MCD - Earnings call transcript Q2 2020

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Operator

Hello, and welcome to McDonald's Second Quarter 2020 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded.

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

Mike Cieplak

Officer, and you morning, are us. remind Chief everyone Executive in want With forward-looking Ozan. Good Officer, non-GAAP President Kempczinski; joining Kevin Financial available on Chief that morning financial me thank GAAP to this for reconciliations Both everyone of today. I release and call on and X-K statements the Chris also our filing call today's are on and mentioned measures. as apply documents measures the on are call earnings of corresponding website, any to our comments their our the those with

and Following ask over questions. prepared that yourself you will open this re-enter question, more website. question we webcast being limit replay I is you one, call than a if pressing and queue your most have now, please ask first morning And queue. for I'll Chris. please via your Today's conference one recorded is the remarks to it also to for our being and then turn

Chris Kempczinski

and good morning. you Thank

first reopening, reflect best the the earnings COVID crew. to safety and the our world our approach uncertainty days quarter talked what's I As XX amidst call, a in methodical our customers and pandemic, grounded ago, I in back to short about of for

closed work temporarily second quarter, had results. safely to together reopen improvement we late was system restaurants in nearly to as that continued the During those sales display; the dedication McDonald's March, of on our all McDonald's leading the in

also thank members, continued to operating not And hard a their open dedication, markets would our want dining nearly business. today, are possible. Without company with many begun suppliers Almost have you and huge rooms. reopen are all employees. say I of drive-thru and crew As been to work to delivery. franchisees, this and for markets have globally all restaurants

a of position said have from pandemic entered we that of We the that strength. since the start

velocity growth in plan world. our around the several last the markets strength drove years Over broad-based

our success have throughout possesses More we McDonald's however, advantages to importantly, the built believe evident is advantages ensure crisis. last. that These several unique been

known brand. to these the world's trust proven seeking significant one First leading be advantage is has customers is brands, times. the a in have Customers McDonald's strengths. for have safety on. during our iconic and can value uncertain been of McDonald's familiar a and brands count playing for also And rise, customers they is on convenience the concern, McDonald's our the historic need and to while top is

And during improvement. these also else. us UK, pandemic. drive-thru more seconds has continue the We more serving develop ways during put of have IOM X,XXX modified times to serve markets five has all drive-thru that to test markets every pandemic. across across XX the most in execution new Drive-thru XX,XXX customers. contactless major matter We across how almost has market our introduced satisfaction. improved prowess an XX% Amidst been restaurants changes, than customer sales allowed this major channel our Germany and appealing And penetration XX for of these been the and closing our is restaurants. modifications to operating restaurants about of then the seen our McDonald's significant reopening menus, particularly new safety and machine. to U.S. markets: in service markets another during our know ultimate operational Canada, system all COVID. new made all-time customers and of restaurants, our and Second, anyone run has big drive-thru. unmatched in convenient satisfaction hit Australia, increases while safe the our highs McDonald's procedures France, We've weeks, averaging offer drive-thrus in customer to improved to and great restaurants, a customers speaking Within actually Across

Finally, sauce. has the our been suppliers always and our will employees, secret be of strength our franchisees, and system,

is local system's in and beyond communities countless identify able opportunities going unwavering could of fostering the to pandemic There drivers, healthcare be to us above keep they those XX,XXX brand been building and and people truck neighbors Thanks the to three who going. committed commitment. have our are is is there market level. especially Our comes has this local operate to leadership, the our franchisee to to three-legged needed system to stayed examples the open, community to the make so the for stool mask feeding last customers. workers our for community. from most working good nearly We They franchisee communities months. that shifts respirators. been responsibility demonstrated we the has few and rooted local take And why be where is to ways Every and from in we're which at meaningful most important strongest and

food, ensured no feat, the challenges material, toys, or for in of globally. chain globally from few supply to in the and that weeks, suppliers. the both incredible our of breaks categories chain have an virtually experienced suppliers they past supply and packaging, our a the and time, just strategic scratch. for teams our At is months, in partnership had PPE that some testament global This we locally, supply Our a other significant given equipment same with built strong teams, matter a

changed To QX largest and crew from about including XX% we've details we successful all In UK, the ran this highly reopened our the the Turning guidance restaurants will local I'll of were results including extraordinary strong a observations and and are our Several some driving and QX, we In headlines operating is open also XX U.S., periods virtually Meal which France, then, with during remained completely You the customer nearly segment the to and results, spoke sales Spain, of dedication provide sequentially methodical all open pent-up and a saw and for state quarter. accordance closed remaining program to open and our demand in health through last open, seen Italy across of Operated encouraging operating more Kevin, In while teams quarter. segment, International responders. provide procedures Market ensure financials. we in first selflessness key improve our experts. approach, kept few Thank restaurants serve were recognize nearly markets customer our when we however improvement. prolonged With We've restaurants to sequential our a customers. restaurants now have safe manner.

