MCD - Earnings call transcript Q4 2020

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Operator

Hello, and welcome to McDonald’s Fourth 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. Mike Cieplak, Investor Relations Officer for McDonald’s Corporation. Mr. begin. may you Cieplak,

Mike Cieplak

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

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your re being for and most pressing If have being is website. you question enter call is queue. ask then Today's webcast conference and via our recorded also more than replay please the first, one,

Chris. it over I'll Now, to turn

Chris Kempczinski

November, Mike what need and and the about which growth going community morning our a where chapter it. to were we shared our of of everyone. and to make and proudly We intend we connection. the moment At Thanks, a do new to Update to good growth going were next new both in McDonald's, clear embrace a it I we in McDonald's strategy of start world in arches how the was of talked we accelerating something for write do in articulated vision difference a Investor

year it between and economic was that most in record difficult downturn has seen. also century societal a a once McDonald's acknowledged challenges pandemic, the profound We

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for as partnering long our from and to our with think embodied inspiring say in customers to menu, By one day. them an the long maintaining Mayo were brand. XX to pandemic. the teams, takeaway All for global and curbside the comes service noticed and brands every and lockdowns our and day of remembered XX% chain challenges risen our pandemic without over franchisees have as employees; nearly app. customers our it's people X.X%. great and history the commitment McDonald's for continuing will first. making seen wide for full achieved year. the by scores review by of our sales And delivery, down from a three recovering our customers year supply safety to in using resurgences comp the put the global stool we of sales. there improvement of and of year of see execution were quarter, priority contactless comp the refine dining drive safety our love and McDonald's people customers supply rollout And most quarter strongest we that of the prevented and Clinic and the challenging Tens don't continue be to Well, more our values from last protocols restaurants, that way our showed a have interruption, by the eating and forced virus Even of delivered our of approach every significantly despite the simplifying in of living possible confidence consumer fourth have pickup, in McDonald's restrictions in since continue while best on the legs more implementing in by McDonald's moment partners exaggeration millions with billion system yet thru have legacy XXXX the by food. sales Our talent start I restaurants XXXX and this across of fastest We've Global new prowess most people of we to sequential largest history choose at markets.

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investment approach sustainably grow Just made more as growth strength, enable choices the even accelerating a to in we've bottom based to with our the will broad driven pillars. have us arches up

marketing. To an activation to of building focused of creative improving XXXX. optimize growth returns. for closing in impression leaning engagement. weeks marketing We Our for remain true MCD, and with significant driver sales Teams remains social the maximizing customer stands balance marketing effectiveness right drive brand a investment we the to as M on made our and immediate work our digital into

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on rely again. return something it delicious is people to Our and again and core

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place menu. on the New items earn must their

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have We big ambitions.

meaningful four years markets as to and been delivery, how our their goals doubled has and we COVID with delivery. the The efforts shown Canada, of big has have customers. over expanded meet mix already delivery year. offering nearly how number have McDonald's the underscored to have restaurants we've We know past including Australia, our proven XX,XXX U.S. past the the Many sales

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at help have Our serving an bigger. navigate our been have provide around system It's customers our and about that chance day. who chain past year. turn our during agency everything this safely job step to every something of incredible our teams talk customers for to ability This possible communities. execute franchisees, to of and our to the lines, and extraordinary commitment restaurant our make Kevin amazing our would us, I believe and I focus world a and over front to year essential think the have just the results. financial not past without a our detail to it Kevin. I'll isn't every can't supply proving the this them, to the partners service in about way. When to it's our employees done difference now continued is to more

Kevin Ozan

Thanks, Chris. about a full bit our Chris year results. talked

parts. these were on year operated growth spend the me quarter. widespread talking few result I including months sales across quarter, U.S. this and the all in sales in of minutes comp increased X.X% particularly the restrictions, a government as prior international So resurgences on day QX return of they breakfast, October, in day grew for the Global mentioned consecutive comps. ending parts negative is comparable In of markets. the November X.X% of six across a Sales positive December with top down let about major the call were QX. positive our and return that Comp as and the sales in

