MCD - Earnings call transcript Q1 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, and welcome to McDonald's First Quarter 2024 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mr. Mike Cieplak, Investor Relations Officer for McDonald's Corporation. Mr. begin. may you Cieplak,

Mike Cieplak

and call for Chief today and Ian Chris everyone, me Executive us. on Kempczinski; Borden. 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 are available any mentioned our call on documents non-GAAP filing and Both with measures. website As our

Following this [Operator we and take Instructions] for will Today's being webcast website. replay also prepared being morning, remarks your via our conference questions. call is recorded is

I'll it turn Chris. to now And over

Christopher Kempczinski

when of Thanks, Arches suppliers relevance the everyone. were our inspired join the Accelerating teams, Mike, restaurant on brand, our our employees today our display of good strength system to global as our full you of I strategy morning, we welcomed celebrate the to Barcelona. comes and system, of franchisees, our McDonald's and power company McDonald's together a the collective success recent and time from worldwide convention,

For by reunion our of brand. from America, stool. our history, testament nearly the across three-legged to reimagining of a power the nearly more joined discuss outside than to market global XX,XXX And future North XXX this held we're first our time we're the we in biennial XX-year attendees how

growth. nearly strength level on sustained clear areas operate executing It's of high platforms at a the across day-to-day a strong and for all to business that McDonald's we the continues of position establishing as long-term focus from

with to the built X quarter focused connected on XXth of years. of This quarter and marketing with a positive insights relevant based XX% foundation culture. by consumer comparable our strong establishing our campaigns first was with The strategic on growth last creating sales brand success marks our over growth plan consecutive XXXX

Combined McDonald's loyalty economics, level building restaurant with engaged equities employees same restaurant time, of our menu our through restaurants is scores. franchisee providing core can commitment formula alignment, industry-leading strong strength a This the an evident experience, to customer continues unit estate, our At our easily strong the visiting base. to satisfaction results and restaurant our see and positioned. great today strong our we're winning maximizing and modernized them well drive with customers

the putting broad-based every As they around with consumer that of the reflect faced pressure be I Consumers to spending, it in clear on day-to-day spend they the continue first is that pressures on QSR as is their year, persist elevated which quarter more world. industry. even the discriminating dollar prices

noting worth almost traffic U.K. was everyday of It's difficult our we that traffic day. now Canada, to is Germany, delicious ever. customers for at major Japan the know more markets, across in in the QX, every macro looking and the feel-good flat for our industry, promise: Australia, U.S., all has That a industry than and environment an value deliver industry slowing. In reliable declining price are to each context affordable always the And moments been

of executing this growth Kroc Ray ago day. landscape. and our the plan consumer true against long-term Staying model first opened the on the our McDonald's, very for years this just when the the side was driving regardless XX nearly of and to as is case This broader remains

meet evolving mounted, customer have needs. with pressures agility consumer we've As reacted proactively to

points, various of launched provide our including across value IOM example, big value international everyday customers. smaller, year, more these our meals many X at our all price menus markets. bundles we've affordable offerings new past For to the over Featuring markets, of

drive other quarter. price everyday units convenient value sold results. features strong like its continues the during for McSmart our in every And a menu bundle Germany, to performance our In continued markets record first menu Spain, has point, with which

dynamics. everyday recently I our market value has of firsthand entry-level an an challenges, challenging time renewed significant which their I driving their consumer value and team inflation value to light implement with offerings environment was ability created experienced to where on in in In our identify traffic platform, Poland focus these new a impressed by market's quickly in is restaurants. opportunity back the into spent

And and high value a encouraging have progress in now awareness, market impressed in established last which the consumer their market address is France, business franchisees to moved speed our opportunities. which flagged The their been own menu McSmart by I with which quarter, I've has their trends. driving with team

we're to be at laser-focused said, continue tell clear and which available points some great on doing where outperforming. strengthen us clear a well, In this we In proposition. have food our day. value, McDonald's opportunities price It's work. through means is affordability, offers this business customers survey That that every however, to delicious markets markets, still the must we our it's the entry-level good

our value, the continue of McDonald's leadership the scale committed approach on replicate gives ability McDonald's to the it's us system learn that go-to unique value value we customers. we like destination size history that a take it's with are and has One our of other. construct being We and menu success will within the affordability the to and to literally further. from continue at we for we playbook problems, the our each industry. forefront As to McSmart to the keep to solving imperative wrote the And McDonald's a examples look long upholding for

place, affordability with markets the years, local As needed, XX strategy where value offerings. decisions our last are pricing to we've franchisees closely done those our working in more the balance menu our with aggressive in and teams for get with right

franchising restaurant these over And we've and strong. couple to cash strength navigated flow ability margins corresponding the of remained Despite cost of the environment to financial elevated P&Ls, initiatives. years, the past the invest have traffic-driving the thanks in we average our

quarter. bar satisfaction in across a customer And restaurants ongoing global we first the the challenges the spending comparable This continue across our customer driving times of is sales service we with to on our X% Despite higher and pressured improved consumer markets. nearly our raise of experience strong segments, focus in execution. levels these growth and delivered on

there strong recognized us. to and of core in XDs, when highest estate, globally times, is it's execution our in of the this customers And win our delicious maximize focusing offering positioned within the to our on the challenging delicious best modernized on our plan: value control what's McDonald's at industry our we combine our menu because level could our a food to that alignment food and will In fully is convenience. strategic match across approach with brand, impact exactly growth. competitor power unparalleled significant drive no continue system

spending we and our laser-focused share. and growing continue, headwinds pressured remains on consumer macro market As maintaining QSR are competitive advantages

results. our about With that, over I'll to Ian to talk turn it more QX

Ian Borden

Thanks, good morning, and everyone.

