MCD - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to McDonald's Second Quarter 2021 Investor Conference Call. At the request of McDonald's Corporation, the 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 call over to Mr. Mike Cieplak, Investor Relations Officer for McDonald's Corporation. Mr. begin. may you Cieplak,

Mike Cieplak

and call for Chief today and Kevin Chris everyone, me Executive us. on Kempczinski; Ozan. Officer, Financial the are Chief thank morning, joining you With Officer, Good President and

their statements forward-looking apply measures reconciliations of GAAP of as also comments corresponding those the reminder are our along on a in earnings today's on X-K to today. release call the financial our available any mentioned our call on documents non-GAAP filing and Both with measures. website As our

Following this Please we re-enter to over take limit now, recorded additional is will yourself for being replay then Chris. also call questions. for queue And prepared I'll and being via morning, turn remarks is website. your webcast Today's conference it to questions. one the and any question our

Chris Kempczinski

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restaurants. foundation course, on work of arches accelerate the Of to running McDonald's the built success, is great the very core of our

we staffing, important world-class know our to regular open hours will to we back dining be As than get full and return execution rooms, ever. more that

get stops in and establishing the and dining in story return limited than variant to out starts more a customers will capacity. heading XX% the new welcome That about tell back normal. strength. to includes working of Today, world, Delta to the a in-person While more dining. routines. hours ready to COVID position to has venturing people to hard brought are our around resilient will are of as channels to When but our we Kevin? our we with are we all resurgences dining continue nearly now pandemic, were including By from We're Day, many Labor to are back or we into will eager ready Internationally, the open. Not our majority operate them. are more and of than U.S. restricted come XXX%. it the barring building be only Kevin are you be operating restaurants, rooms restaurants dine-in, today the

Kevin Ozan

in year pleased were a Thanks, global second sales basis. XX% on X% comp quarter, share that to the Chris. or I'm two up

rate. of the demonstration now business. surpassed at and consecutive Our performance levels XXXX has second of base our We've an sales for continued broad accelerated strength quarter, the resiliency and

we around a the two grew levels, basis, positive all business day all XX-years. Turning comps to on our XX% at two progresses segments the versus our quarter, strongest momentum for up comp growth segment with performance across comp U.S., as on double degrees across In XXXX or a year sales two digit continued sales varying recovery year the year parts over in basis. the quarterly QX XX% world. And saw we

same record While cash achieve to continue time, franchisees operating at flow. high the

over marketing an the that made includes focus our XX-months. restaurants. an performance underlying in result digital running investing last strengthening This with of the menu core great bold and Our is initiatives, in offerings, decisions on U.S. the of the we've accumulation

restaurant BTS which U.S. second meal. incremental operated the in taking marketing crispy and continued check is by international driven larger In to two XXXX That's increases. in segment, success we full average some customers or in of by as the rehit the began nearly bolstered which advertising strong, venture growth up an historically order left been as the the Both shut platforms, basis, includes price closures. This customers our during perform sales strong been the last a out digital menu operations has initiatives in to and recovery and As in sizes, drove XX% Comp X% and attracted hold. see delivery were continues elevated growth, more quarter, to to quarter, Remember, sales peak in were at pandemic. of an down well in sandwich, on programs. the QX quarter. menu our year our as robust year level, due and we market country cases chicken

the XXXX the core Europe growth began restrictions of IOM from in continued Western continuing in Mac delivery back the menu market in in allowing exceeding to XXth The comp recent us still and promotion. in place. marketing quarter, including in monitor COVID birthday to BTS with dining, May. Australia. resurgences we're some continued to performance countries began levels famous and orders sales Although, during bring segment world, reopen benefited news, Strong indoor successful Big around

from dining for results recent The and customer lockdown Delta the the rooms throughout of the country In and significant orders mobility. through below In both market XXXX coming COVID-XX activity where UK benefited sales in menu, mid-May. the National have the as the strong Outbreaks and for with the still of Canada and marketing were the BTS record produced delivery lockdowns place and comp core dining France strong Germany, kiosks portion channels, including a Canada famous in to Momentum led quarter. Australia in ended saw levels our reopened sales UK, customers rooms orders use meal. market QX. reduced quarter. the featuring engagement self-order While, variant accelerated digital digital reopened.

