notice say been of crafted, All We've phase. slowing of to of can they led streamline where particularly or back, but some some a we about, customer giving night also we've and the the ton moves week dynamic. menu two a had removing the signature second some co-ops chance back service read you which of breakfast rollout from There's

diagnostic those things -- we’re smooth the So, helped just also But, introducing and operation in introducing increasingly technology, the kitchens. tools.

crew into elements and real the its seconds. various for of They see can drive-thru decompose in lanes. visit a the managers Our constituent time in basically customer a drive-thru can

us attention, long see we the taking to are How how we taking it? it the gather to we orders? present cars forward And So, and are How take take takes beginning the that pull long with later? food to just bring changes. asking we’re food payment? How to notable the to many and long are

So, it quarter. of clearly really off start this takes by

for which in sense June, for In smoother well. incremental. Just that's helps as you mean, And notable. I It to throughput it's service I the would a of times say drive-thru, than us with rewarding customers, the U.S., seeing is XX-second saw more we clearly, journey. a what we're in year-on-year reduction a already. also in give example, slight that's

the in more that a certainly surpassing do. I'm encouraged. lot on. we’re markets there's with double other to international But, production focus certain And type of really So, putting

there's So more come. to

decline? Kevin, a traffic to you may bit little talk want to

Kevin Ozan

quarter. David, the regarding in the guest U.S. in second counts

U.S.. the underlying quarter. talked Worldwide wasn’t earlier, in about in helped quarter; say, quarter, things second the like And our mentioned the offered versus count. than second second as guest helped I'll in was, bit were think, about, Favorites of sales specific year which some number second this year and Eastern less little I was QX. drive That calendar benefited The trend actual in things a for the a with shift Steve of there the But, meaningful the Filet-O-Fish LTO. there That change had the some guest the then quarter obviously count Filet-O-Fish. the a negative Steve last an We timing co-ops that too. quarter deal XX% that first

So, underlying there hasn't been negative the the while second trends. the I'd really in was change a in less quarter, actual meaningful number say

Mike Cieplak

Our is next with from Bernstein question Barclays. Jeff

Jeff Bernstein

much. Thank very you Great.

that. Just breakfast had if the in the the side keen on of I you to see the just last business impression following on that you One clarification, color quarter could the breakfast got provide were some U.S. turned can maybe breakfast wondering there percentage accelerating I'm rest the the talk more of the stands, favorable. if day? whether you to quarter, the about compares of was and any it where in momentum the sales to how

the and or we we're other return out next think years that And going then, thing. Kevin, you. as targets the we now forward? of Thank ‘XX expect, to how get we through another update on three-year ask for few going outlook cash I we out an as look one wanted to just the should about Should bucket finish

Steve Easterbrook

that We in one. initiatives the we breakfast the trading results of strong did with the as a of first sticks the launched quarter quarter two, better McCafé see would performance in donut local a daypart comp take local did and get first well. in activity I'll the Jeff. Hi, be see support, the to out plus combination some

solid in we we growth. the breakfast There’s but have still as before, perhaps competing So, the in market, a growing grew to the way as back and we there's I used our was been guest plenty sales on It don't it entrants of the who think way, day, day. the the still amongst own slowest we are we're decline all sales. daypart count daypart, mentioned to, other back

work by but We’ve it more got that, know So, to remains we do. growth. got competitive. We're encouraged sales we’ve

Kevin Ozan

And returning of regarding target. cash

So, know, billion complete do year, this to we’ll as $XX track you that. our on three-years target. We're

in XXXX. Later update far an So, what that we'll that going beginning this as in the finish year, provide means as perhaps we'll then, year. forward,

Mike Cieplak

question next Morgan is Glass Our with Stanley. from John

John Glass

update of rollout Good morning. But a you relationships? franchisee also months think them. about on you where for to about or some it the us the talked there EOTF were U.S. -- and and Is you resolved where some rent around think you're relief I commissions plan they you I eight royalty And adjustments now, you of the sort get just of to Have was particular, of there Thanks. to half, delivery? ‘XX that. slowed or issues? the make in things you faster? ‘XX those greater I maybe embrace just profits, maybe stand with In there associated Hi. think back concession and Can friction done talking adjustments those enthusiasm down some to Can talk what stand in and on Thanks. pull the about made rising? economics this that. forward in you maybe some