As a execution our for growth driven the first strong few IOM X% just quarter, strategic minutes Chris our plan delivered across U.S. against nearly mentioned of global by sales segments. ago, and comp

that we've landscape, in growth expect before, year. pressured customers As we continue moderated to economic the top said they as with line spend be intentional a dollars more this

the to closely in local of and East. In region. day, in the every our sales impact the our communities IDL in from work Middle remain show war America offset continue we segment, way to system Latin positive support proud Japan, the were continues and our to the comp for with by ongoing up DL We customers Europe partners

McDonald's. I'm of this in entire deliver our the feel-good that like during our system time ability once McDonald's any with the moments customers again again delicious, which XX I've and years It's reminded my to seen in resilience of to times environment, and

with a McDonald's drive with the than XX to we cultural a tapped relevance our a continue We global new quarter, One truly this approach engage world, Way U.S., into creative reach markets new the McDonald's generation In of global excellence to campaign. combining unique around fans. brand community a local to including more

WcDonald's, While and sauce, we're gaming McDonald's bonus communities, this an app dipping our new lifted life fictional alongside we theme purchase, Chicken we been brand content anime, McNugget By mobile to fans with long packaging brought as for across sales. created brand McNuggets, our a restaurant in and quarter. a category excitement a featuring enduring has known

passion mentions. and billion brand for universe for social the the media spread in and fans' XXX,XXX Our impressions WcDonald's U.S. across X over the nearly McDonald's quickly with

Our consistent delicious quarter strength improving as this in many to a featured also showcase we approach our beef to with markets continued across burgers our were fan favorites.

in Burger were deployed Best over of globally, delivering satisfaction was both in Now taste our and introduced customer quality our France with categories and burger promising hotter our results this quarter, recently across Early core restaurants in XX% juicier improved burgers. scores. lifts and

a significant customer the the category the in character now in of at in we're an our and Big the advertising. Hamburglar, the fully into country, Burger to the Tapping of the center record we the U.S., And satisfaction of deployed drove iconic with contributed launch campaign where the nostalgia national Best across scores Mac lift celebrated market.

XXXX. core achieve quality We'll Burger to by what to scaling deliver tap into system, of and highlights progress taste big size the showcase of scale. The the our power McDonald's by small up with our improvements to we've restaurants that burgers can to continue end can when made add changes both full and we nearly Best all

across leadership this as universal on year few larger later world the that has satiating this the build burger further around team We'll a it be beef, created we in before our chefs globe. to have it scaling testing in from look burger. our a appeal And markets of ensuring

also equities sales our experiences and customers. new and our the by increased top app digital of celebrated this digital spend loyalty greater with Across leading customers. as record app increased We growing is orders, and mobile core our menu frequency mobile quarter, strength combining our penetration in to loyalty evidenced exciting our the by for markets,

areas a win We're digital customers digitally from Powered increased the markets incremental pieces. campaign in seamless Famous center a featured chance campaign by Fries resulted a also we sales. by leverage redeeming Australia digital their like across share experience, to the at market's gamification. and loyalty acquisition the game learnings of as in World McDonald's and customer digital growing offered

a results nearly continue Sips return order chance XX-day unique user Winning to XX% in total last with to of drove with the on of also experiences mobile record Sips, cup. their engage quarter. base the in we market The the market. experience, a loyalty of to more users drove loyalty Because U.K. during in digitally every app active Customer game with in their U.K. increased digital our digital the members active win growth and frequently pieces, customers encouraging engagement redeemed Winning strong our loyalty with to add the like drink

the app know significant today's right world the are at experience McDonald's. price driver the over in restaurants, of goods or our But and in especially to mobile for often delicious equally choose our more is our how we food where services. whether paying everyday We visit customers through is our provide, a consumers providing environment, all critical,

Chris quarter. value a within several a markets of few drive results ago, to mentioned As minutes strong proposition this continued our

customers continued consumer-centric compelling and share This affordable with at Poland strong gains. drive our QSR Spain to results like value price to providing Germany, points in approach led markets market and to

meet around speed. to of needs scale As for our greatest enable size we working our to drive the agile sharing customers and is we'll use what world, and continue impact, remain the to consistency the

Turning P&L. to the

Our drove global constant X% increase earnings $X.XX an currencies. adjusted for line prior the share year per the of over growth of about quarter, top in

the quarter for XX%. was margin operating nearly Adjusted

offset growth X% biennial discussed by opportunities Chris consumer about costs efforts continue mentioned. of in strategic such margin restaurant was generated well $X.X partially environment as for currency. invest transformation higher we've this the to This as Despite billion line the nearly spending Convention morning, constant digital, our and quarter, associated our as as increase Worldwide that an G&A in top results of costs with pressured we

for Our tax was the rate adjusted effective XX.X% quarter.