While steady restrictions dining in some indoor then. markets still And both reopened are in place, for since we've improvements June. seen

My our Performance of were returns segment up of markets the of comps driven build the expect and yet impressive successful its we and driven growth. QX, strong by resurgences international and quarter, in across McDonald's five past big comps The year resulting launch momentum quarter, Japan largely favorites, their parts. that in levels to XX% McDonald's member to growth, when pre-pandemic marketing China. reopen country. development Southern shown operating in to China, with across achieving comp in ahead and on the demand two relatively and flat maintained to waves an QX markets for look comps conveniently The quickly. with Comp to for we delivery market performance surpass focused but customer basis. menu our restrictions. has the Japan app a international China, are base As return emergency results was due year all sales strong to sales to a The continue the was continues customers up expansion throughout XX%, promotions, digital markets. XX ability for Brazil, day by breakfast us and state evening in delivery XXXX safely positive In levels consecutive quarters serving nearly in were have COVID license

X,XXX restaurant and In surpassed over this open XXX is restaurants addition, on the to now in year. China mark new June, pace

and sales continued constant around growth year we high in recovery quicker now to teens the system-wide mid slightly expect currencies. our the in Given world, momentum full

pandemic-related now we the in around continue Delta still see stops with there's markets especially variant. some However, uncertainty world, starts the and as to

I'll turn back Now Chris. to it

Chris Kempczinski

Thanks, Kevin.

As ways to our the finding capitalize we're ahead XXXX, we to of strengths. look rest on

the campaign, is of brings the pillars back create a our the reinforcing seen goal continue are we've last the to that It that the deeply our to proving a greater to us at arches generation connection create marketing and restaurant MCD ambitious speak and engagement to an consistent The any of us without that our the orders it was McDonald's everyone platform records orders Balvin in its U.S. To all idea, growth in increase experience, famous core Travis sum Which As longer-term. authentic ways, platform, of customers, a favorite the our has U.S. accelerating digital positioning year, famous leverage customers enjoyable when with our one unites interconnected, we famous our new intersection deepen items, bolstering and would adding for one celebrities is Scott, famous and is than menu whole complexity, but parts. launched on the their go all to J broke based in simple customers order. including then while orders was another.

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we customers, also McDonald's and back for to connect easier we using and By continue part and As with breath and McDonald's. reasons size come experiences day menu and scale. make leverage personal we're our our to our seamless will more create advantage to customers giving it to our digital, crew multiple advantages value in our convenience, biggest and

I'll pass back financial on performance to Kevin. Now, QX, in the for it more

Kevin Ozan

by sales impact year. continue in to pre-pandemic Company margins to U.S. due sales incremental million result for operated XX%, compared $X.X McDonald's gain billion margin top-line growth in lapping quarter, in Adjusted margins, Chris. per as the a year-to-date sales company and adjusted were company comp driven operating one-time in we other our of technology. benefit as higher our check. which and levels. In last and increased performance spend sale recovered to was the currencies IOM operating dollars the currencies, the Thanks, see restaurant with some segment, $XXX decreased the income last in both as a in higher reflecting QX, mostly a In constant earnings to further improved QX $X.XX, higher investment and ownership improvement across strong, of last operating UK. income Japan, marketing restaurant primarily segments, COVID-XX significantly in incentive-based constant higher improved in by share in tax restaurant Total margins average by year, grew G&A offset driven compensation, was year. margin X% all have excludes of franchised operated on

rates, the currency $X.XX on benefited exchange expect XX.X% EPS for an range share. the by FX with of benefit the $X.XX. was we're current $X.XX back-half XX% of for for the And estimated finally, to tax by rate $X.XX about projecting tax results translation to $X.XX year in of XX%. per rate foreign effective QX adjusted Our XXXX full and to we to QX, tailwind Based quarter,

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

to Now, Chris. I'll it turn back

Chris Kempczinski

turn proud ahead I'm must as to it's past of Kevin. system. reminded to testament also accomplished the where of that all Thanks, a the that opportunities focus the remarkable lie we've the we us, resiliency But McDonald's during of we It's incredible XX-months. of go. us our

restaurants get about truth values, the XXXX. better McDonald's employee XX-years, ways equity hour U.S.-based system one May, one average. in we to why ourselves, $XX the we business recruitment from do There's it's get our better suppliers better we drive come by keep of finding Today, by is How to and industry fundamental We in for diverse better In continually That's together XX% how together to announced a why with goal not for is and successful the wage hourly of a just this relevant, generation, core retention than U.S., the we average that growth. wage in to our increase is unassailable For and reason our next. company-owned backgrounds, We our focusing at the our an people. the on get double a get diversity, this inclusion. more get better through market but XX% highly competitive talent, today? our together together.