segment Finally, our License experienced several International throughout Developmental the quarter. challenges

pattern through is severely improvement a high early Our the penetration. due as Latin pressured our several more for less Coronavirus this China that and remain of suggesting after activities and drive-thru convenience wary recovery, In thanks has slowed, our to brands developed Worth Japan of cleanliness incidence with pace comp business sales positive partly noting to now XXXX. into we solid Japanese in signs reputation quarter, was continue customers. social countries to for America and customers had expect subdued of the

Nonetheless, can health operating notably around a of consumer in sentiment dynamic see, industry the new the the COVID-XX are confidence. unpredictable McDonald's threat trough public the situation many remains the vagaries create our in overall factors In to adjust it franchisees As situation, represents environment. going level and I an of of I worsening. share world, to markets grow continues pandemic believe of markets learned growth, the as give our environment. to QX Regardless our and market forward. most as performance, that to you be the U.S., appears me to believe, the this Three well-positioned has depress operations

First, the strong. health is financial our of system

providing financial in for injecting Government also in our targeted, rent the we further adverse reduced to COVID-XX franchisees these menu temporary franchisees. Chancellor's UK you As actions flow supported the P&L. quickly assistance we're modifications and And nearly on the McDonald's additional system the strong franchisees and the such liquidity know, When cash program royalties significantly and to impact dollars average the pandemic. needing we restaurant. move operational of have our outset necessary, billion Collectively, a PPP and relief as program of defer introduced of U.S. the support. have programs the the franchisees provided at timely, into

in XXXX. sizable we've to amassed invest half Second, back a marketing of the chest war

markets major activities. value spend and their most reduced QX During marketing significantly

in spend our the As be we reinvested QX in XX%, QX. chose until to stabilized. down U.S., example resources conserve as was and will now an the funds marketing situation These

roughly Additionally, our and Together, we drive-thru, strategic these laser-like across will spend equivalent call as in extend the month invest previously balance recovery, announced, we've one of the our to delivery opportunities U.S. an each result owned we in Markets actions marketing digital. in marketing also And in McDonald's Operated Thanks every will million to and a sizeable these additional advantage. McDonald's to our media half and market. of incremental channels for well accelerate in to in focus is International third, see XDs, the second of and the what developed increase spend foresight, our our XD year. $XXX

We're in Again, You'll more demonstrated hear want thank to our turn for to serve. later our QX, trust to resilience in results. to want talk in and our now in second McDonald's. I'll year. dedication about I extraordinary more detail our I strategic it for your the ready thank over customers, you Kevin quarter and the in to plans system XDs the to they about

Kevin Ozan

on comp performance move for by update quarter Thanks, our to July, on an P&L, some walking Chris. read on on the end start and our the I'll position. items early financial through an with then and

the QX, While and for as were our its the by eased. sales XX%. customers. Global of quarter month we XX% reopened June sales to improvement the comp throughout nearly were sequentially improved Chris restaurants about XX% down into through and open. our all markets of this improved And encouraged down we're quarter, the without have Comps quarter serve global July. challenges, entered reopened throughout with was as restrictions as the progress We noted, quarter not comp with today quarter, and

and June, in restrictions, recovered on is concerns XXXX such resurgence. factors Performance sentiment While depending government sales. nearly markets the as of varied uneven, consumer of giving external we our across and XX%

likely larger as assistance we present, to consider The be check uncertainty, market the through the consumers general this is pace to many orders the from at some long and have recovery. markets economic That we navigate well-positioned reliant sales we're environment, of and heavily with to operating counts especially believe themes as rolling-off government on also growth virus For as is impacts guest number drive-thrus in said all. of negative. continue emerged. consistent Comp

performance performance. May across sales markets. June temporarily higher quarter. with heavier for Chris restaurants sales positive at several As down delivered drive-thrus for like across foot markets percentage proven markets bolstered restaurants early competitive trend City recover closed reduced segments, delivery recovery. a Operated a and in as we're for June, tourist from of mix of France of experienced advantage UK overall and and Comp remains its international quarter, and mall or has with Australia Markets nearly our reopening of seeing May XX% for reopening higher sales, the improving showing strong key were In a half traffic International impact the with the seeing in are the comp began us a to a by drive-thrus to quicker segment decline travel are Center Australia the have slower began sharp delivery both XX% to are more in drive-thru month mobility down doubled the concentration looking as XX% our Market than mentioned, the June. be of locations of sales to and suppressed. and dependent

recovery the customer we've our markets. the of were a dining rooms. throughout sales of seen is uptick in as step across While restaurants percentage XX% larger Pre-COVID, reopening drive-thru nearly our of a segment, in crucial in a total significant orders

impact in almost or are still limiting in continued local of rooms segment the Today, the although limited negative high-single-digits. although has the the restaurants two-thirds about hours all have substantial they many improve, closing capacity So and sales dining In dining segment, have operating in reopened with restrictions regulations. even the IOM July, on comp restaurants or to a dining based area results. on channels such as remain

open to quarter, and commuting Turning to were weekend the U.S., X.X% down quarter by Breakfast the to narrowing. routines recovery we've is June continues and disruptions all our greatly particularly for is benefited XX% the improved disproportionately with from of the down X.X%. Throughout gap like recovery, impacted of comp progressed our the remaining customers still be locations. in through while as with nearly weekday nearly pandemic, to sales restaurants lagging serve drive-thrus we