our As our our plan. by growth The business. year the grow is to put the about our includes a resilience development that against to on and and strength invest footprint us for our the markets, the the in we in strong look of forward-looking unlock people are before, and efficiencies restaurant, our off pacing overall we where customer end for accelerate to requires business against and talked opened ideal long-term of our China, including driving areas as Development deliver restaurant XX,XXX pace position right strategic in needs and new to making as as start XXXX. across recently we track global X,XXXth critical of This financial we've investments. restaurants openings well

we'll full addition leveraging long-term development, ultimately innovation the Global digital efforts we're in restaurant entire global also growth capabilities speed for well as system. In new and McDonald's By organization. technology areas and our like our to investing Business Services scale, strength build of our as within for modern transformation our and and unlock

the scale remain that positioned system strength with the McDonald's only well unique headwinds that the provide. we Despite persist, can and

we we platforms. are and and along for With on As this and Chris of we restaurant with the growth our suppliers upfront, company consumer, company, our the leverage that on how moving focused will I forward, deliver strength aligned our long-term financial strategies system talked shareholders. about our can to across system confident the further continue our remain franchisees, for right

with that, it let me back And Chris. to turn over

Christopher Kempczinski

we've with association great With with relationships globally that elevating as yet it's Cannes with Thanks, the resonating culture Marketers in World's and one generation throughout our meaningful We of a building Effective say when answers. We're Ian. consumers. that brand scaling that excellence, renowned next Lion. in like Work is the been calls, is again and of wonder to the ideas world recognized and marketing culture creative Most McDonald's no that consumers, by

menu our And campaigns, mobile doors to customers app. QSR drive often. door restaurants we the environment have of an this opportunity personalized Breakthrough experiences our customers in the a of more the digital already to and McDonald's traffic, through again great-tasting who pressured they with visit visit again to physical come get and as will and

based like means than recommendations on loyalty digital phones, our better As make else. driving serve customers know capabilities decisions and more frequency anyone personalized on using to purchase customers their our

we capabilities time when And by the message the already to investment right even drive will experience, love McDonald's encouraging we television, personalize collective With like our to deliver shift from right to consumer, mass right the insights we marketing the who members, at media more. investment visit to digital those powered the ads profitability. billboard modern and loyalty traditional to print work and in

flexible in customers hot on our experience already with orders the what is And fresh and restaurants want: successfully personalized on experiences delivering transforming Ready delivered underway depends convenience restaurant Arrival, across accuracy. world, create it's whether future to deliver The markets by orders dedicated operate more long-term the drive-thru to format reliable concepts. platforms or we we've and building digital discussed, a for lane other experience infrastructure more support a in China the technology X efficiently. And will

our fulfill there's decades-long communities fostering McDonald We've marketing feeding fuel our system talked is best-in-class example purpose component. House strives McDonald's of positive brand, to impact another work the menu greater every but driving ways about the to there dedication and iconic Charities. and our our day, And than no and Each our of Ronald locally. with

care and hardest more for through the pediatric of of Ronald that world's This it than through stays of support the tens healing millions children year, promote year. running has of times. across providing the families McDonald XXth and programs we're million most. overnight essential extending Since leading each XX% families strengthen is hospitals the family house significantly Charities, footprint more to House the X of that when the helped global families celebrating first With barriers XXX providing remove care, opening, organization and across charity's they've anniversary services world, than expanded need health

our alongside Director, entire new next strong the Hernandez deliver White, Before recognize I moment also Chairman many the continue an company to the on close, month, role to system under of Miles XX to assume his rest our of and of forward like voice. a performance Lead I I'd his Directors. to Board as Meeting look following working for united the of take And to additional aligned McDonald's Shareholders years contributions throughout our to I Annual Rick Independent service Board

the to the the laying is as our Accelerating that right focused I am for growth. confident Arches meet of needs system priorities and with evolving future tomorrow on customer playbook, foundation the the

take that, With we'll questions.

Operator

Instructions] [Operator

Mike Cieplak

David Our first question is Baird. from Tarantino with

David Tarantino

My question is on the comps outlook.

in I tougher you commentary that last than operating suggests guidance. IOM year. mentioned call comps to your gave range U.S. to to on you climate Ian, you're you the think a the that when think, expected now And and X% I had in the settle X% this

for And the aggressive if needed secondly, wanted your you U.S. play then still there I more more value get in concerted ask that or in specifically, one, range environment. current those of So in view? markets the approach is to think both is a in do to

Ian Borden

Thanks the for question.