Steve Easterbrook

thanks, Yes, John.

before, both the owner/operators them of a which off out world. results our breathing that the push similar in that I point what or strong, rollout and really I’ve and And more bigger, tensions natural. a we've kick the those and As of getting room, bolder -- of said, one money create way lot bit does speed invested vision, two to of select mean, the that's are -- very easing starting they to said in and really the and lot from lot other would the -- We were time, gave a able EOTF a say the similar the in hard are as of the time, was that by lot them. seen worked projects elsewhere they built. through plan at I EOTF really work a wanted confidence effort, That year. XXXX who a comfort. operators, company we’re a

you’ll are with the the of plan, end So, the majority the find, owner/operators sticking to their businesses really original by of XXXX. complete plan, accelerated

to. it. optional they welcome pull be projects XXXX XXXX. be for will It and in to want for to We'll forward if their They're owner/operators ready

track. to this clearly reopen, getting we which we're the performance also of mentioned the And it XXXX, as driving when the as last mean, I time was back time downtime look learning this year than And X as during than also, quicker. we the year. system. organization think that less we're in to the X because you little the on get always better. The the business helps wonderful levels, what recovery year yourselves I has projects, of EOTF, the days back a is at example, to to -- us were is an it, recover if up better it about closure sales you a is get dip curious a We're given in

which for execution So, is outcome X,XXX I probably but projects business going builds confidence them. a be these that around the those this X again is year to think stronger elements, owner/operators this sharper, our in

clearly business is this With delivery, owner/operators we’re this a The yes, opportunity. keen know great roll to out.

face the a in money with to and We our commission costs as have, best it around encouraging. want the world, can some they to out make the as them them company, we heat find as of our we, will to owner/operators with each a money We order of an to of how make markets result. it out in make arrangement of take

So, far I place. a we're think better in

in probably I a on demonstrate voted they within here the delivery. is that a in think third-party I being August, the rent once the And making the week, and about going have with restaurants it moment. Eats operator two the have marketing owner/operators dollars sure the second to of this got confidence right. eagerness really And to on U.S. the we By ways settled indicators of at on mentioned the arrangement new with my end campaign behind DoorDash operation just the put marketing national get that will embraced think, Uber I Houston we’re the integrate probably we two XXX around with we’ve X,XXX-plus that's just technology they've and was DoorDash. comments, them, in around which restaurants. opening

seen no which about two either we're at of our X,XXX, So, have partners with the there on other around about means, on restaurants we've kind X,XXX Uber perfect August, commitment business. about owner/operator depending about have going, key world be coverage. There’s gives DoorDash we’ll additional one crossover. the showing of And that we've our third-party incremental is yes, already and Eats. we’ll delivery speed that That again, good And got hence be it. the operators. as X,XXX up strategic an you the X,XXX There's behind by or going just end us

are Customers solely, typically but are not typically, third-party app. loyal to operator one

where So, in we’ve and got Uber where got seen as the Italy what around Deliveroo Glovo, three, elsewhere such we're SkipTheDishes we also Eats. world, know Uber seeing platform. from when to Canada We’ve we’ve we the Eats added

partners the confident. I and in with But good year, XXXX. will to So, work result, confident of the much operators, mood decline cash experience the flow got May the the that feeling it, are think their cash they a delivery eclipsed we’ve of in By flow this and come as we're growth then, more the saw ultimately, of incrementally multiple operators.

of gives that. satisfaction. as that a June you So, great continued imagine, can people sense

confident So, forward, that and growth. lot them a in flow they we And build committed of months to they’ve and plan, X to lot and such they're a maintaining a business committed business want we our committed now have row success. trend because to this growth cash to

Mike Cieplak

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

Greg Francfort

question. the for Thanks

few increased that how is, were do And time Just much the front last capture the then, front going as to of kind how going the you can product XX-second, back strategy much years? times, are forward? or to question And the very savings? what you you much to much. think recaptured what's what drive-thru seen opportunity there as have maybe guess, is of key on quantify I up? address and menu more how then, to And Thank make you in the changes percentage there with you those in you have have the