sales contactless again XX% experience, of for more shifted quarter. a our this drive-thru to nearly As customers accounted

thoughtful who the July, also seen to to Mid-quarter, Together country, dining transactions today in digital uptick on across in for open. about continued sales have customers enjoy U.S. We segment with continue to as seating see reopen began paused capacity about a dining with responsible with food comp positive to June we rooms down the rooms the to reopen reduced in delivery for restaurants. time sales with the Comp an premise. and International early quarter, and the we has X,XXX the their per In resurgences we franchisees, we've and May taking dining our month. want both we're slightly to July, Developmental of determine remaining the U.S. through during rooms. XX% comps and The improving month right turning see License approach were XX%. down the

comp geography somewhat in recovery across for competitive segment, has recovery. of fact consumers Increased remain while as positive closed uneven, schools Latin have mentioned, delivered pre-COVID impacting hit the routines, pace resuming especially of America quarter. the been are Chris resurgence hardest also the And Japan activity been that cautious concerns. on was in the sales and the As light China,

with new of XXX remain confident has China, opened restaurants We restaurants about unit a XXX year. terms in opportunities this growth about new In June. open through new restaurant plan China to development, in

continue the somewhat proud uneven gradual and While we way to be our the markets the to recovery globe near-term, for responded to teams in many expect the around of we're pandemic. we've and

specifically years, become over our last convert model business system-wide the growth billion margins we local the quarter. franchised environment, entrepreneurial couple for spirit income. to COVID-XX margin the business more about the were bottom as key a a are and P&L challenging heavily line. Despite designed is several of related owners operating XX% top-line McDonald's P&L, into in the operating Franchise of our tap There and to Moving efficiently by of over to $XX impacted component lines generated dollars restaurants a sales the items. overall represented

increased G&A in currencies or First, for $XXX million constant XX% the quarter.

is an in that contribution than was the QX million, more making to incremental amount about Chris IOM and mentioned, company costs contribution and $XXX to incentive The included U.S. lower marketing G&A As markets. compensation lower which for related offset accruals. travel the

significantly still of a minimal restaurant Turning other the the full-year section, restaurant year, to for be operating versus we gains and last activity to income the expected expense year. as of are sale on sales remainder anticipate down for the amount

bad Our be rent an our abrupt of projected finally, equity the for the distribution and affiliates for And This million one-time made reduction the shifts in earnings deferrals is $XX and reserves for inventory. full-year additional to consumer recorded in to $XX related we million early for product down and mix in to payments the franchisees, substantially. royalty for was of debts QX. obsolete supporting further demand pandemic. centers result of about We

coming we've taken into As to our business the preserve I've financial underlying an system pandemic our the actions health of mentioned strength of flexibility. before, was financial and

we program share early in repurchase As March. suspended our a reminder,

financial new securing in We us broad-based $X in position form deferrals. to of rent financing by franchisees ways. provided in QX. and financial We primarily our assistance the our the to royalty enabled also invest billion liquidity This a billion several nearly $X.X system back of of in bolstered

and expect franchisee for year. positive remainder of organizations. specific the of performance, licensee the been was that an at-risk building advantage years continue. a using operating we're still financial liquidity The flow of developmental strength for year. and As making for only anticipated deferrals of the QX assessing also McDonald's positive further framework QX, for quarter on negative to expect objective our the the We're will we expect cash that be our Based current on financial health second franchisees require and majority for has our first to flow broad-based organizations the of a we of decision free Further a and the and and a percent health assistance. support, of in small competitive cash result, collection in free the half we and

mentioned, marketing drive the in accelerate invested we've IOM growth. and further Finally, as U.S. recovery markets to and incremental we across

the a project capital development pandemic took terms most activity expenditures, pausing In the very work. during of we onset to approach by of practical

are invest roughly for to franchisees our business spend billion many $X.X the capital expected including half able some completing and dedicated projects. XXXX work About and willing $X.X now EOTF As be resumed, to billion $X.X about original the will XXX U.S. the has is versus billion. of

this planned restaurants previously Additionally, we and Of is U.S. restaurant XXX future enhancing U.S. in for now accelerating we're our franchising restaurants in McDonald's Walmart financial year. volume closures years. new XXX low The our of Japan. stake to strategy, flexibility about plan closings planning the divest for with year, are to Consistent open portion XXX gross net some half store over this locations. a and

the business local reduce of result the will the the believe gradually it's McDonald's This a time and the right management volume take As we in some our because over few time past in McDonald's team, confidence performance years, our the the Japan of strong stake of Japan of market. shares. trading low ownership to

while we decision our with XX% we provides own flexibility reminder, additional least to commitment business, financial of to our ownership. This at business. us a As the also and will about Japanese XX% demonstrating capital retain allocation currently our strategy, execute

priorities remain uses of same. cash, Regarding top the our

the ratios. shareholders. to in After for debt elevated to and we'll near-term in the leverage growth second reduce our investing to business that, First prioritizing look dividends our lower

franchisees remain shareholders rewarded. funds duly continue the a utilize manner ensuring financially to is on company strong, focuses our our and manage the to are our judicious We and that will business, in grow able