of XXXX. larger advertising XXXX our also get four spend is we've world. together have That XX% our us United We U.S. over the a in diverse in committed serving We diverse will diverse in here our a and purchases a across better by customers, media next goal by communities And suppliers from to purpose a with put years. own with position doubling quarter of national set owned the by and States, where suppliers services the XXXX. owned serving between increase but to goods spend

in As the who with our the support efforts customers easier through to U.S. access we Biden the of part vaccines communities Administration pandemic, millions the make information of enjoy ongoing on to recently partnered McDonald's to for

doing cups, national campaign Our In This lead customers which Do Canada, Can We of part vaccines.gov. hot McDelivery the with McCafé month we're stickers, continues in this both to seal McDonald's will around Is Shot, supply a drive-through similar This with in digital which national replace Our campaign while campaign orders, hesitancy the McDonald's vaccine information and restaurant something to through confidence. supporting

get planet. we XXXX our of of against we report publicly would to the promised sustainability we were of May year. a XXXX, through our first size to our commit better on the In goals corporations fall progress commitment together sustainability our to our framework. major that by of Finally, one this We

of to and We're we to three report, role source packaging, owner clear converging each the sustainable any to world. have do. today energy As our know making We guidelines and in still food internal the day from part we every we're just example the create ourselves with and expand a our action, to where following partners locally legged hold the are globe to known the work experts. across It's it. and We're responsibly, strategy not what use broader to play our and release to be much ultimate suppliers working impact prepare protect in unlike but to transparency our of I've our a for a closely we prouder been with never to planet. But how working power to do the other. our and in moment of efforts accountable, the renewable restaurants we It's do commitment company, stool critical landscape to external of set to science-based our ambitious sources. goals as operators, difference employees

role unique of world. are in the We our aware

inspired the are ahead. that lie We all by opportunities

and with the forward getting year, story world time can't to the people. spending With restaurants to that of Q&A. will face amazed begin we the has everything with around I'm write we great chapter that, the next McDonald's our and past the I'm back-half the our system accomplished XX-months, wait Over of this into looking over together. more back

Operator

[Operator Instructions] you. Thank

Mike Cieplak

Andrew first from Cowen. Charles is Our with question

Andrew Charles

provide voice staffing technology backdrop engage update implementation a the situation is delivering prompting of the this drive-through? you. talked in both about you ways industry you over I pledge the Thank ordering frictionless an to Thanks. challenging medium-term. Chris, of given for in ambitions guests experience in the and at a more AI the can to of hoping and U.S., drive-through just and your near you was lot on Apprente accelerate the new

Chris Kempczinski

earlier are the we the of service we Officer Thanks, that more as have Andrew. an design channels, week, Customer idea introducing announced opportunity this creation When it with job we was Chief to the it in to it all these such they happen a feels way the one at kind the time, like reality opposed that happened, of was came after same as which in things how other.

chatter that is this is about feels Manu’s experience seamless that restaurant. So making the completely so a the this customer in

I that Apprente about think it, as to central but is it's the raising point you're related to it. not

we about us to is to we think a a of going it a years effort two with in XX takes Apprente. deploy we're were But announced be the seeing maybe that in before that I ago number It's month that significant U.S. or restaurants. progress good that was able

with Apprente as still accelerating there's of lot around U.S. for read anything wouldn't Apprente, getting the to related interpret announcement Manu’s lifting, I eventually globe. and the a ready associated So heavy or across deployment

Mike Cieplak

with Our Eric next is Gonzalez question from KeyBanc.

Eric Gonzalez

states good that's labor, have in versus wondering comment and the that those of on you've improvement on might successfully and have Thanks. impacted the you attract was speed the particularly talent? questions can strategies And comment I earlier recent And in benefits used across ended system, you quarter, the now then whether some seen drive-through to maybe become the thanks, a labor early? staffing of shortage have if some a have material morning. just maybe how government can levels drag sales? on Hey, whether I if franchisees the

Chris Kempczinski

is not certainly you seeing staffing it's some we're in easy, U.S., environment, early don't by seeing a in it still U.S., Europe, pretty But improvement. have have the states of but want the also the because declare while Federal Thanks, certainly ended of part applications people movement better. where on borders. increased to in that of that applications to limitations staffing challenging in a focus is significantly, any I those of we're Eric. challenge, the better. We're It's just it's tended getting seeing have challenging across do even stimulus, some means if