Steve Easterbrook

into get of business is in obviously, XX%. XX% the upwards Yes. XX% a of can on U.S., the drive-thru only certain all as depending got of busy it I drive-thru service. where wouldn’t mean, the we've drive-thru well, drive-thrus the how I in are. Europe by markets about details do differ to They of country be restaurant whereas here

different major totally a the across creates time that service I say, dynamic. would markets. So,

ourselves enhancing notable, the and down to to as knew abundantly Obviously, do sat up not time set better, be wanted in which XX peak throughput, and would critical we about be notable to we particularly customer those this times. in we service As seconds be to it. also most business to then eases March, that's the

There's of is was mean, Experience with it. store, rebalancing counter in Future. There of the the area, a front aggressive focus that. initiatives number I heightened I a to of mean, some focus, getting just rollout the understandably of different dining just we’re it

innovation really team barriers and to to market our the now are So forensic a and drive-thru, basics. on selling certainly of and that more right the I it's menus think by got example, making the our menu, and and items for on just through operations focus people center But, positioning, analyze in our identify those global margin complexity service. volumes, contributing not starting but certain training not far the incremental things are there much slower-moving sure we’re many ability to we've great

number to timer in the around around providing you this, the not tools diagnostic information drive-thrus I area, about XX that forensic now. smart the doing of we're fun. Europe now tools of first ago group, a make captured it's to and owner/operator managers. or about my getting a have well, the your attention saw XX the service as the drive-thrus actually competitions enthusiasm markets, then probably crew we've majority rolled of volume out XX it now months menu particularly making what those and the But your Probably the in the to each decisions. is among kind So, had the probably just the else restaurants, managers just local in to And to anything I them saw months can mean, Canada have we tools drive-thrus in they menus markets. these ago. that all in technology When is had you. U.S. and most drive-thrus of into and the drive-thrus There similar the competition, how are was tools

incentivize A, it use the can tools enthusiasm fun, these in in many identify we just make to barriers So, getting are crew. actually management and but ways and where

So, at. actually we’re seconds just months are some more in. I'm or three XX We’ve to quicker where four now encouraged which come. with markets XX,

U.S., I opportunity And got making I'm they've of So, bigger the they're focused getting than some is good than where on proud know headway. better XX. at. U.S. they're but the a the

Mike Cieplak

Geiger Dennis UBS. from is with question next Our

Dennis Geiger

you've the you're specifically opportunities I guest where growth a I U.S. guess the about context, are could the I to casual the for Thank there to think getting in customer, questions. Maybe Any customers, casual still about and U.S.? convert strategy to continue customers update up that a give, counts. show seeing the bit just that And where biggest talked that's progress discount improvement? just Thanks a to and in about if more customers. converting then highlight thinking the you more past retain you. Steve, how you wanted if you're on regain that ask the could within bit and

Kevin Ozan

can a Dennis, Steve in. it's chime I'll stab that and take Kevin. at

our certainly we've about, progress breakfast. to as at far opportunity, be or I as biggest talked As one of think, continues opportunities

new lot into there's Steve been that of entrants As talked a space. about,

a are players comp more dayparts. of new not the most there's or growing, existing breakfast, really just that I'll many count in have at among So, say, But kind scattering, of units. guest entrants caused guest the of counts

kind as fair strategy we will. As convert share, regain our either in dayparts was didn't retain, have us you far the other around convert, areas of always other if opportunities or for that

our like It just those taking areas frequently. we're not opportunities, potential more having of coffee wasn't and snacking further come necessarily growth that some areas. areas them of and but and in existing as customers strong are So some

snacking. there are So, opportunities still and like again, like in those coffee of some areas,

personalize and apps, opportunities. what through it at with the one That's whole digital of means, through think get customer way, point. further customers. to think, of that's take to program relationship kind big loyalty is of and there's easier our our one both purposes where can relationship opportunity, and I digital whether offers better existing of and But, for is, know this the customers, about we some we and relationship existing expand is our the that an EOTF

biggest there we call it's the not is more that Again, The a being breakfast it's we to U.S. we because in fight on customers, to just losing losing U.S. it's opportunity those us really continue counts but here what losing for of the regain dayparts. customer probably visits. call it think, is it in of guest we will do environment guest to it a a very I a, counts But, do about, And focus various be count, street competitive guest need some the lost.

we that as it's habitual as often you know, time, breakfast ritual. not a if some especially visits, So, us historically. And may of which those is, were as additional regain they can visiting customers be very a

And be so, it if huge those benefit. at we can a coming breakfast, get would customers again