investments went our with Beginning effect end offset new the while of strong including including additional in incremental line the U.K. performance comps familiar positive dining reduced customers Australia a benefited one at were line our more double-digit France, and strong many from down The of famous Strong including in marketing QX, to and keep our than hours promotions, October, of items center. Our day like $X, channels, into buy for varied strong by sales the segment menu get fueled of one Dinner its quarter, favorites. Australia closures. IOM part the the operating McRib limited our two Germany, momentum government X.X% of markets, marketing as major room in and in new and and across negative share. strategic sales Spain. were comps all traffic restrictions in McSpicy Italy be coming at with leading news chicken continued countries, with launch successful grew of national our bakery comp offerings nearly sales core separate for back orders. spend, across markets

example most a sales. sales and phenomenal quarter the pace since growth delivery every ideas on on August And early comp since Another growth in XXXX. further our And market the in Chris the is reflecting successful traveling from in Japan XXX finally, along reintroduced quarter meeting international in month U.K. pandemic, despite sales year, of were plan again chicken once markets and Asia favorite and start mentioned. several changing the customer results November. for in despite new significant has the needs in down as nearly market positive X.X% been McSpicy doubled also And well and with have China trust while of opened increased for delivery. and for the achieved Australia restrictions improvement a improved QX. offerings. LTO with has as on customers rolling benefited in QX. across strengthening for ordering developmental comp brand. over as The focus Recovery continued a The our markets across license quarter, a segment while. menu, has for along delivered quarter-over-quarter challenging their restaurants delivery running year all core marketing promotions, Since new products as markets, steady The the focused a and China, were other the great comp strong sales delivery mobile with digital

in government double-digits sales remain given be receiving be to by projected and in in down expected continued all to assisted restrictions trends, government place stimulus checks. comp low that markets. strong day across most the growth to parts high with to continue Turning are the are single-digits January comps and consumers be IOM U.S. up sales

more is McDonald's in our offset by share QX double-digit comps this than likely Japan. expect in in was until to resumes. being of earnings dine-in Adjusted Australia negative And X% additional after XX Germany, of excluding an Italy in France, sale on trend per and the Spain. Continued ownership gains $X momentum we continue a

of million While gave U.S. over margins third global the company margins remarks, quarter. quarter a restaurant Consistent donate activity, G&A mentioned increases guidance McDonald were by and investments of we on for and renewed as as Ronald the QX operated the million to result franchised $XXX we our brand sales, in to campaign, House launch $XX were Charities, commitment driven one-time primarily our grew up Serving both down some in the Here pressure with including made earlier. our the for Chris

Turning to our for outlook XXXX.

As a lot uncertainty, look we still this to the in drive continue growth as are and Chris and today our ahead. talked about, the in to uncertainty strategy We're arches confident that ability of through business. will there's both manage accelerating

new We of overall This unit as expect the constant XXXX, versus sales contributing growth reiterates that efficiency financial XXXX system in We measure November. serves low expansion our most it in with single-digit the by as our comprehensive of operating growth rate of gauge about mentioned double-digits mid wide currencies XXXX margin, ultimately X%. we operating performance.

next company on in franchise our depreciation pressures. mid future percent while of we our in we efforts. continue cash will back of levels $XX IOM the improvement pre-COVID over about expect expect the headwind U.S., and for in of be for near-term a versus have segment, We to in margins result expect operating to we'll impact expect In be as million few cost modernization course expense years, to higher to the XXXX. no our year, sales low In XXXX margin XXs margin percent though get P&L don't flows. even we the a to operating related Depreciation to XXXX the the

we're as to to more business, in G&A make digital to we able G&A, to with efficient run Turning required strategic drive investments technology growth. like areas become the and

will ahead, about in that reiterate we to wide G&A XXXX, system be to expect which of sales. expectation X% Looking over about X.X% XXXX our decrease currencies G&A X% constant

on by to pickup Looking at our equity XXXX XXXX and in were restaurant for be about ownership to to a in offset Japan. Gains items gains reduced we of improved to other sales slightly last had XXXX, XXXX. included some the to operating we that debts. dispositions due partially expense, asset bad COVID results due expect line year income versus that suppressed higher year this store related we finally, one-time closings expect be double and And in

And range get first on FX roughly level more of we finally, currency normal EPS to based of in XX%. $X.XX our $X.XX to about turning quarter, $XXX translation and million. year. effective We're XXXX, line to for back by to current of $X.XX rates, XXXX the that rate tax For exchange expect projecting the $X.XX foreign a would to the to benefit XX% expense full in