turn back it Chris. Now I'll to

Chris Kempczinski

Kevin. Thanks,

competitive grow to position ability we're ahead. confident look operate we to ever Tomorrow, well-positioned crisis our strength, our we McDonald's, this Here market from first and holding through of digital in remain share convening connection. we're of as at this calling enduring guide move operators, touch continue to will that point forward. suppliers inherent of to reflect our values by we system the worldwide. worldwide We're a as strengths our the use and highlighting us We'll employees it on

since Just towards tomorrow. advantages, of solid our while we'll as better to we've unique the and meet on equities very the today, building beginning, a core needs foundation, draw done

to to Our agility use resources of and be will drive environment. resist customer importantly to will current focus recovery and the as strategic we our our evolving continue prioritization we adapt

us will continue year. growth elements evolve velocity important, And updates be Q&A. to well plan of to has will as later the We of in the strategy While the begin plan to customer. the the needs to and the we'll sharing served look forward we now continue meet needed

Operator

Thank Instructions]. you. [Operator

Mike Cieplak

is Our with first Cowen. question from Andrew Charles

Andrew Charles

thanks. Great,

has a efforts years value sore and in over several bit the the business help innovation. left breakfast place U.S. been to of performance Your a focused despite improve for on spot advertising

a little -- positive talk with month clarify So month? And different morning bit under let slightly or the me do for about at one routines during positive a the reinvigorate U.S. during seeing be July efforts just why are breakfast disruption? point pronounced different can Joe, thing comps you during to trend when slightly will time Thanks. some they

Chris Kempczinski

prior been as Thank of about daypart Good challenged and morning, to we've on due one the the has question you breakfast on point. more for Coronavirus. Andrew. Certainly, the calls, breakfast talked

have time. challenges you a had You period we mentioned to longer over that fact breakfast alluded in of the and

one been only a more was level we've was much has been in prior you of there's the think activity that. breakfast. to driven growing. daypart a that as know areas there increased that competitive have couple Certainly pandemic seen the I Breakfast that

around of energy things focused on other it us were flooding some and of as a just was were grill, off were result, like say time focus I and for hot as were not more the then of daypart. other that And breakfast was pressure also and honestly we a competitors us. certainly into dayparts we so out the rolling for investment. one would area the as took lot And there That new

a breakfast. emerge we of a be this, is out investment part as to so it rededication And standpoint think from to marketing after going and go of I certainly

in our think going advantage fast forward. have we're as be will ability to well. breakfast right at drive-thrus now an through I we is certainly innovation the looking for that And breakfast then

share at though We're U.S. If we've our how in. certainly the look you the pandemic, still daypart. breakfast is through the in actually even challenged most performed growing breakfast

we're while standpoint, drag And operators a overall share are I breakfast to the it at so know U.S. and hopeful that continue an from and is Joe gaining trend.

July, to about to let it As some you to give the over specifics. pass point me Kevin,

Kevin Ozan

Yes, month, be with left, a trended for little U.S. to say related full been it a most running the And slightly July also. positive month. positive but throughout days they've expect for to up bit comps, Andrew, the few we obviously they I of the month slightly

Mike Cieplak

Tarantino is question with David Baird. from Our next

David Tarantino

of question markets of a in if or getting exclude a that Hi, when the Is positive? good could you of in matter a will what us would impediments all was IOM you needed morning. units terms to be, number? the I related to I in second something running be comps you are and in from do think a wondering, you -- Kevin, biggest positive closures else what give see the and sense are back guess the do impact the think those

Chris Kempczinski

couple right. A All thanks David. of things. Yes,

in talk Let's and talked they primarily talk Australia We information. July. positive. Big it's May July July. I'll round give And talked markets, in June, be a quick you about about positive since if to I'll about being continue being Five of most positive Australia, the about our we recent will.

the U.S. remember, few addition the remained of that through Now and open Australia around markets Canada this. all was world to in one

similar how again just remember U.S. are open. behaving, relatively So different in markets. remained they I'd is meaning say than they to the that And turning slightly a they've certainly got positive little the European Canada, profile, is July.

France UK obviously rooms. so to France little that kind proxy Canada. So closed in that May, in slower I began return. a began and beginning Germany reopening completely I the Europe UK reopen UK different. little mentioned as and profile were dining UK, they're to is is June. reopening remember, the U.S. just of use a for a France,

So markets. dynamics those double-digits. I on look going they're call them will in at total, If different you've those high-single-digits markets to three in roughly I got negative, the European low

overall, those five group negative single-digits five July. that mid July, of look high, when that in you at for So in running sorry we're markets probably I'm

As far that factors as the things. those, couple impacting are of a

I think one David, is a as those the several I that, were of closed. fact mentioned, fully markets,

it while just, week if couple et all immediate it's take a in So little rooms an big drive-thru settle The get down, and of up a to lines bit cetera. normal, there's kind see to and the say. of closer the back we is things thing. back weeks rush a reality is build or after of does I'll more to a time Dining

I of mentioned COVID were our into XX% script in about As going my in orders restaurants.

specific thing some order I that so back, on the dining those it'll goes And that's markets other those think to locations. whether travel markets. guest then in in rooms tourist an get all of or counts be fully is of certainly And locations the open centers getting European

tourism. countries the Spain's, more are on Italy's certainly Some dependent France's,

impacted so some And of those markets being than see you more others.