Chris look, to Let guidance. jump out think probably and But I of I what know me I on give in then is, well, build start typically will we don't start say. with kind whatever would comp as you

on I a years. back provide industry felt looked in directional we do perspective the more what think were trying we kind looked what historical to as of typical we range to like was

going felt we know, we you top where 'XX moderate. a being was line talked year to As about

that into I heard as I even been anticipated those say see isn't continue think we X. for is, have to we in be clearly, seeing, think the headwinds than that we're industry. have macro our months to the coming as remarks, because broader four I certainly headwinds year can year year, I going the you upfront started typical more significant what say we -- XXXX into quarter think macro and the we a

And comp the going far. and international in large flat U.S. -- from perspective we're think markets we to the our of sales the see from roughly and frankly, U.S. that can so quarter we what many start a I expect

the be or we're seeing of I that, think And a I in historical trends. either had we to declining we probably that likely think our largest below indicated. internationally the is going seeing is so what U.S. as we're industry we're believe certainly of traffic and And many range result that that markets flat

I control think context the us. we don't is, around what's macro clearly, important

of the against needs those of we making ensuring the is it our is business consumers, do can and what making so better And always else. is needs, adjustments in than that we're anyone to deliver course, appropriate we're on focused to always listening sure

And think clearly think, by affordability services current context. all I the basket consumer where an macro impacts. I Obviously, are I think their a with in lot I consumers mean, and are expectations across goods inflationary area the of is hit, dealing obviously getting heightened. they're full

many really think got difficult do. long a that We've a we've know through time. we value importantly, need I and because think, of money obviously I that over affordability. for history I strong context important both been these and it's to being in say leader we what times

well, able and to think than a against our against is to I And to what it better and expectations. each us do that those to success positioned think sure for that, we be anyone of strength consumer else. delivering know how the we're financial business position in going current do we're large that's puts markets our I of make

Christopher Kempczinski

And I then offering important U.S., meal was when in turning on Mac XX% bundles this the McCrispy. you a system, there I value, at to my that offers the of to answer off you U.S. that we've jump to if some you in $X less. now waiting or digital we're And Big recognize offering franchisees or value app opened got our great great it's for while look buy right $X.XX in our some offering for first are Big digital our U.S. value out I and get think just system XX% Mac there. could a is the is

So a there. great lot value there's of out

talking awareness a that's an the there's But where to platform of on for everybody the is think drive in ways U.S. XX is. the was value And local platform. And platform that in right issue with have in what time have of our the the don't same there we're message a are national different environment now value there right that is I things U.S. is value out opportunity value now doing a U.S. value I is value. message, an better going the one we our we the in at with competitors in national us it with out what about, that

it. for to can then high a around awareness the the I we media get on scale aligned more So proposition to the that consumer system to in use is opportunity U.S., strong think, value national our us drive

in awareness U.S. for what know and And other the have that's I got think, I to markets on team having Joe where the compared that's, are U.S. you've big able the the going success, I us opportunity high as at the U.S. look So forward business. and we're focused to to be

Mike Cieplak

Brian is next from with Our question Harbour Stanley. Morgan

Brian Harbour

Do a takes sort the you of to as timing that the else in about U.S.? of plan, or that about question, sales especially quarter? perspective a think think product I second that value we'll some of could perspective drivers Yes. noticeable improvement from prior Do the response guess, driving longer you that that? U.S. start given to kind on this than in think some the what's be What we will maybe it think year? comp we see

Christopher Kempczinski

value seen, very north I we've number if to in marketing got and having together drive what opportunity my example, a think in period starting significant quickly quarter that, an that's of of as to in time was very and I Well, France program a around prepared to encouraging noted then that I short awareness about in France, areas turn France, results. Sure. a trends they system support XX% last I their came against talking national as that of of business they remarks, put

that's platform, how about that on. pivot and quickly marketing support quickly to that how and business it's something not with that place. know against that, system I talking Joe U.S. team value move can when highlights are what impact the U.S. can And a the a getting franchisees see you your you compelling think is strong I have it's in

platform takes, value there's a it's around can think, out we the level, local How there I value of lots national how together that again, a but come U.S. that compete. at great stronger do in we business have in it's pretty once clear up the you respond to to the be place, conversations in going happen I to start But is that that have individual that that quickly. think, could long market.

Ian Borden

our think Chris closely add is -- working said, really I'd said, I leadership owner/operators. with is to is, I know, what the maybe really our U.S. mean, only And I build Chris team just as Brian,

we what need that I a good to talking about. quickly kind have do globally, going together And other of that as of work as we've understanding owner/operators to that we do, we're was kind well of how address can And to markets as with obviously, really think to in opportunity. seen well. we Chris move,

Mike Cieplak

is Dennis Geiger UBS. question with next from Our

Dennis Geiger

Wondering a if consumer, could kind more that speak or pattern. U.S. seeing cohort bit it's what little you to you're of by income whether with spending

of sort of maybe key speak on affordability then plan, And can the be you all the other value at beyond growth a can current supportive national aligning system U.S. that and some sales environment? to sort in the of of the levers

Christopher Kempczinski

discriminating Sure. the over Well, how occurred is consumer certainly in has U.S., I things the last of spend we when inflation think I think, in one that opening certainly very the has the that their And dollar. the they that couple of is being environment. that noted our years in created

income important lower-income And think that seeking are I be it's while to it the all it more recognize pronounced may with may consumer, cohorts value. feel

as making said, to benefits low to well. on middle that so And and have going our we're that's just that not is And benefits our upper income, income as to focus value to sure, I customers. strong will have offering

are same you're regardless actions income the of the talking so that about. the And cohort you take that

at feel in about other on From that U.S. sales where good standpoint, I really we're the score, driver