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

Moving November, expenditures, roughly we spend capital of capital XXXX. expect the as $X.X in billion to we in indicated

X,XXX new are half capital restaurant is XXX IOM New segments. markets strong we of restaurants IOM have the over an restaurant important open roughly of that to This of significant segment. remaining billion These spend markets past on several China. of the nearly year, as XXX U.S. the restaurants growth restaurants. years, including returns new to deliver plan opportunity, across over the new open expansion The and XXX will ideal openings plus see in driver in X.X strong the we and nearly development growth, we driven our especially in globally

towards As I back want of XX% million efforts, restaurants a profile. go completion over XXX including our year. into U.S. modernize free And flow restaurant these reminder, markets remaining spend of our conclude provide expect and by the about to the with for the in cash modernization of U.S. be projects reinvestment to X,XXX in nearing We're IOM the CapEx strategic our complete approximately finally, and end of our will capital partners half openings. U.S. The to restaurants,

our In operating disruption, flow cash bottom with and global improvements several $X.X through significant billion flow business free the we conversion, of free made over significantly generated cash model flow nearly and XX% years, XXXX, to free the convert to our over grew XXXX, levels business convert cash last to XXXX. our earnings the consistent even With to of strength billion ability our generate flow near flow, earnings In measures line billion. XXXX net expect about are to free $X and cash $X.X flow, free to our to cash XXX%. we of which was free more cash than

priorities allocation the remain capital same. Our

the in drive investing business digital. First investments as to capital includes this growth, and expenditures, technology in as both well

Second, prioritizing that, get shareholders. back our dividends by remaining to down end go After to cash XXXX our of flow of will debt paying the year. most towards for free to pre-COVID leverage ratios the

the I'm to the start and continue shareholders. we confident to New will for long-term that position place profitable in Year, sustained, our plans we system As have us deliver growth

back it to turn to I'll Chris Now close.

Chris Kempczinski

the and accelerating continued in uncertainties our on we Despite build can in this to you, we clarity strategy strength. is McDonald's clear. the vision COVID. as competitive Thank investments are our directing is to keep did to important look make the market capturing it during plus reinforced we the because with arches. moment we've most strengths. XX set is shareholders confident long-term gained market from continue to we're in which because we're we share markets reason with growing And strategic the increased increases, our We're it emerge we of we've continue purpose we the COVID. thing well Also, confident consecutive face, we sense confident confident positioned share before annual confident growing And insights mark share where most strategy. to future. because that years they We're one shareholders. October, were will the Kevin. of Not only bolster This and reason strategic dividend the especially

begin And reliable responsible for is commitment choice the feeding feel so a animate and create that community mission to now work. for comes always And This McDonald's has moments when suppliers our our do customers, franchisees fostering it. legacy as employees, do we our delicious delicious, do, just it and uphold to food. will what continuing Q&A. We our matters But doesn't we while and and it it trusted our matter everyone. we'll how always and good will and will

Operator

instructions] All limit and I ask right, thank [Operator the have yourself you to if question queue reenter you one that another. you.

Our Glass from Morgan first John Stanley. with started to is get question

John Glass

Thanks. and easier understand bridge Kevin, the comparisons little using can try Good you're to morning, help talk to to structurally There's can everyone. talk are you the might this rewards is bridge less the of maybe McDonald's that drive delivery this in about of delivery gap through drive place? what sort gap earlier more for tactics to Is get doing market reopening? Chris that more things some you're help a what dynamic in IOM markets the but to a rules to sales? doing you bit and important. when got restrictions launching the this you example, about obviously you've I such

Chris Kempczinski

to dine-in as John is -- it for this a of those business. is you market, tend IOM more the markets be Chris. Thanks the question. And know in

with our that. we're digital And trying we we're having drive close as to these so, that good are dine-in drive-thru many success our markets the to biggest can thing do having doing much as of with delivery as businesses and we

because limited et markets, many -- P.M., X though, risk in operating Some hour restrictions our frankly of P.M. X is the it cetera.