Mike Cieplak

John from with is Morgan question Next Glass Stanley.

John Glass

better? primary many the delay of what franchisee factor? about other better gotten an year, talked because in there's of good terms unit construction? the there to is talk about to accelerate that how opportunity as start has growth Do was of this growth Has excuse COVID? going those this it unit maybe international of thought When what's it reducing Or growth. opportunity a gain a particularly time was for opportunity think that you in have Is markets. I forward, McDonald's lack result long maybe you gain and are and think estate is And willingness question you and about What me unit causes it even to some changed? share, opportunity just that a distraction? the growth as think was ago; bigger unit restaurants My Thanks -- is real this not morning. pre-COVID there about a a at

Chris Kempczinski

Yes, thanks, John.

think both what So certainly let year disruption was markets. we in point, franchisees seeing our about me a which to there and or construction let me first lot I of near-term the year, immediate is, yes, talk your are those this this industry in with

year. may that you're that's in say be in openings bigger there I'll which may especially So some further having say independent are where some going opportunity seeing forward; seeing, challenges, I why units us. doesn't this the That Europe, our we're reduced opportunities restaurants why belief present change think I'd for

So expectation would unit to And year, XXXX. there's kind go we of thought script mentioned our for grow. beginning we in that a Europe, we especially continuing that for our I is growth again, next believe China been back of in have in we where lot opportunity to is growth.

our opportunities think pandemic expectation this that's now now of happens to in a Europe, our We of to right near-term on markets think forward. back in is our what going year having Europe. But there's we significant the right they'll expectation units the year. unit bit growth still do with So Europe. of have obviously in key our and get lot this disruption, open XXX that little But all which we slowed dependent because a down

Mike Cieplak

with Our Jon is Fargo. next Tower question Wells from

Jon Tower

Chris, the obviously, curious, taking including you've mentioned all for Thanks in you'd I significant items particular, menu operational question. you've changes just breakfast. I in the I'm earlier day pulled and that off U.S., procedure made fairly some think, believe some

as you can the pandemic So to right you now? remain temporary permanent discuss will versus think tied changes are what what

Chris Kempczinski

Sure, thanks, Jon.

to just made menu. to restaurants a a menu, number some challenges It had with the the certainly productivity largely look number core It to us. our positive world we menu limited operate as was around to U.S., and very easier benefits benefit had we went It margins. of Coronavirus. levels you're at and also around particularly right, staffing you if a the had due of in the So other markets major

as very through helpful we navigated was of the quarter. All that second also

As it, add out in to menu. items us a as is to that prior think back we of it the going bet safe come you're see said I've times, I

going to not also back go to I we that where were. equally we're think a all it's the way safe bet

our And make so bring market its And we every the for sort is I way that's looking vary U.S., there going market every talked menu how have been, to that going but that is add some then items the this earns in the not year evolution know onto just about later it. mindset is think I team has to mentality of just sure menu. U.S. that market do operators to looks is planned at that how with is item back that U.S. that on. let's And with innovation

Mike Cieplak

next from Palmer David question is Evercore. Our with

David Palmer

very know in I'm set sort terms only positive being the is that really International Thanks. talk if great units you in competitive how meaning don't making a rooms get pain know be to relatedly three in you're informal walk-in trends a I the trends. to that eating out as trend only you're to that in things maybe of you dining and curious if know format way by particular, out and and to could market lately could Thanks. In doing of able for market walk-in see versus from there bed big share drive-thru your sales Operated the back with is and Markets units Europe open.

Chris Kempczinski

just that are countries a walk-in talking Europe, has off dining I Germany France faster. we're in under it's quite Europe, some back different say anything variety David, much faster we our markets. and would that remarks, is bakeries, they of bit to Those take smaller dining And do room on for business. of now you do open. kind have Kevin to have competitive in almost media going operators, I'll a business. But first recovery that we're and that in of think we that now by-format to it general and as for restaurant what just of something attention else on add, to of create all him. in a not dining there. into the tends certainly you well. pass you had in want the more seeing cases, the you're hearing take many about to I'll of that in come add. of And part recovery in business. certainly competitors that And That an Hi Kevin about a are to details, with which didn't set, you be off habit of pressure. that in you are laid overall, more paying and if we're you get businesses those But out face a if drive-thru the even that won't drive-thru or as those Europe, from I because a the right a places the basically nice but then of like dependent to accurate if difficulty allowing the see pass worth when Chris. operate Kevin, anything tend then seeing else to fast as rooms drive-thru does a business, it his to is drive-thru, Consumers see is rooms I'll exists opportunity leads share I opening to our it It's was sort different opened to in us

Kevin Ozan

a detail Yes, give on little what Chris just was to saying. just

UK, I drive-thru. markets to sales you pre-COVID, three restaurants big if our if numbers those have are we our Germany, mentioned, markets of in the think were the about in two-thirds some about through sales drive-thru. two-thirds of third pre-COVID Just France, give a through of now that Europe a drive-thru about those about at look And the in roughly those