So up that stimulus the off, seeing Federal I the an improvement we made in you're as go announcement. that think rolls And do I rate. think our well. as there's you'll evidence I application mean, wages see that

going situation. us, U.S. And that think the up wages I I broadly, in restaurants. we're point restaurants made restaurant. we're close in McOpCo staffing about helping levels full after what full our in in is April, would we to our or announcement our for improve just McOpCo levels deem back of or so our X% also would to kind we be staffing out getting seeing our

So is possible, the situation is improving. it

franchisees, to things the seeing at work McDonald's think cetera on can and tools coming staffing ways negative local the service there up some and the out ensure childcare, of you're free times. been of the that system has our the I and right ideas its short-term they franchisees whether now, and In power of that deploying, a like our the staff with innovating sign power of bonuses, restaurants. impact et on sort that's there the

also we've times over challenges XX But by recently, the certainly with is a seconds, the restaurant. so service improved but seconds. that the More about service staffing of the years we've restaurant, decrease remember, may don't few we seen in big in we're three about the you last demand As love seeing part associated that. times it

it is to staffing I continue but challenge. make So, to I'm and we're constructive on progress, certainly positive back-half, think a going the In outlook. the

Mike Cieplak

Next with from Dennis Geiger question UBS. is

Dennis Geiger

Great. and But near and the plan you enable Chris, Thanks strong the for sounds momentum you've question. more a difficult longer-term. to are continued the in solid growth got support how perhaps the that approach, in maintaining strategy over comparison about U.S. And like us over and maybe what Thanks. both drivers frame emerging momentum going quarters of help up further of help sort gains to existing coming could kind underlying and you U.S.? thinking you forward? the if that the it's

Chris Kempczinski

Sure.

multi-year the the we've three So delivery going of drivers us, arches the laid marketing, to that C, core was the strategy which we're be was drive-through. had pillars that menu, out accelerating and was and Ds which M, the I for of digital be strategy to It growth going this. think three

to think you're to do layers a to the what drives from see the is we I ways within pillars deviation will us see going three don't find of see forward. you those expect, I business will sort that next continuing So those being of growth. as what move

McDonald's orders there's with idea idea. for with standpoint. coming we is with a keep And starting famous more from new ideas do has My got here we the great certainly can think our marketing to marketing famous But M, to up So team the been us. at a nice challenge orders. we've what's next

it patties, lifts So that With the to nice out is and that's as Australia, XX in that. seeing We're in market out We're core on of to a delivering number hotter and when got us rest well. deliver. rolling fresher be the we've markets, menu, a to turnover. been are call rapid Canada we've We I burgers. new done that's that we going cook to are deploy to way something rolling think of one to

that offering on to as there. just on the lot with of before loyalty I'm seeing at And chicken, seeing think remarks, U.S. in great I be a of that's in pent-up is And type I advertising users, loyalty for we're lastly, the the we've stages taking referenced good rollout. opening there the certainly for turned what We're seeing us demand start so chicken we've early McSpicy, success for customer by to something I another in with incredibly far moving out, a the digital. this of we're early, far. XX million my us. that's sandwich encouraged think, in thing us. very customers then had for so And testament so a adoption sort and I'm we're even

outlook and that don't of momentum. within that are sort if to about think any want give we ideas I kind the you with So, continue any QX execute, beyond. still there's out that to going to going see much very I The to. not would we're strategy thing one and point continue just us Kevin, going intact, about of how to you're come and to is know

Kevin Ozan

QX, as a trend talked Well, think we had two both obviously, the about, just as and I U.S. we've quarter. great in guess IOM, for second we year about U.S.

would accelerating still look very a reopened two As and we quarter, Several in May segment the The U.S. it digit in basis, the the continue being opened we the see will strong. little third just IOM hand bit June. and double to year of I other on certainly markets, as ahead moderating a mentioned, a its but bit on think we and momentum. little

momentum the the of IOM anticipate we in so And continuing year. rest the strong for

Mike Cieplak

David Baird. from is with Tarantino next Our question

David Tarantino

I quarter. did last morning. in last good the better IOM a guess, that. second IOM. you to call on stay And comps I have to the that to obviously, about you Hi, comment follow-up than negative expected had your much

And up surprised of to you you're ask wanted you relative to picking as to share key think reopen, I So, these what competitors? then the kind outsize do upside? secondarily, your that markets

Chris Kempczinski

Thanks, Yeah. David.

things guessing time of on the knowing on get two to not end going of the And we markets allow at that at I they'd a that. your we're in Certainly for exactly said or the So basis. dates, or expected I think would no than to better with we first did obviously flat each point, we're back to the yet to year on guessing the markets when when time, IOM regulations quarter, yeah, one reopen. based reopen, the is