We're We're a of restaurants improvements most how really speed running nice restaurants, with job our strong our As are I look service. franchisees in doing seeing our the restaurant down. we're in operations. team seeing at, is of running turnover our in importantly, U.S. partnership

get combination have menu to as of I'm that happens satisfaction All be the do. things and improving you innovation of we will to year. the scores going exactly of will, are going is to throughout customer that those find to we satisfaction. course, we menu our innovation part it well We're can increase ways U.S. our innovation customers. It's expect into comes, seeing in menu but engage what And use not detailing what the certainly in then when

great we menu. just have around would be out, core always business point finding lastly, driving grow we're And if to plans. marketing, can be consumer I your to great with the And you doing ways just marketing interest

in marketing And so Wieden+Kennedy, for have look to with I next business. agency we standpoint a the that know our the U.S., what's the to big along idea team, drive they're the from U.S. continuing

multiple at disposal. our levers So

Ian Borden

important foundation of Dennis, And was just the think I'll I we more I of because mean mean, an it's saying challenged the this I what point. our Chris our majority strong into in incredibly business, -- is macro in I the maybe of such modernized a engine be would marketing to. business think position. our think vast deliver And that We've build best-in-class think emphasis come kind the on I with an as I advantaged think, meaning have environment position. brand I fully we a team kind creative estate, continues got, Chris that's of referred to and great execution. an

relevant got strength in one of culturally that's financial our history. our resonating customers its strongest We've think system in that's ways. with points I at

years. the lean we've over into we've done the So of together the got ability work opportunities last of to because of kind all couple

quarter. business growth a kind the each of if of continuing you growth drive U.S. progress the to is those position all-time Delivery, And in then We're in lot of And as made XDs we we you those hit example, highs to delivery, digital, drive in of Delivery for -- continue know, invest more know and digital we areas. drive-thru to we've in have of leadership first digital, think broadly. our in. a areas. sorry,

sure our and majority about make business. lean can those just really the affordability feel know of consumer to we for going We more we think the I vast So meet on and needs. is looking good in value, we're and

Mike Cieplak

John is with JPMorgan. Ivankoe Our from next question

John Ivankoe

even or have different very pricing pricing combo pricing if restaurant in speak across opportunity base of direction be obviously, market. in Big combo the happened of the it kind stores. about And like the about what the given pricing specifically wondering can or to as that was just a pricing is even actually to McDonald's Pounder I need communicate menu And highest address certain we talk stores Mac certain things will core country across has U.S.? maybe Quarter I the you that what within the press some of

So communicate the to of around of what an even kind outside is maybe did consumers menu we there kind pre-COVID? opportunity a need or core pricing give value get of or that back perception to of and value of menus for the

Christopher Kempczinski

look franchise we Well, I were it's think Sure. that margins we've you in start just recognize now were important -- restaurant-level U.S. today, in XXXX. for where franchisees margins rebuilt to me margins versus let XXXX, with restaurant-level we where in to the if back at

the pricing the around that's quite quite food as were high was what -- means So taken inflation and seeing several over to and offset high paper labor last commodity years been inflation. we taken all a

are are and we the the the about to in in where what now to that to from talked which a says do margins we ability restaurant we I have that were we U.S., do earlier So me forward, XXXX again thinking then proposition my value where -- question. answer to going back be about in

that pricing of our at level. need from over pricing several the local a core standpoint and the last menu, we've stay happen capabilities idea to the the pricing think done on do have capabilities lot we I we a building where years

are will used the is a look our is. we level, products franchisee And they we that. restaurant are then and level do So relative of take what at will competitive at at what us, inform against all pricing our to at up products the around and priced what the that go match how

way gets from feel think on. we an we we overall opportunity reported But where there be our sensationalized a in one-offs shape is attractive like voice about that's are I and the compelling from I are, Yes, focus will menu know be speak entry standpoint. price more what I in U.S. again, what team, are point, So one that and affordable points decent to to our will that for consumers a with the those is. need

Ian Borden

our about we Maybe because that or think that those products making entry-level on in that And compelling equity -- that's affordable it -- Chris at if I is price sure, I items we is would maybe sure said, strong value of generally way know it's doing a meal point Chris we've John, we've do is like part would then affordable an build at sure just entry-level an of It's think big affordability right. making people got as for a the consumers -- price I'll well. for getting got got I affordable I think it talked think -- that certainly points a breakfast things. consumers. And and got behind. in bundle value good bit as and compelling we've to what the with making business think to at little we've say U.S., breakfast what and couple like It's looks

options. talk the a And across looking you've points Chris products level so aware awareness of make I price to going heard as executional got we different about, the affordability an and influence forward at visits they're standpoint, got, offers right to think, we've sure are obviously, significance right we've that the of that's and and look from consumers as their got the and consumer that price, we've at

again, talked we're hard in of opportunities. and think top sure working delivering the really sure we've opportunity we making So that's in have those our strong And seeing each Chris about, well, against place performance make done in as to I focused markets each on of we're that we're where we're markets.