Steve Easterbrook

ecosystem Just to if you we're support comments, Kevin's building the, particularly technology the like, here. around

them don't drive-through, want them, when we've they For us got is down. app to going slow to for themselves, on a order and Once get there, to our it we if and orders customers us Or and time transactions transactions, to customers, pressure our our picture the have some Uber to process the they're it example, through this Eats, with working them McDonald’s the will and without valuable we're we link, relationship started with home partner start be drive-through McDonald’s the less app. through to the slowing also of though ways getting a build enter having personalized to delivery, eventually when good themselves delivery, we can those a ability to which in-store to self a valuable for really even route to identify the we're again, identify of drive-through person-by-person. to I delivery route think kiosk. be make And down, at find you home

to will think make customer that to perspective, be from more I And experience more customers. smoother more just enjoyable. ourselves those for incredibly the us relevant interesting valuable make and and

more, to here to a quickly say So, expect got can the got we've initiatives innovation going culture choose those. to yet, customers could how of but initiated. certainly to delivery some excited there playing or markets, it, home by piece Nothing better the number in-store, hear are scale already I'm offer working you drive-thru assure the is really on at on got a saying our right number we’ve now of been markets at learning themselves of to in you'd I initiatives believe We've that we've they and the of best very we're very, about is identify we business. what way customers out.

Mike Cieplak

with is Our question Jon Fargo. Wells next Tower from

Jon Tower

on the unit Great, I growth. wanted thanks. talk just quickly to

I think today, seen to And you bumped up years, expectations past your XXX for over numbers. net the you've two nice a XXXX net. jump stores in absolute

this you growth this So, the discuss not or past? you. in whether What's type can net to in in fueling or expect Thank markets, than returns better of you the persist openings future? franchisees new seeing

Kevin Ozan

question. Yes. Couple Thanks, John, the of things. for

release. call the in guidance XX it section the what's quarter change First, is slight in higher of it related I'll was last than of less closings. driving additions the number about outlook that change, Really, net to

in but our closings number markets the are Operated in this to anticipated, be, half about will year to is. we the be Licensed of those a half in about closing that change the and what going gross them of are year And beginning our of So, lower. thought similar was originally openings it Developmental that the little bit International we half for markets,

still about a think our we unit lot mature of in how markets. far as even potential, As there's growth,

Canada, new believe. like a growing units, of opportunity even have Italy, continue to France, the So, and lot markets long-term U.S. Spain, we

is helpful in in substantially, portion Licensed right China is business markets, use which Developmental changed see their way the are model openings capital. DL now markets, large you actually our what and the our of what's Now, the other we've

pretty us So, it’s to for a grow. efficient way

we by So, the our that see I in like more both to units, in new spoke own, mature continued our just about. you growth should in ones as well markets the expect again, DL as partners, markets

Steve Easterbrook

hence, volumes mid-size out operated on. I throughput to on capacity mean, on sales increase And double-digit I've that’s are putting markets Poland, restaurants pressure of Just comps. the to Netherlands, a top that. significant of in some these just comps to markets. Recently want Italy, sales to shout and clearly in been of add some double-digit and give I creating doing

previously two greater them remember, know the at And I’d to to are if spend mature to a market in units for the the because tell sort I you, called expected bit. And growth. openings grow about and time sales pace segment time So, growth counts months they market. I'm and perhaps we that strong out up in to more have high the that heading growth a we desire both with they is pick was than team. the some an guest again of at little segment, ambition you there Russia a the with seeing,

we stronger the So, is eye grow the we're close stronger real the units confidence keeping on level business, well. to grow And a as the then the it.

So, by end the the more come to year. of

Mike Cieplak

Our next question is from Brian Bittner with Oppenheimer.

Brian Bittner

first a refranchising all your much than of I as us little impact, positive talk with It's guys impact, bit the they've similar but you expanded about certainly know think the were store level a Can Kevin, more said seen analysts quarters. you in quarters, and five recent time, in were you've probably level States? margins forecasting. in United healthier the I

up on you Can margin how the believe impact Thanks. on what just second similar was EOTF a trend that? to into tell change And seeing this franchisees half? drove the comps you expect us this then and net quarter are what following the if quarter? So, you change the so, And that EOTF.