And business So little had some when channels. thing is markets that to we anticipated, reopen that's reopen, seeing all of a the we channels quickly. that certain were comes the bit earlier whether do back able originally other than or we are

certainly of those Europe. demand some had in again, And primarily that in shutdowns pent-up markets so, a there's

that's that's in whether when demand or drive-through, through know, Europe the are to come that's we And business a U.S. have of significant reopen, markets we you so, waiting back, than the there's seeing whether in-restaurant those in-store. percentage in And higher we in-store do as

important rooms it So really was the throughout to dining reopen get Europe.

we don't than is plans, lockdowns those now have say bit but better obviously as momentum the in in go the little So that the of markets. a good bit that first assuming all that through a lockdowns, we about none back which markets feel go continuing a again, a of of first our were demand anticipating still on and is, I'd gone as backwards long expectation little we quarter. And reopening risk,

Mike Cieplak

Our from Morgan question is next John Stanley. Glass with

John Glass

outsourcing event laid these and achieve you of on on an a it has December, targets thoughts some some that in to months technology, on you in-sourcing, spending as your targets? last involved versus some some you some been associated goals? has much line? about very your digital that, better CapEx gone I'm technology G&A talked this Kevin, how investor with thinking which at are asset need you of G&A you the out spend fast updated thoughts when Thanks for and Chris and off doing to journey those how moves given much. be was would versus Has particularly upgrades. further, pressure about Just your six

Chris Kempczinski

and the and were for I to you of next Kevin think the guidance years Yeah, expected of other so. then we start pass we But off it how to if anticipating back our we I'll three kind some business certainly John, any go announced, to or there, evolve thoughts. over what in

little think I that probably bit maybe standpoint, that. I on toward about think very it's getting so, do experience. source much us best a And on giving in think we're we ultimately from a with track outsource And more balance is a G&A. for I customer that versus there G&A the

it's hit customer se, about but for So it's by the delivering driven to us best number per experience. trying a not

referenced of just suppliers think a our don't bit do we have I I think if year. to pick know you better. has out capital a I to from because industry, experience that's we'll best We talked there higher you spend anything of the be probably going different unique dramatically breed there. last end anything the can been growth add? previously, you're from think But see opportunity standpoint, that about little don't guidance what tend we work Kevin, of from on that to out when does the in

Kevin Ozan

reiterate is the about we our But kind XXXX. $X.X what billion a just talked and that detailed both done initial gave, of so. and percent we is sales or of intact, for total capital, as still would yet planning pretty I guidance No, think the for envelope XXXX, we for G&A obviously kind around the haven't much G&A of I of capital which

will then, none the certainly on that go is, G&A on I don't So, a either. I think down, actual up talked the investor in sales And because I we're don't about as changed technology the event, think, spend we as get really. of but of has significantly we would spend expect to longer-term, to seeing what go levels percent leverage, expect it

require So got we get the we I we've sales. think forward, as which why of as should spend going amount ongoing sales advantage the certainly more technology leverage size just from of a and But, believe grow, significant will a percent an scale is aspect.

Mike Cieplak

question is with Barclays. from Jeff Our next Bernstein

Jeff Bernstein

you very Thank Great. much.

but just momentum? about the labor to take Thank over then you you the consider how maybe have are conversations getting or you. a The think XX-plus for And would you presume do the corporate. how be to go commodities cash topic, months, pressures effects outsized, Just as outlook that flow strong sustain based XX-plus a how the the a which months? franchisees. to model I your mentioned labor, you'd visibility. what just that with good I to on commodities But pioneer prefer incremental pricing, cost there back the wondering helps profitability Or margin think Or, peaks, the that those hit pretty savings? you would the of your messages environment wondering that, terms to outlook I'm size, system are do clearly next and incremental we and your global about inflationary you insulate think system just is menu sales think wondering franchise for in

Chris Kempczinski

X% muted seeing it's, in XXXX, inflation, Well, it to call Sure. pretty X%. we're

hedged lot that. our inflation there with as number And, and an our out have, that we some our Now, that. so what to typically in our of that, talking probably there, categories to recognize a we of we challenges suppliers start ways size you for It's that we advantage mentioned that around But that looks think October. standpoint. a and give franchisees that little perhaps XXXX the we're us to have are can from from hear We early some the some with offset in in to certainly too we're of your outlook benefiting that question, going are have of we be things we about an there relationships also like.