Mike Cieplak

with from David Evercore. Palmer is question next Our

David Palmer

that is dayparts. even the the eroded least consumer it's slice -- industry, surveys thin, You it And digital gap you does satisfaction has or improvements higher. gap. to at had the surprise heading definitely doesn't certain out-performance renovations. the wonder the whether noted But been trends I core as scores me given the food it surprise restaurants guess all I the what in that me that does and and customer to that U.S.,

your insights the the price point from narrowed other What certain scores that are that Big you're differ been why because opportunity surprising. how for about the international in gap has income maybe markets? cohorts? X Is seeing does value And with U.S. entry some of opportunity the an it just has it

Christopher Kempczinski

Sure.

our I you think major on improvement all there's again, we of satisfaction, that. and and across to as satisfaction, look markets on we're overall noted, multiple our seeing aspects

on think some drivers we seen one of our I on we in superiority opportunity you affordability on losing that's if relative markets. any it, in And there's that it's if superiority have some I anything pressure relative in a as that there's but that's of overall Again, or satisfaction probably not sort then declined. satisfaction, affordability. of few has all markets think where that's certainly, closing markets, the see decompose

a It's markets narrowed. proposition, as has still the but superior gap few viewed are value important to still degree we note in a of

things focused to this we been the things as back need leads that we've about that that all talking on. on so call to be And

Ian Borden

you encompassing our think David, is driving as place, heard and place to previously number experience, different experience. build Ready you've the in that I us across we're talk know speed of mean, noted, as because we fresher We just on overall delivering markets. top which I arrive is of put an maybe in our food a think factors. of Arrival, better when as U.S. customers restaurants consistently about better execution I we're like to hotter, delivering capabilities in

the Chris just mentioned customers got about the I can feel the on all affordability need think current we other sure against consumers experience we're good we are and sharp we're this aspects point on context. really the laser-focused in expressing really opportunity making expecting. the is are and of what that and meet delivering how But that we've

Mike Cieplak

Eric question next Our from is KeyBanc. Gonzalez with

Eric Gonzalez

are expectations pricing perhaps inflation I On year-over-year labor levels, could back you for level year? but appreciate to that and of point to food discussion, your the your XXXX and current pricing margins the and speak the current store-level this

that And changes. the in seen maybe then elasticity whether or of pricing flow-through changes any you've any just

Christopher Kempczinski

is U.S., depending in could it per Most your focused the is pricing. the guess most now if answer I the different obviously on Well, the just a you I on Sure. again pricing. you U.S. carryover is is on not where the It's U.S. carryover world. focus my give se. that are pricing new in question But pricing of because of see

the Much level, much there's probably to national what labor inflation. a we happened see high do California inflation. we're of certainly Again, you continue see said, what over bleed labor expecting That California. single-digit of that could of from of that introduced. is And on in out coming

food that's to down gone levels. paper think inflation, on I then and much more And historical

from a historical food we're and more back at So forward. going on paper levels inflation we what see

Ian Borden

the build, just to said, to paper mean, Maybe Chris and food Eric, what I low single digits.

of paper certainly in So both of 'XX the although labor. first food a carryover inflation, got we movement from fair have effect from I think this kind 'XX favorable part still into and and we've bit year, of seen

I rest we're prudent address and our about a price-weary. pricing think the including note going looking getting that important of is, in And to think, we XXXX what's to we've increases for that backdrop the on be already working think I thoughtful and on price further affordability that talked that fair the our of are owner/operators, understand that is business, keep and at I about consumer any need. on bit to consumer opportunity place kind the on certainly the

Mike Cieplak

Our next America. Senatore is with from Sara of Bank question

Sara Senatore

one clarification guess I and question. a then

industry always declining. QSR flat. industry flat think I as is at to of the of, best, You is where I traffic guess, this that an mentioned kind traffic

have better data So have inflection I you sounds it trying point? like? I'm whether sort sort an of been -- consistent, of to usually do, than more trends the this Or just that's understand, traffic given which

mentioned question the where to right have then is And margins are I you back are. they

as peaks. flow you pre-COVID, not contemplate do anything making sort expenses. franchisees. they investing digital or pull in whether of capital investments we've don't like back to support I you But cash to franchisee think think back on other fee be investments, are franchisees or those seen other in restaurants abatements some fees kind it's guess you if of when about COVID maybe also doing value, is know I I operating

need something you if supporting do really can just value? is franchisees you reinvest in to So that

Ian Borden

It's Ian.

and me take the question. Chris your address I'll then Let clarification let

that So markets, traffic, talking and declining what was we're our top many was about I seeing of or industry trends. across flat said I earlier is

If we just comparable to U.S. negative give think context to be quarter I I and challenging in full traffic talk year. specifically that's the to the was And that's it X, the environment. industry the more negative for macro important, the about expect context

Christopher Kempczinski

in the franchising about cash you're QX. I how flows. XXXX look are go franchisee your franchisee see highest We're turning a in question cash but flow, right through to as then at we being cash but at that strong think, peak, our we're franchisees, we level increase going strong and second ever, at, support very to franchisee flows other and I When position. And they're could well, you U.S. our Yes. franchisees, markets

did And interest the on ago balance if the our of franchisees, in was that modernization years for rates. we restaurants many done low period you about all the sheet our U.S. think super now a in

seeing debt books our being the market And that's right significantly lower is now. rates carried at so what on any for the franchisees than we're interest in

strong a And so our franchisees in are position.

a mentioned we don't As value it very subsidize the here and of in know, lot step I control you We're pricing. a they out think the doing there just have in is I what in market. We earlier, great pricing. fragmented But opportunity way.

offering, And on a that awareness do very on and you around high frankly, value coalesce don't so and all have back national we're us pull little the opportunity do proposition. local bit maybe value how a the which, you for awareness is we drive how

us think in to that the be from media for way position of up a and smart I to scale this go we're neutral a net And that. think our do system engine P&L. just we end forward. being that going of franchisee financial marketing there's the size spend, using But a and So I a certainly, to can good health that's opportunity going to do the standpoint amount

Mike Cieplak

Lauren is Our from next with Silberman Deutsche question Bank.