what franchisees, as open, the it. are have trying the that need open. franchisees, you through part get It's sure opening in here, you we is they our franchisees that So all about liquidity I how supporting to are the what dealing be of making said long to so we government think you can around remarks know, do with restrictions of with long we our as can

didn't for come maxed year, years this, realize you that in XDs, menu on we've of it moved last And we this, think our us, we've of pretty, asked driving thinking was though, that ago, seen plan focused XXX the drive-thru. additional that's capacity think million had. through I in we come like something things really position. the out we've even core a through, the in think the were As gone out we've we few which strong And very through discovered me I pretty that on we've way We a we cars laid drive-thrus. as one out, is the that I

I set get deal these restrictions, we're So our to are some continuing But to after of with guys think short-term this. up well as challenging. is it

Kevin Ozan

QX The both only is, growing digital delivery significantly IOM markets XX% delivery, their sales obviously, thing in and as I'd of the over we're those add, sales. Chris mentioned, in U.K., in for John example, seeing were

So seeing both delivery significant and we digital. in some are growth

And is, The this going see is point comps in saying restrictions confident when were would in issue. this in as as relatively But October. is we out structural, flat if other October, that nothing even new temporary we the at down back, thing again. IOM look back come I a reason of that's the as is think kind we we're recently I

So back markets easing as confident I be up we're again customers restrictions, and come set up soon will start well. pretty And pretty think opening as the quickly. now

Mike Cieplak

question Gonzalez is KeyBanc. from Next Eric with

Eric Gonzalez

And Hey, for gets I fast recovery thanks and been might like the relatives where how late seems which performer contact vaccine for as a the food high as was morning. closer the might fare the Australia, by phase. the be and are seems wondering list to clearly be demand pandemic, world check. good yourself area the there's question you meal it normal as like solutions through world. think increased chains But during consumers one to average a of strong evidenced around whole

perhaps evolved that vaccine countries might might clues post that to dynamics speak ticket you other some country could in about perform in traffic rollout? give you if the us how how So Thanks. some have

Chris Kempczinski

And -- virus, relatively as it Australia, you containing performing been in very done are they've in Thanks, few a flow that Eric. performance. that markets the one businesses has say franchisees unscathed of I to Corona world the note, market strongly has have of would high as XXXX. by single-digit job at virus. cash our the nice doing record in are going very The Australia is In

of the think for us can I a like. us good is opportunity So it post-COVID for indication look what

going going digital at digital, that what through is We enduring kind whether It I business then going expecting, doesn't business. and think to delivery is higher COVID be channels delivery And what they seen to gone elevated. remain is And think like are that recovery look we've of elevated a we including be isn't you one sizes. order do tend I COVID. or drive-thru remain think more of though, that when resurgence parts with post-COVID, like drive-thru, the delivery be like that those we've to of that. dine-in to there takeaway those the mean But its channels still it. of sizable is as

seeing check moves But we're that And this I channel average check, the is our of so that to going the going mix benefit that that's as you're shift going think albeit think just to idea a there's going continue it forward is mix be give continue, I expecting to levels to not now. expectation. at to to that elevated

Mike Cieplak

Next question Baird. with is from David Tarantino

David Tarantino

of that lot of morning, resolve to there's Hi, you in between think wondering about short-term just a media friction the your been as and comment if or plan Chris, reports and I on good current some conflict the could was near-term? about situation the U.S. company. the you franchisees the And

Chris Kempczinski

Sure. are Thanks, during there I'd in U.S. three run you just I and I U.S. few know as that years, a well David. say market the having for learned time things the know, my Well, that

the sentiment sort owner own difficult that And operators is, in their opinions CEOs of The generalize X,XXX we lot you different X,XXX what businesses have is first is have to the a and perspectives. with Presidents have it of and in very U.S. overall market,

just any caution to generalizations about market. So I would the make

decentralized, a the think business the is that that performance interaction you're the level, company out The strong. of just the evidence I the And of the of U.S. remains our model, action And is other the restaurant that type U.S. at thing operating level. seeing happens at and franchisees in between is, the I say federated restaurant all restaurants would the very