And having of markets. drive-thru. advantage to without the drive-thrus those quicker those the in restaurants as than seen back tend do that certainly we've mentioned come So Chris

Mike Cieplak

is Senatore Bernstein. Our with Sara next from question

Sara Senatore

point other wanted to the EBIT, China. I but markets. contributor read just at huge I it's about a you. this for ask not to And know Thank

weekends the related just difference if markets? a between you a you I that retrenchment sort in seeing there other that And risk tell expect weekdays, of just think seeing about you'll you'd the said that see recovery and what any than cities primarily retrenchment, a remain in some the be kind in from to seen us to talk of You similar see of markets, that? if to you're in and more is scenarios or expect about what about customers U.S., to that get could research of trying depending patterns you about to the are in other we've the implication that different dayparts kind of wary different and just into trying XXXX. there more on that may heard as of you guess I I'm of COVID lockdown countries, think sense or some of function is there behavior other the how guess China can in in occur? if here understand we've kind might to

Chris Kempczinski

do therefore of only probably that Thanks, have China, more think restaurants in proxy good there Sara. about the a think other probably to market. not the XX% the Start about China's drive-thru. fact I with for unique Sure. and

all when that a and it's business. so talking you And been the don't we've about, have a challenging different drive-thru for dynamic already reasons dynamic a more

one that's So big I think difference.

a different you coronavirus. I the different waves -- sort there of government on, has of mentioned think touched of of variety you been I'd also kind say and actions several

to going you in their right think are trying of wary. of non-Western out fact is think All be this other seeing Chinese competitors consumer market is aggressive been the the there and market. making in the encourage weighing come kind more you're very epidemics of the to again with do programs year in balance some And on restaurants promotional you're of demand that that of value to people all definitely What of that through I that and stimulated to get now them house. China, in go stimulate certainly the minds when take some seeing more as have China of to there traffic that it the many trying we all combination is

there's way it allow longwinded really read-through a China good to of a number saying think China, other don't that on markets. be to in I going So of factors that are

the and bigger As were and on weekends. head seeing the a difference between weekdays we earlier pandemic, to weekends, in U.S. certainly the

I'd was through now more is As a disparity leveling it saw does terms again, tougher moved and out. where it's the we've weekday. out between guess that lap as say than tougher that and disparity at. earlier. in weekend comp, But provide weekdays not the of getting still steady between and of That evening to a Weekend the -- state we we're weekend a pronounced is I and weekdays as

Kevin Ozan

And then, I'll just add dayparts that you mentioned.

is overall drag, I June That'd be market U.S. the will, both July is been I is we're is breakfast. then the but contributing Chris is. June in two. lunch biggest Dinner just gaining mentioned It's has for July. think as in if I'd breakfast for that into the declining. comp say breakfast in and share between you at say that and And positive. comps the would earlier, the

Mike Cieplak

is from Andrew BMO. Strelzik next question Our with

Andrew Strelzik

Thanks morning. Hey, taking the good question. for

of about year? bit bit more I little just I'm anything the a half bit up a role to back started expect talked of the balance You pandemic, innovation play, through in will the know to due there the back we see pause what a should year. just crank marketing just the was and of to a wondering

Chris Kempczinski

I in talk some I opportunities, example, in U.S. for some back spotlighting not that core some of about digital. the intended menu earlier, as menu, the be But spend going that bulk items menu spend the innovation say of have service when There is the innovation. really and innovation, to our would year. half intended perhaps like of that will for I bulk going of channel toward be to is said we're the

may largely is right of wouldn't be deployed but for view the I war largely is looking base against core is going So still think are makes chest some business to it is sense innovation, menu favorites, because trusted against our being that the sort about consumers get now us. it why that which for

Mike Cieplak

with Chris from Stifel. is question next O'Cull Our

Chris O'Cull

I frame is the And have in check increase the markets? sequential in the quarter in you seeing certain change you're the could was check increases Thanks. or hoping U.S. as any morning. you the in through moved seen you Good mobility

Chris Kempczinski

Chris. Thanks,

So the there. this Also whole due so we'll the kind check think part of mix seeing some of check, it pronounced out big larger Part send I your think on of much dynamic, numbers mix, what I during someone is family. more of saw delivery the out sizes, becoming just was behalf to were order a order QX. industry-wide there to we're

And sustaining XX% the in we're so imagine in all looks to in forward, what the meaning check we're starting terms going seeing going more rebalance it traffic levels average up U.S. that of you what call like average see or increase that, of it are is And would normal checks to improving.

a terms driven look come bit of we contribution environment. negative growth is being seeing trajectory is starting by in is but largely check And to more, traffic it improving, but in of are check little you're you expect. down a would traffic As the its still as to it just

Mike Cieplak

Barclays. Our Bernstein next question is Jeff from with

Jeff Bernstein

you thank Great, much. very

wondering or insulate the of on thoughts just a the you're weakness, of more there's market where perhaps a XX McDonald's potential wanting just sense push versus how concerns your to brand international ahead outlook, on a get your likelihood seeing question recessionary any some might recession years change, Just value to past certain once you're you. consumer recession you the outside just look whether U.S. COVID, coming or ago seeing markets has we changed for help see or forward get over to what, to that Thank that better strategy horizon? otherwise, time willingness for the trying if on