Lauren Silberman

question. value follow-up a had I the on

you a value imagine could point the XX offering mentioned look how like You the could just I ways. environment like what talk future price different Can value U.S.? different difficult. cost across national platform value about you're be looks given

type are at consumers look lower bundled points, for, price you mix? then most in the when seeing what looking entry value point, of value you it Are uptick an deals? And is

Christopher Kempczinski

price of points. successful I'll level then Ian. to need outlined Yes. I'll maybe we in I hand you see start to entry off have our good a that general and being playbook, is think which as Ian construct But sort

be have value to that need specific you offering need if there You have breakfast a business, breakfast. something deal. then to be meal to needs a And big to you that's

we there number the high-cost successfully. those very a that world, same of is in between markets, see we're again, around markets differences cost markets, in that competitors different et And U.S., then, our have cetera. doing But low-cost the Certainly, environment.

in so other and markets exists that And -- well. as

If would it's it you of be to were if France, Paris were you what somewhere to much to to different outside than go go Paris.

differences in exist those world. around many the markets So

an shown think if thing to about you guest driving historically for has system a you're that our franchisees, is this you're a if standpoint. ends ability driving in do portfolio ultimately, from counts, being good business, it And our up what transactions, think do I working with how everybody.

history able We've So being years. we as mentioned for XX opening. have our a in do this. I doing been some-odd of to done We've this this

what takes, with what understand national it we a that our proposition franchisees it like. think I around through conversation aligned So happens to looks but value get

Mike Cieplak

Brian with Oppenheimer. Bittner from is question next Our

Brian Bittner

should with to books, perhaps range in quarter there's model. the the there's the for that around As year's if financial expectations a year? mid- still tighten of moving last to look this case we that wide it first Or towards in As operating range, Ian, very quarter? relates range? a we similar saw is is pieces kind guidance, anticipate I'm what But the in I we XX%, to operating an a the of good margin to XXs understand like a lot base fully and high declines opportunity target curious, margins

Ian Borden

for Look, 'XX. duration of the the macro headwinds to think the lot us I working terms There in the variables what's the I on in forward of hit are seeing difficult it. obviously look the a play. kind the predict we're Brian, it's macro for and we're depth. of thanks And you context question. mean, context means of through at It's in

is our dependent be as margin always, So I performance. op and going to is think leverage of our level that strength growth. obviously on sales impacting And

remain I be to sales time, as And we're the in will top be confident we as we're work helpful I over and affordability to drive leverage direction kind time think getting leverage of margin. And to in to we going want. op in opportunities over address we've got, continue op line to growth. helpful kind growth drive drive margin that to able continuing back to the in certainly think I Look, of really our strong ability confident, that's

Mike Cieplak

next is from Our Charles question with Cowen. Andrew

Andrew Charles

Chris, looking this will be years to value past. from platform learn national more about how different

if launched. approach competitors $X So business to in instance, what for the you the just $X was it I $X a had It regional U.S. looked the successful year despite for XXXX, traffic value. about like that think, said that are historically, in brand been back was pursuing negative more national value more

make going if successful, So value I'm is what like forward. national you be this think different will put will more you to going the that what of time curious look lead that to can about constructs

Christopher Kempczinski

value in It's Sure. national a to team up define Well, partnership state our is look obvious. what to like U.S. owner/operators U.S. in with proposition the the the

it that gain As for traction, but then $X to it $X a minute drove very you program $X, strong results. took know, with

X certainly, business. $X, the you the at driving we for performance under $X successful or a if U.S. the that we're think $X the $X of now many very $X, think, were X I in across year over look -- last $X the performance in I was U.S. years platform us

can you you you the the it does on to the drive The quickly start goes on transactions the that that quickly can see point And back drive can with to and actually impact business. awareness, how driving about that. incrementality turn faster it faster around, that consumer how awareness

the you platform compelling the then drive it's defined, business. making it's that impact transactions awareness on to the that sure And first, with customers. ultimately to need properly it think, you making support sure getting I So that

Mike Cieplak

Our next Greg with from is question Guggenheim. Francfort

Gregory Francfort

a know continued if the support weaken might seeing, the what like just or you're the same there is standpoint from business. business I'm from that? second in a question it's curious royalty And has that protest what on done into perspective you My International through in rate and anything it's doing ideal way U.S. be the the the I to if quarter or business don't maybe

Christopher Kempczinski

Sure.

at impact markets, are look perhaps the in of boycotts if think then, the say few any our cases you some And worse in places. wouldn't think, slightly able better say might of look some there. I in some a things I it's and be getting getting to you I of

change So on no big that.