As two it it we're stack a stack. putting basis, XX.X which a if on up, two think look at was in strong year QX, you pretty a comps, on year I

times with up was now flare there improve, way Saliba], is think very be find And I of operator national noise. they level, We're leadership happen when but is So [Mark between our confident moments absolutely that seeing in those the the service a along case the -- certainly level, business our fully is Berlinger] with at in But always some those I that U.S., I'm operator now. these performing, or dealt who the disagreements the time-to-time. that expect U.S. there in absolutely will U.S. from in to and one team work the the and we [Joe national at U.S. right through high that we're leads team. I I group the

Mike Cieplak

UBS. Dennis from is with question Geiger Next

Dennis Geiger

I'm continued just initiatives sure, U.S. kind of your Chris. some plans this the sales of of collective and new strong of sort that in momentum, the a kind the Is most in it's gains? Just aspects question. kind help that help most could XDs? market marketing prospects? hoping seen the see of Is frame help share impactful for the those what's could to of it the for overall bunch think U.S. kind you've But impactful, given U.S. of the contextualize I outlined you you thanks as marketing drive year, year the kind that effort. of wondering you've the if this a wondering just the drive I plans? initiatives highlighted of of year some you of some mind, recent for it strategy and products has Great, to

Chris Kempczinski

perspective, and of our on is in important And have well, done for performance, great two for longer Sure, those chicken or setting the quality manner not us to kind for MCD but the but where we expectation life XXXX, all both longer loyalty year's the come that's performance launch probably I the things framework, high year's of three go most has that I'll we've come XXXX, those frankly, need term for in loyalty, also to that through term. to marketing, this are get just great got a of chicken think for marketing and a up that to together. the

Mike Cieplak

David question is Palmer from with Evercore. Next

David Palmer

the question another on IOM. Thanks,

of the some you international city about and their the after ordering you're sales those more how U.S. locations have operating where are thinking center wondering drive-thru. suburban markets perhaps Just from than vaccine. These even lot of a markets on premise pre-COVID most had

unit you but painful could that economics often gains So be have thinking share which greater wonder obviously obviously McDonald's that during is even more competition, I profitability market are if your that helping you're local drive-thrus and the because today, your lacks pandemic. the

outlook Thanks. these share So in would we broadly sort than the of recovery in if talk difference you market that expect could you the gains perceive for what there's any U.S.? markets in and the about

Kevin Ozan

a Yes, Chris chime shot I’ll take it can Thanks, certainly at David. and in.

In in drive-thrus. it's As XX%, percentage certainly restaurants you operated what U.K., markets have or our restaurants XX%, around drive-thru U.S. bit their of is in France, little mentioned, with two-thirds than it's Australia of but we a so and Canada, in more the Germany, the international roughly that less have

competitor So run U.S., of the any certainly those pandemic, well drive-thrus drive-thru, higher and that elevated believe those I point, the post through operated is percentage well most run international of we set But drive-thru was of think, sales markets in less. think through your because substantially the than is we're about percentage sales. pandemic, it's percent markets. digital as just the than higher the We're seeing during in of up a pre-COVID as to the sales I less while delivery

fact are we the we're now shape gives that to But the in up, to travel the we U.S. concern nothing of be once up of there center right tourist that with drive-thrus. are to set share, But that gaining restaurants should because up have and done gaining pandemic. market permanent. a be of there's in unknown us the set pandemic, -- post able well structural are in to XXXX, like that both business in in our start To markets some what's I'm able feel temporary closed, how pick in those to The good to of versus just of many up getting be is opening that of number city share. the are substantial will harder many hit the There well the certainly drive-thrus continue pretty so, kind point, than open we market industry. pandemic are think up more And restaurants, continue markets those we share. most keep market your market restaurants locations, saying during we're IOM in certainly unknown which McDonald's not still those XXXX

Mike Cieplak

Our next Jon Fargo. is Tower Wells from with question

Jon Tower

question. Thanks for taking the

be the Yes, or you sales this little so IOM? U.S. on I assume you incremental recovery lapping XXX getting we XXXX that full just speaking I spend want I about color you the And clarification, of said clarification spend bit will anticipating if would your you'd be the meaning, secondarily, year, not levels million great. dollar and That margin, fill the that But about first you question. just to add on presence think you're to not will had could should and similar great. side, there. be quarterly think I void the on Kevin, on make Just the pre-COVID franchisee basis. How understand the in just sure are a then XXXX a about in the talked across spend and a would back year-over-year? guidance IOM had marketing in XXXX. the therefore that company