Chris Kempczinski

even are in been and safety that of concerns. we things pops poll concern economy that we we we out the across sort and it's you of see or eclipse many would public the a in week economic our in of consumers have is exists cases, in do recent that health a do of consumers our every things markets, I that survey of one the most of did, that One interesting is around think type anxiety recessionary that -- belief public most and there say I we dynamic, that major the tracking definitely concerns

about to the going signs concern consumer the not the at sentiment in whether wrong that I and look lot consumer make would And there recession be a we're around of I'd suggest that out so predictions as certainly I'm that, certainly is direction. qualified any in all economy but and say going or there's not, of negative to warning

really through talk growth, As about tends business resilient, is, on I we But the important, it's times mix but into we our making is which of during to and I and business more go well-positioned our that's the is our key can and U.S. component sure touching including know now. number right franchisees think type potentially or are of with having our more through periods. teams be of And means and of that having markets, in your affordability around leadership that of types environment markets think what world, you marketing about so times for Kevin a conversation you're important. a something the good whether that this, that those recessionary major recessionary pretty that's a feel as

up, defensive about as One of of more of talked as coming the we of the went that I the that spread, out into support, is the make things we of maybe a sort pandemic think posture. -- QX sure system of reduction went that to in through terms some the shock marketing we need and I of ended just our

of be a or on normal, we're use affordability war kind marketing means to new the into phrase that why and the want the it's for play time about normal going normal, next to what it more mentioning operating have in whatever chest, were thinking get for you saying to can the we question. foot. kind as us to reasons we environment, Now we That's of all value front you are go need but your also how back

Mike Cieplak

Ivankoe next Our is with question from JP Morgan. John

John Ivankoe

much. very question, you thank if Hi, may. A two-part I

and the rooms event. part seat words, to example, are And consumer behavior the an to more very have behaviors think from of other major permanent time change there and to your come to a the you've going way I got consumer to basically of is ones? what that head normal any And perspective, of you in dining Chris, of curious leading using some behavior the rooms, the was temporary because as what separating auspicious is back second at you such COVID. of to dining each be question for organizational lot other, XXXX, you will that changes you obviously that with from used, if reconsider disruptive obviously, been a sitting a have next of McDonald's First,

terms we the took in after Where efficiency coming thinking right of you about are look from and you McDonald's structure the organization an view, Thanks. as job. You're forward? effectiveness point overall organizational of shortly the

Chris Kempczinski

thanks, John. Yes,

of about we that? the I on still almost and we very dine-in, went completely one On rooms Certainly think dining as last the our the I'm has this, And are do the from positioned EOTF earnings very questions call future. the on well that I through I happy into that spend for that get pandemic, I think us we we franchisees, mentioned my remodel is feel our good program, that hey, answer absolutely.

that remained the you if of usage markets like fact, at have of things open, for in up by example, is that Australia, kiosk have meaningful a seeing we're amount. is Australia some open interesting had In one the rooms dining look

playing think to experience I the new so where are with some of and future of right the the order we the kiosk channels like modifications that And this. order things did

what as drive-thru. and is dine-in the is we're of overall Kevin amount growth of today because smaller a certainly, percent of that this seeing business Now, mentioned a our

believe do able to be still I mix. traffic think not that view get of of you dine-ins to we an over be the to to going as our is longer going open. a growing our part is period We're without important getting look out time, dine-in

going we'll experience. of to mobile, important of a it's contactless business drive-thru, customers is to delivery, whether an important priorities drive-thru see strategic more the but they are use being the one going for for terms us: delivery, in the think we about the future, type part use is I of things the behavior of the that to and the of looking which the mentioned I think kiosk, their have one I of use They're why that is behavior, XDs experience, that. that certainly of an us of for enduring do to digital and be think share of for for are foreseeable are of dine-ins enduring of as be looking going own. more still can a I that So digital use on type change that navigate more

the admit, coming -- been of being there's the a of what work thank but a But there changes does certainly turn I described for there's and road, I've we that terms us, we're In to that auspicious, so major not twist heard do that. going anticipate of changes, as in I'll lot COVID be for I looking for result. have but take my all any don't mean longer-term, at must this as would auspicious, as you in

development? of organization G&A that highlight be all going all pretty And And that think look we're things in just the position the the for balance training I margins. good shape typical one organizationally. from and rationalization we about good anything that there. when anticipate the but need as for that virtually? But As will to I'll you there not I more done several think about be training How expense and we you we look areas that we things in-person to I a last virtual look we at be And So very globally. What's to the that training pretty know, significant But to would through and about, perspective, where to broader put and substantive what just on move need versus need those think U.S. at don't think do over to learning. like? group. of G&A going think going are layers do in we're us that be in that I are that the we're might I years, there to went a now. say a some at does