going little to a be in to that right environment something on a to it's be our we're is bit to able significant I'm range that seen necessarily we've to with premature more line hopeful next we're historical a inflationary manage that kind bit in now that of year. that. going think say I So, that little

on so manufactured We're bigger supply seeing We little chip are into the growth, equipment, it's as the through Asia, also some over have the maybe on rippling in aspirations. of chain equipment seeing something a challenges related But bit unit particularly, issues. getting equipment that's the shortage equipment to side, markets it's that that getting side.

that think or things. about when got there, just sure inflation pricing taken lead I is the we've standpoint, would So, say, item bit add food around to place I a pricing we From that longer making X% little maybe in monitoring because so in we've just are this a with that the year, and overall is closely that the of equipment, U.S., tends labor happening plans what's on line, be ahead where lastly you in with roughly inflation inflation. the in the a

on got make sure stay So And I the think disciplined. ahead certainly recognize that, of being customer we've And is. is our to we they where pricing. competitive get that system can't we

Kevin Ozan

actually that that's quarter. only year, increased a we pretty over with that add mentioned, second I'd along versus is, Most last Chris he that X.X% year thing last with inflation costs, pressure cost X% said, pricing was out by food just this lot increases. in has of because year-over-year, as And labor that the we're the only about was locked year. of Chris taken second in But, driven some this for price commodity costs quarter as been threw The prices that year.

where pressures continue next that impact are. right we inflation if But Certainly, the us. think into everyone, feel we pretty good about that. year feel I would including now, So we about good

Mike Cieplak

Our next Guggenheim. with Francfort from question Greg is

Greg Francfort

U.S. to to the franchisees about in run think take of will rate over your similar. think you know permanently? for Thanks. I higher terms it follow-up to reinvested How that question. to XXX I'm time. do underprice out Do margins get just you how that were kind to of time? the plays just reinvestment at Maybe try do share? in points, trying guess thanks Or, XXX into are Does basis a trends you Hey, peers labor? dynamic margin the assume franchisees probably over that. I I a company but think that

Chris Kempczinski

check. driven on start the doing. thanks here, company maybe company I A Greg. some guess, how Yeah, quarter the very those franchisees being for had a second guys couple use margins, with by the of are as things, question, think let Because, that Certainly, proxy you strong margins of margins. me we I in higher average for the

have there a on to will average moderation expect we although the are last from be as record And think up haven't think that check we're cash anticipating higher operating obviously. I some two, But come flow we second we and May year. one as quarter began bit, over I may From bit. I potentially the still seen just through we to that check, a this little cash little year. in average over side, progress, continue, $XXX,XXX their they moderate wages that think the in They the of down yet. flow mentioned, franchisees

I to approach our franchisees would than and pricing, in So the general several financial we And consumer to we in able business. they years have certainly more have continue both the be ago. to take research-based a on strength reinvest think,

overall, to good it I But expect research, own each pretty our within we the a think feel conditions, pricing from in that. looks we But consumer obviously area looks the on second were each U.S. at and the quarter. set after and margins. bit make I where the market would competitive moderate about prevailing it decisions local based little it's so, franchisees then the And at company

Mike Cieplak

from is question BTIG. next Pete Our with Saleh

Pete Saleh

dining ask about rooms. to Great. I of wanted the you. dining rooms Thank and the reopening

XXX% Day. by you dining of think reopen given staffing on you dining any and issues Just issue, experiencing? and that franchisees rooms guys their this from they're if said wondering flows getting the are they really Labor to ongoing any open XX% I Are cash record you today see pushback guys rooms. the reason expect

Chris Kempczinski

many what I seeing look cases, at franchisees also part that recognize is the think offer an our we're open. that And they McDonald's. in competitors, we certainly their have dining our of important experience as dining we at rooms

the So, I franchisees we certainly rooms our need get to think open. dining understand that

the But what there's a I question mentioned There been XX% is that get back, there's need of dining not part kind the the that bit getting earlier toward you're maybe that about of on not we've open. today a open. offer key our to We're some think of why it. of effect to is the pushed questioning dining think we rooms we rooms have anybody broadly, It's difficulty, staffing a transitory would McDonald's. little now able get issues open call one moderating way I I pacing I is thing of at some here to kind the referencing on is of through and just of there just so be September. here just our as to to to kind have We that of what able XXX%. about right pace work by

Kevin Ozan

certainly obviously, to it is dining drive-through relieve some And in pressure to the rooms. in helpful the help just

drive-through sales those. levels back pre-pandemic, not they sales dining of but certainly do the were the seeing to rooms we transferring are to over reopen in go when dining are where some room We