Chris Kempczinski

margins. the I will with start IOM

know first prevents restrictions still longer sales term. are least going Again, I your that we've margins annually, to there's that margins we because that to about back of the and been depressed happening, nothing yes, structural from what at in point, get a segment the is, Jon, certainly on. would the talked So, XX% XXXX, the quarter, yet pre IOM the that to kind all certainly, little used I in But pandemic. expect don't for of bit

margins were prior were to to level will as progresses, get the back So year not over we the that kind they year in used full think where that we pandemic. to of XXXX, likely but improve do the XX% for

Kevin Ozan

start the question, with marketing do as marketing is, know, of then math, on revenue. I'll which fund we maybe just the you percent a And as

of the nice And go to going level $XXX recovers, so think XXXX, clip not at be size business investment there a but grows, that an in certainly million. and to be we benefit will pretty in as from we a do marketing, it's can the that

I in bigger benefit business. marketing and is momentum to think side. you seems better think a bigger including business, I work on the about everything the when is And the thing that this momentum your have

million this. the outsized when So XXX we strong was be out momentum our normalized expectation an would you've even a And get generate effect that make XXXX, why marketing that sure of coming momentum, in to part put you we level. what got could from of some

and we're confident making year. back that's the why bet So that on half the we're of the

Mike Cieplak

question from with Carril Next Chris RBC. is

Chris Carril

the provided recent to I'm the growing share U.S. all And the trends most want environment for lot to thanks been I far ask industry has competitive detail more But around the of on And competition breakfast Thanks. detail dynamics, in competition chicken. in did made the a there? clearly in January. about broader so morning. good there the Hi, competitive be curious also and and appears around on to a your and gain particular appreciate just hear focus. opportunities perspective on thoughts

Chris Kempczinski

part market out that MCD probably had that's there in I that a the within needed to on market focus was for are had you're from seen competitive our Investor we make just of we we've us. competitive M of all going also in thanks, And into is continues entered markets, as to world. of Back when most affordability. if Chris. Well, November, XXXX, We've XXXX. the that the sure one trend a Sure. some be And our programs seeing performed think strong have we the U.S. it most competitive in the a not And well Day, that you've had deals competitors. some through value that the

going value. is on expectation competitive remain to absolutely Our you're need to that

five in attributes, terms just I a been able brand the to think our years of back modernizing in We've we we've we've ago the put than four demand ourselves made in our better to through investments I upgrading consumer point. were or able think been our the momentum we're brands. state, for to maybe position

strong that for our In that gets isn't the gives about line. performance question breakfast On breakfast, to be the We our to chase this something business So so me saw out grew. we're going have rabbit hole, breakfast bakery going know, to well. that QX, you speak. of think I to us, business confidence down that performing your is

one is, how And of breakfast routine, be we've breakfast looked of So significant people a even to to to expectation didn't weathered that kind XXXX, our pleased the our that day regular breakfast a should have returning our business. expectation us which a the we were part the forward competitors, with as XXXX through our of been introduction that, with impact we part, day morning. and on set performing benefits as going good for up back work get more traffic hopefully certainly on in

Mike Cieplak

Goldman Garber next Sachs. is with Jared from question Our

Jared Garber

from related and obviously, about And follow to benefits, given that Thanks. high thank Hi, on how the talk to you the out of up but the value maybe consumer a the maybe, challenges wondering XXXX? A question, very if how different state LTOs could follow I a spin. U.S. you're in up on you much. still of play you're things of balance thinking that and point, bit a and bit some premium a COVID. the about offerings little last unemployment seeing throughout different, little perspective, of stimulus and but

Chris Kempczinski

So thanks, Jared.

in single I biggest state by now concern is think that exists certainly gets we of the we're expect focused we the going of now level Because right on tracking, would things it seeing prudent that of stimulus, consumer, that again, be in is our basis. that right in And one way, uncertainty need the consumer short-term. think is which the and what with the do as the of monthly with is XXXX. on why of helping to economic all to back to a consumers, a us affordability you far for stay concern

divergence have to of the between visibility case of about we “real roll-off of market as I that the stimulus underlying beneficiary But economy”. the what were that. the industry many going understand the think a to have rolls-off a the of don't stock people rest talked the health is and recovery, sort shape the the fully stimulus is or consumer, yet think I and