Mike Cieplak

with question from RBC. Chris next is Our Carril

Chris Carril

to and in other discussions on is the beginning innovation continued forward? greatest continued demand deriving menu of are or good recent franchisees, improvement focused focus and focus loyalty? opportunities the from turn like your these opportunities moving Thanks. morning. with Thanks In terms here mainly the to where's improvements Or operational been efficiencies? So for conversations

Chris Kempczinski

latter. the on definitely it's Sure,

restaurants I running. how job think the our we improve have around to opportunity done and franchisees credit great to a across globe the are grabbing

of As we and mentioning XX significant satisfaction top up out earlier, our markets amount. think in pretty were see are eight up scores customer we by a I

is embedded, the share to for going made. I front now we've the is think in all there after in. that as But But I on aggressive war gotten of an get that we've credit getting modifications opportunity I think to the on those affordability. that's chest like that's things about talked earlier. us operational And that food marketing

conversation of market, good a I enter we by us a the mentality recession. what's is depending business think is enter that the on now have vary we don't have whether going to that -- market resurgence But so have we regardless for And virus. on. the does a position don't recession, of I think, Whether we resurgence, a gotten

to country, mindset pivoted be needs by our vary towards to that opportunity we going going the have. are I because strongly share now things those think of All after that's

Mike Cieplak

question with Guggenheim. is Matt Our next DiFrisco from

Matt DiFrisco

in sales Thank come percent I you. about and of to I And you've then the out delivery. My the absolute delivery And clarification. or as question down are U.S. and has going either improved mobility people a And about, drive-thru progressed. seen actually how is getting wanted the that's on to dollars. and just wanted know a if just as more

dine-in I purchases sitting as and necessarily the purchase? international is going think an down or was the XX% business in-store, and before in not from well market that that of grabbing you said XX% so dining, but in-store

Chris Kempczinski

on get Kevin? Kevin here, let's in the action Yes,

Kevin Ozan

of several Yes, as delivery on so one to percent has And XX markets, every Australia during XX% isn't markets but about above The growing sales pandemic. the one think it in that that really side even. seeing our remarks, the of sales significantly I'd go at almost across my I specifically or got markets. sales. We're delivery; board grown of U.S. XX% international we've of significant up. basically on of the the in certainly say mentioned a every our I

So even cetera. et significantly, drive-thru with and growing that's

our we're that's And percent seeing little drive-thru. or around the a certainly lower, from drive-thru, overall either the growth away again, consistent take say. delivery in most across not growing but are delivery U.S. the is away a Both of of as theme Again, board. from So markets, I'd a significantly. sales world pretty international than take delivery

of second was, mentioned that in were international restaurants; XX% the The oh question yes, in meaning the I restaurant restaurant. going our they is ordering markets the XX% of that

and some in actually ordering through Some of those the drive-thru. of were restaurant taking at the eating kiosk in the those were versus front But away. at counter going the were they

So it mean could in-restaurant wasn't kind dine-in, which all kiosk. or it just could front of was mean ordering counter again

Mike Cieplak

will Peter one BTIG. We Saleh from take last question with

Peter Saleh

the Great, thanks. the any federal there's out, been see then has in you given impact franchisees seeing benefits, unemployment any can talk lastly, given taking guys for at guys capital, from of in access And you comments on Fed been you assistance virus sort curtailed financing that's just Can you're Thanks if weekly and that out their benefit U.S. paid set question. concerns? make environment the the bit has about that any a the guys expire the to your numbers there's think been for you soon. that's both or all if can little that being globally to

Chris Kempczinski

take first I think programs, very the the the pretty in they've apparent that cut I'll U.S, government Kevin Peter, you closeout can And of think $XXX helpful the mean about second. the then been the quickly. on checks certainly with part. I But impact the first as when was Thanks, got

there it kind off, be some would reasons the were same was roll-off. the the of would to our first of is simulative, some we're it it prospect built be for trends negative it into but rolling implication degree that put think if was in, when I that to expectation Now that seeing

you the $XXX, I'll went $XXX world that government had was rolling-off around it that number in but in fiscal to don't just expire. good of comp. other a not certainly Kevin, a positive whether, markets that seen know but U.S., for details degree, And we've a the to we're has of, Now to pass I the it benefit a to parse from the on the benefit policy then there

Kevin Ozan

have financing get and access our our pretty they On seen the of in around we've world as capital got businesses. flow; need to willing are U.S. to given it. access they the in general, in cash to franchisees franchisees the that's want and to the financing positives for certainly franchisees able They we're invest. do continuing why EOTF projects still are the actually They've to and to capital invest much have one those

So say time. also closed I any where markets of at we that for do up I'd around much pretty the say a financing a couple world. have haven't international months of some seen drying were again even potentially but we they

potentially taken franchisees the our individual some have restaurants on purchasing years heavy over last would et several debt some projects between cetera. And EOTF

It's say just So there are kind really But individual little a organizations access isn't ratios. are through a capital. that I of stretched. their it lack working to of

Mike Cieplak

good everyone day. call. Kevin. Have and joining. our conclude a you, will That thank for Thanks Okay, Chris

Operator

conference McDonald's call. This does investor Corporation conclude

now may You disconnect.

McDonald's (MCD) 28 Jul 202020 Q2 Earnings call transcript