-- there. delivery of think which note markets, interesting also interesting quite to is holding those in an worth I that well, business it's kind just it's many of is our dynamic up

the improvement Ian, is to in better some Middle But have to we pass outlook I not marginally over, to in the war impacts meaningful on earlier that to to any what an we're the referenced continue as on is over that until expecting maybe markets. I'll on our and call, it trends. East going do you. So see conflict

Ian Borden

kind start of into one mean, build the were international think said what of were we that the headwinds macro that's seeing headwinds. number of just our Yes. quarter I upfront, I on that I large more a significant X. Maybe across markets and continued the

what the fundamental our and business, part right McDonald's providing that that the I I are support and business about to before. business of for situations those external mean, call think beyond everything look, our control I this kind I heard franchisees doing me factors are of for model. of everything of on the talk is do of in support it, the kind IDL, are that think franchisees there warrant are you've impacting I'll continue right mean, kind when

always always to to and if make provide we designed decisions support, when temporary. go in our mean are I most who targeted need. and to It's franchisees it's

the and markets talked we're some we and facts DL Obviously, work with been our support have have impacted we've continuing look for to incredibly that think circumstances to provided partners. region. closely previously I some the that in continue at

say a provided in close to very our DL and But far level. just call significant that close that's been what would continuing we're I not so partners the has level work gotten of stay obviously, support with the I'll to region.

Mike Cieplak

with Sandler. is from Brian Our Mullan next Piper question

Brian Mullan

Illinois question a your in you talk some could the CosMc's. about in tests Just learnings on both I if are just Texas. wonder of and what early

process that next you how or you to might you year about to evaluate if here plan talk approach great. looks it from build wanted in the stores, to related decision beyond. be them Any color of you of ever what just terms can then would ultimately that, more how And like

Christopher Kempczinski

a there's report. in Sure, telling Well Brian, you, I'm that to lot to going disappoint not

we're lot of that, of of true a of it's to of sort a what still as think are curiosity expectations. CosMc's a performance I of interest that's sense And kind underlying sort result get is seeing tough in driven. the there's what

in neutral see a traditional build function concept, comparable a to volumes That's As and or expecting. what at restaurants of than ability on have stronger a was be the to to unit unless smaller-footprint ultimate we're with be CosMc's that's we've building both referenced traditional in to looking it going at lower got our to absolute ROIC Investor margins McDonald's. Day, what putting accretive McDonald's. reason a a we're we capital no business that There'd for these then around the associated this is cost business success what to any be to that against we've the our driving

things those that we're assessing going be in of things all So are market. to test our

And function it unit these will XX function the be to it need As we built. restaurants. will things capital I've opening function margins have and It get we -- be spend previously, of XX what of we to volumes. that plan be a will referenced of a a on

will All is. our what drive ROIC overall of of assessment potential that the

Mike Cieplak

have Barclays. for Bernstein one from Jeff time We more with question

Jeffrey Bernstein

Great.

seen have at households comps. know I maybe the the up U.S. and on guys home. some food following you Just there mentioned weakness and lower-income the trading into

the some if always lose who feel but you that to value. like maybe the compare is like low the segment. I down looking you Maybe inherit trade quick-service wondering from the has you said, can message importantly, above, Just you some slowdowns. for end, everyone benefit of on been past if

in that terms system whether the recent especially sure fundamental I biennial And sentiment, with the any think from buy-in franchisee heard the easing. when want there's I the incremental for context, push. franchisees that of I sentiment there is is right, that to most just mentioned a the value you make like

Christopher Kempczinski

economic so versus think tough the it's last and go compare I was our to Well, slowdown. back that an time data today there Sure.

think that the I dynamic is typically the described we what see in you business. do

I business as income that over-indexes with also Jeff, our you lower consumer. think, know,

So there's consideration. that

is And I that's would the discriminating. just recognize we that's again, something low go in just price being that where But to we're consumer environment back an income. not

affordability. for looking are good value consumers for all think I good

And so we're focused on that action.

menu a or that franchisee alignment In if that that's in work franchisees item, every what our terms about that would timing value a on a buy-in, to market process would it's national through of like. look look get of new with what like, program launching we single

So in the that's -- U.S. alignment franchisees ultimately that is are on system to going be conversation. that. I different the U.S., team work people doing. has that it's in And places that through In a different comes X,XXX think there getting to

doing market. franchisees like any other just as it it know in XX -- And with U.S. we get done. a -- comes been would I how of years. for conversations to through it we've We said, But it this lot

Ian Borden

what Chris maybe X hooks just quick Jeff, to said.

to macro around sure the fighting what talking the frequently. our of making I mean, to I'll a mentality got think street-fighting time I is to Clearly, got less context difficult. franchisees in to street-fighting call across we've that for is are the on win visiting And what context. irregardless think is we've clearly, mentality we've leadership consumers the I are make sure or fewer markets, us. certainly everybody consumers our more got teams business, that spending about talking current

the compelling position the And a There's with the have and no I of focus our capability. why system strength affordability is reason value lot as consumer. most positioning about today and a shouldn't -- positioned we've talked think our from we

and to and the going ahead, and through I we that are I leadership measure on we're opportunity are, are very and Ultimately, that. the we're certainly taking focused share. our laser-focused that's we Chris teams, And think on progress

Mike Cieplak

Chris. Ian. Thank joining. Okay. Thanks, Thank That concludes a you, great day. call for our everyone, Have today. you,

Operator

Conference Corporation This concludes McDonald's Call. Investor

disconnect. now may You

McDonald's (MCD) 30 Apr 242024 Q1 Earnings call transcript