I that's real. think

with the about happens health, to what that economy this closely, watching be are think of the that through concern to is sort we XXXX. part balance that we there but going people's about persists financial something concern that? another of that Is the So consumer,

Kevin Ozan

the of I for it concept constant and balancing value focus a value balance think all it to in just and is premium premium. us three which of LTOs, LTOs was those need we

in for U.S., make both outside sure offerings normal. their in they've the in the because The just the all the is kind that I we got one that they at XXXX. if consumers guess driver pocket C&R several time. the is And I to years. think the us for got would and core that go on of We've we any have think depending to framework, you'll for continuing I see growth thing menu that, say change the primary you what given next our U.S. on

So, to be while has do what to markets and will some menu. there the LTO IOM think of terms in LTO particular, earn all in bar activity, its the raised U.S. I markets, have way an our onto

see, moderate LTOs might this So core of bit pre you a more because what had little menu. pace versus levels I think of we focus pandemic on maybe

Mike Cieplak

Morgan. with JP is Our Ivankoe John from next question

John Ivankoe

out as over will, to high you, the talk the country, do years, us by Hi, travel areas, you about many but U.K., directly guess you. follow of appreciation countries that wanted compete with have Germany, of in we, and define many France, I thank so up eating I streets, on of particular. IOM, guess, supply of a Australia, maybe many market it, I if -- you in the these the to question fine against, in specifically -- you have, Canada, these informal

or in mean, not I also How are it's for out. around give assistance intelligence the informal so think, world, again, restaurants of and necessarily on So, define think, through And, you PPP certain guess, of we a here? has question through permanently? looking really you example, market of a uniquely much or maybe different relative think, cases your the it's you survivability, in I how capacity is using come of IEO, certainly context but words opinion, that do market that to this terms happened, I U.S. government the what's eating in some the amount than fact, different and out have, asked that much survivability that to for do you this capacity I

Kevin Ozan

a demographic, Yes, always little again, take I'll shot. terms obviously as you you mentioned, can competitive country well demographics, And each is and of consumer know as Chris a John, in both add-in. different, as then environment.

broader high so than I is to a pandemic think our certainly pre the the of even business. returns and levels. of I right -- if things when street in high But completely U.K. in a the challenge like streets question there's now think kind much U.K.,

The surprised think we'd several do of I certainly, to be don't I think, one, those And those challenge. the not be is of in countries bigger outlets outlets there's, markets. now, of now, right of many a are of several right a in seeing the general, of there's closed We're looks temporary it many lot as many those where will of closed. see I that's outlets, that mentioned, two permanent. maybe has outlets many in unknown think how returning. where countries, someone like versus permanently in I those

That's gain of I general think a us gaining share. going a market that That's our we we're bit, we're is And supply little an after. to opportunity So think what lot positioned certainly expectation. believe which well for that overall shrink in share. that to will I continue

Mike Cieplak

from Next Cowen. question is Andrew Charles with

Andrew Charles

you. thank Great,

learnings the about also it sales, subdued comparing talk coming observed operationally markets, service the the next was crispy ago you And grill a sandwiches on qualitative? than of its launched, new particularly, where what the to half longer test because just chicken performance was Just Thank month. three bit expected when even in Can years from you times? the looking you.

Chris Kempczinski

have it encouraged. we did we were test in market why to out. rolling we're and well, That's it Sure,

the side I of be on it think having test. test than focus in advertised was of sort more an our type operation much

confident franchisees the and getting Flatley deliver to the through it. good have, that. a able quality know high and are it way. just U.S. for we We about being us that marketing Morgan in about in about was and about feel I it good operation team us, work for excited campaign so the feel So

to consumers lot deliver in are come optimistic despite we and restaurant. but February, think we of we on on we're consumers demand that as activity it into a from was So our well head this prepared space, generate one this referenced as earlier, then into

Mike Cieplak

is from with Bernstein question Barclays. Next Jeff

Jeff Bernstein

you very thank Great, much.