Kevin Ozan

store company -- start talk margins. are our have me restaurants. And those we the with margins, I guess, obviously, about operated Let because I'll level

detail I those. related see to So, can a lot of

of second the first all XXXX of say things in that the impacted kind we let's talked higher XXXX, than big -- work projects, bit the I that earlier the were, in in the more little other help all of we in they changes And the those beef, comps restaurants. restaurant one at in hard of higher the But and a that. kind lot about a Steve the did differences fresh thing XXXX. in including threw the field, say quarter. stability restructure the obviously definitely were quarter EOTF, restaurants there's is is think, I'd certainly comps than the

And of kind our of I’ll little near the are efficiently we've now the end initiative bit, of slowing kind so, overall just able restaurants kind less stabilize to getting as just have deployment, as and as or running on pace the as of restaurants as well say business possible. a refranchising, now the the focus

saw in the we've seen efficiency than kind we we labor of in productivity last second year. in -- more So, quarter saw than first the the and in quarter

On the franchisees flow we've side, up. their talked about cash is

similarly. level doing been their So, unit have economics well,

the probably that's change we're certainly. versus think what year, I biggest far in as seeing as last margin So,

I'd in higher it this that was first benefit for relatively Related and a the of to EOTF, similar be quarters the quarter, expect quarter in remaining we the than second year. to the say little was would

X,XXX of off year far that will coming we this finishing As but about X,XXX our in -- total. said, that's about year. we X,XXX year, a projects But completed as you so this last of complete

recovery, a of benefit doing improvement So, talked we about have big we're et Steve of, base projects, less complete now to addition are that quicker the seeing downtime, that how in projects of as kind we're cetera. in those

we future EOTF So, completed certainly benefits have we projects, continue. And expect obviously, to as helps more that those results.

Mike Cieplak

we As question hour, we'll final with top the Senatore Bernstein. near from one of take the Sara

Sara Senatore

I I if just may. have two quick follow-ups,

you the EOTF closures is And gotten just that EOTF have still this so lot last you you there. noticed would I it and that underpenetrated, an to accordingly. store dynamics the the growth across lapping it's wanted year, issue But, supporting that decelerate back thought And and any a the maybe gotten like, have during traffic the contemplate, customers to We've I really the you had you'd there are year. issue the that cannibalization? spending on still China, restaurants more so seeing some as U.S. between been and taking traffic haven't of board was in back not lost part closures? first understand in in to seeing Is you have then are I going on sounds sort the the the comp -- are McDonald’s and just of just China impression that. The was or unit traffic. are that of something up their like much

Kevin Ozan

to start can I EOTF. Related EOTF. with

we to less that closed, last projects primarily So, non-mods big are so you -- remodel we restaurants the year, a done. call needed there's had number being projects EOTF non-modernized, the those there as ones components. be year, needed the ones mentioned, percentage to the higher while the had do that This where being a what we done, ones of plus of

And we gotten better so, at the while of reducing closures. time amount we've closed, they're of still some those that have

only won't isn't we related to the before obviously that traffic. traffic Again, we started the fix all traffic to to issue the Now, related were though. EOTF, and that fair, be losing issues

in traffic just done issues. projects, EOTF. of But the as of we're of the that better completing So, piece And and we've traffic better resolve is itself all at getting these beyond more those. and EOTF gotten won't

Steve Easterbrook

really in and Sara. rapid also sales the Just expansion Clearly, China grew quarter. system-wide strong question, new grew the we've had restaurant quarter the of guest count sales We but for to in growth pick of we got up openings, China pace well. a on as

having level I same exceed more been the opening of moving that are business. it's robust. at business mean, than are five-year And out the partners of to is plans looking period core recently, our on initially exceeding openings confident would the So if track at look X,XXX the expected. I incredibly -- ending competitive. very XXXX, certainly we've probably that called you out there mean, say I are And moment.

expanding. other class, and type heading people pace a The middle of of the it average towards which greater Western market. QSR there a are emerging the checks You've is is at there's affordability population mass seen But huge affordability.

are long-term and certainly with excited as it's working about really the the very pleased about, terrific They're job. the well. confident out we're So, market future we’re way there, a doing partners

keep business. they So, be plus if comps as indicates healthy sales this XXX XXX position after the And time, last the clearly, more well. year year same the openings for than it'll at that a can about then, going

Mike Cieplak

for everyone a Have day. good Thanks us. joining Okay.

Operator

investor Corporation McDonald's conference concludes call. This

McDonald's (MCD) 26 Jul 192019 Q2 Earnings call transcript