Chris Kempczinski

maybe this, franchisees what I dining we And I would are than rooms last dining you mean, the you sales thing seeing to room, motivate that the probably on anything just lift. get think open lift. open. I a is When more get a will

Mike Cieplak

Credit Our Suisse. next is question with Silberman from Lauren

Lauren Silberman

the base. across offers Thank and access great drive-throughs asset the convenience digital, XX% you. with such On U.S.

customer, are digital is able share buys then, already being your drive-through McDonald's of through or on So confidence planned frequency average to direct And can the utilization extent versus digital in great your access? in given such an increase drive impulse what transactions you an channels, what is purchases? there to anything

Chris Kempczinski

gives we're think to it's reaction just already. seeing with customer what first confidence, I So, us loyalty what

We have at looking and increasingly McDonald's. of as with you've are business. particularly referenced be sort to way younger that app a consumers the as want drive-through interacting But great the they consumers

McDonald's, globe. the all the I drive-through And think vision able channels, far have ability service different be to are so of seeing we all just ways or together connect had part And the targets that loyalty in see but to of good be guest actually drive-through kind app of for on our that. seamlessly we through work have these we I the digital in around of restaurants, have of are around counts either meeting growth mean, in digital U.S., they we're not the to embedded to different uptick. in we're the part of exceeding And accessing things experience, the these guest to looking wanted where count.

customer relationship digital the for McDonald's, power the is they the about a with is do and see app of the excited responding, So customer can experience. having their personalizing what

the that's we're gives It's of confidence. So that a seeing numbers part me this. as just what

Kevin As on around maybe answers I'll impulse. that purchase just something the have be to that question drive-through,

Kevin Ozan

of purchase launched, the that and shorter what Well, I'd thing also loyalty are cycles you only just customers. frequency saw loyalty of digital loyal in drive if our or did we like obviously adoption, pilots is, the we that visits, will, greater say program

digital people otherwise. engagement frequently the generally have certainly, So would will than customers, more seen we drive to to loyal return they the have that

just Chris piece the engagement impulse So And the sales. in about. talked whole there people addition drive-through the the are plan of outings obviously, another is as to digital do ecosystem, that

Chris Kempczinski

in And in said up $X we year, as the had the we sales of of the XX%. it's first-half release, digital billion

to point, me we're results it. what So seeing goes again, the is response gives confidence to back that and customer the just the it business

Mike Cieplak

is John Ivankoe Our next with from question JP Morgan.

John Ivankoe

there you related were have France to in mean, if potentially you about points, in-store In impact to franchisees enforce guess. over think I passports, you've terms the revenue have could things the thought Two that that you increased that point. September, value product? that consumption you. understand for guess, you in actually Hi, that of that be any as very how to put I your obviously actually technology time about talked of been added related thank certain of in some Is to What some think. you we need and questions, And, staffing franchise offset of first your I that. receive? increase technology That’s do markets, maybe talking franchisee that like beginning the by that spending some about around these could kind are Thanks. vaccine

Chris Kempczinski

I that. at level, the question by Because, the success, hazard happening to vaccine even first what's week, think would sometimes So, changing hate guess. seems like passport on about the country I it a by your day it's

to we've through our what local of a the back to I having franchise respond think shown system, deal being different for goes our again, just, with owner that's adjustments to the XX-months things at the these they're ability and think is ability operators though there. make last pivot when I to able having local are business, And system. kind the to that of level,

and to happen, I again, So where how what's us. going of to impacts hate sort that and hazard when,

confidence, any I standpoint the again next because anything things to from out point about, just what, frankly, franchisees, as far on for pays think XX-months. side over from of revenue things that and ways would value the of of From not whole who we the an changes looking there good bunch to any too what I of to standpoint, think, gives And talking like. we're done we've sort that looks I of of go through lens franchise look navigating phase pretty these at this we're the a away deliver for of and us, job, I me a after forward we're of last think opportunity on maybe certainly certainly that the a the the that.

as in significant sense restaurants, earlier, And we with ever a Apprente deliver those learn you require between franchisees. to to is to up contemplate the the labor savings, would hopefully get we us ends that being restaurants of all to more of XX,XXX what split and lot So that Apprente what need means the profit what a from that, as might XX better go U.S. still before work going what cost things

on conversations any thoughts So, premature or have for us to that.