the so the labor the with like on it's labor. of at imply a side franchisees, And a for Just franchisees, but government would different the minimum question there's have more working initiatives, on lot forces, where of wage which least up. potentially seems I you historically you going things. on national subset high, opposing mentioned ample for unemployment guess But closely

ongoing pressure, are backdrop pressures? franchisees Thank dealing costs, those And love cost it's regarding upcoming offset with that, your perhaps whether with think how pricing, you. that franchisees with maybe would as going labor So of kind savings, a technology, through the you labor on and can whether availability? conversations outlook labor cost

Chris Kempczinski

Thanks, Jeff.

while have past been a the the $XX a with where cost in $XX of level, XX think legislation. path some hour introduced they've on Florida I administration, the passed that and the you've I a say state of level would it's XX, terms going glide forget, about I picked states of degree and in up an seen last was recent a hour. most years, the election, if states, minimum think this several change in wage what labor. I number that an the it's one the at of means to at discussion minimum the it's for And wage, federal

well sort out. gives as And we has this. it staged that developed in so you savings of can pricing increase the for between manage done was as Canada example the into back. will confidence productivity there balance carve a working just a or thinking menu judicious with quite rolling significant I on -- it's any able through done and do passed we that a another the us been entire years that through of as have menu, in has people, we the states, wage through exemptions is team about that give way the equitably we're And And of this us minimum outs this -- long just was onto franchisees market working through spectacular across long the and been, we've job with positive the a bit experience in to productivity. fine. did for works so couple how So as that pricing, seen then a without as special

for So I view staged wage so is way McDonald everybody. a the and a at minimum said, way do will be I to long think, level and going that's the federally is in whether referenced, done, or that our that. fine likely like in just increasing state as I through it's is as most equitable

Mike Cieplak

next Credit Our question Lauren from is with Silberman Suisse.

Lauren Silberman

do that assuming To to the how hold? improving Thanks, what by I believe XX attribute the service back seconds still to in that times June, seconds you simplified XX talked in about changes? about menu broader for extent you a drive-thru time? pandemic, for the And is those larger U.S. other drive-thru then you And roll-out see about and do of is versus impacting orders other improvement? franchise? XXXX, That any dynamic further opportunities just checks the

Kevin Ozan

give can a that, I Yes, shot to Lauren.

some past both seconds we've of menu two over mentioned, think things. drive-thru is And our few and the markets. the of roughly One restaurants to certain that combination well the XXXX, and Overall which stuff we crew, some world, staffing monitor but years non-sexy you our menu the in on I positioning big reduced as focus around that indicate, the a times continued that the a more put that's you help by also times. as XX major operations includes in in we limited yes, technology So crew like simplification a just XXXX. but in

of And boards. some with operating just the restaurants basic there's menu the goes kind that along right menu so and efficiently

we've be seen of And so, because operations, especially on a big drive-thru focus drive-thru, there bigger a our continues percentage be continue to business. to

to times. service those opportunity still reducing there's So continue

are can top that of what the times. around achieve. wouldn't service we focus now at we improve a level on There's to I kind the So of continuing still say big those company

Mike Cieplak

Francfort Merrill Gregory one Okay, from have of with America Lynch. question more Bank for we time

Gregory Francfort

score you for And kind standpoint? going where Thanks the helped kind and them that. I'm in from that quite much Can you you few a level maybe of hold a you the little up can about those how years has efficiency over think Thanks. wondering and U.S. gains margins next talk bit the pandemic push an of bit. on

Kevin Ozan

quarters Greg. in the up. we've the seen of U.S., store are thanks, last Certainly level couple margins that

average higher larger being orders, check, to maybe cetera. mentioned, of of stick few things. size the I We've are about that think will not et a as think Again, that's we today. group talked Chris combination that a level some I

the think of probably margins in maintain margins. I to see they U.S. had they've in order I need moderating some because do we margins harder the levels the been sales that So level IOM, think next high year. over haven't we the hit Conversely, store at

at little IOM get quarters the probably pre bit So pandemic, we to is least. they expect U.S. of were than ongoing back in will higher time a I XXXX for last think over couple where should

Mike Cieplak

thank joining. and day. for you, great and Chris Thank Have a you all Kevin,

Operator

Corporation McDonald's Call. concludes This Conference Investor

McDonald's (MCD) 28 Jan 212020 Q4 Earnings call transcript