Mike Cieplak

Palmer next with Our David from Evercore. is question

David Palmer

on I clarification ask the times just broadly. point Thanks. question drive-through a wanted a have your on then I the margins the in on And for to previous U.S. McOpCo

so, of a how weeks. the that might by that you launch, that been XX gone bit times My good talking, mentioned that I or mentioned recent have of improved had because loyalty particularly of if much and seconds in You that think the understanding you're away. drive-through

So through the And I'm to would if that's market phase, in regard you helpful in and are stores going. that. the improves markets getting McOpCo, as test launch the And speak then to be wondering experiencing a if or you're so that's of could maybe XX% with as you clearly, your get IOM. And McOpCo that well. then that just

in can to there and productivity guess like stop to where margins beyond of on peaks reasons Are in rooms temporarily margins the dining a levels peak in is broadly? you just going McOpCo basis? you're quarter. this the near question Do closed, Thanks. second I new going for had think there. global what's that get You being McOpCo my terms of go I'll

Chris Kempczinski

the I'll then Kevin time service margin. I'll let handle the do and McOpCo

another including improve seeing to there. of time, getting of of through over staffing of the we So XXnd on just last the slow changes drive-through opportunity of saw the or I to slowed I away times. call that's certainly XXnd we improvement But, are recently, the at on set More few U.S. so service seconds XX trajectory we so a know speed, a Day, continuing on. three an what clear, we the improvement whittle service did get markets, and Investor the years. going The back David, of I we're remember service down, have on to the that as be expect able end improvement seconds it to all mentioned, off for the that aspiration that. we're some our had the is may be us XX improvement, that's net at time last year, you focused when so as seconds

of Kevin? it's give just this improvement. a on up were the it's down of So no hard, thing. going going to slowing There's more meaningful gains on willing too times. to service backward the And just but be certainly nobody's

Kevin Ozan

of even the margins, levels, you are were know forward, McOpCos had lot least will low McOpCo a the whether year, our and is of at back margins mentioned, as still margins, in And pretty things, I yet U.S. of as in average are quarter. couple obviously, international Europe get a on as going Yeah. a two a of in strong still And of you've some for rest just elevated. year. down back this as McOpCos. check And bit don't some expect those over the to lot that efficiencies shut both had there and those margins, obviously little of well about, historical still our margins the continue over restaurants improvement the restrictions, first IOM segment. things then second would course to IOM certainly IOM think in opportunity higher, completely I growing we helping or potentially to little quarter is the I the the was because a not. because obviously, combined pre-COVID do we talked

opportunity our So do global margins. I a exceed to high there's basis on potentially think historical

Chris Kempczinski

let come David, back. Hey, me

full. answer made in Cieplak Mike friend your question Your here to sure I

XX crew accustomed seconds. service weeks, it are impact You on to loyalty, both about on modest time, to seeing as whittle it, when times that. down six introduce also on eight had we over service has much to neutral able and we to loyalty question and we're get of so impact kind a But a that customers about pretty back

an is system. work there again, time eight initial out of to to six service the So over But we're weeks, able impact. that

Mike Cieplak

go Sachs. for to have more Garber time We'll question. with Jared Goldman one We

Unidentified Analyst

One all this spoken reopening accelerate non-traditional, the you new business to importance little domestic a about last guys quick you that's Michael side about more and in Thanks. increasing thinking those of question dining the for the broadly. bit enhancements, digital on of cetera? some the But whether strength you of Hi, with business, have the is Jared. have are et formats, guys to tech in drive-through help future, and or growth maybe the internationally, here,

Chris Kempczinski

only, think Well, I innovation out we things more different got to about being a menu. look markets, restaurants. we be to room ago, one think in that's format was and this several the you France, we to Originals at do years think delivery need limited I drive-through seamless how areas big about of as MC is, in no example, at of about Manu part We there offer and experience. going customer which an as looking know different for dining to talked

you we've be So it's going cost always kind at footprint point to take of to I than probably experience to provide, on on of with think be future look Manu to with are we needs if be have the if things share again, that introduce mandate markets that, at format experimenting what format is customer to we be that some will new able part to understand got we today. of to able want to But all a to be from of that. more going do a and Manu’s the lower a part standpoint, new smaller do but anything in format, that. the

Mike Cieplak

Thanks, Okay. That completes Chris. our for day. joining. everyone Kevin. call. Thank Thank a great Have you, you,

Operator

you. Thank the Call. Corporation Investor McDonald's concludes This

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McDonald's (MCD) 28 Jul 212021 Q2 Earnings call transcript