McDonald’s Corporate Layoffs Coming As Part Of Restructuring

Facing price wars and increasingly competitive rivals, McDonald’s Corp said it was planning a new round of layoffs of managers, the Wall Street Journal reported.

According to the report, an email sent by the company’s United States president Chris Kempczinski to all its U.S. employees, suppliers and franchisees spoke of the changes to its management structure.

“I recognize that change is difficult, and that eliminating layers within our organization means some employees will ultimately exit our system,” the memo, reviewed by WSJ, read.

In terms of numbers, the memo revealed none. However, more details are expected during a town-hall meeting Tuesday.

McDonald’s spokeswoman Terri Hickey told Reuters: “We are putting into place a new U.S. field structure that will better support our franchisees and will ensure McDonald’s continues on a path to being more dynamic, nimble and competitive.”

A video that accompanied the email stated the layers between field consultants and Chief Executive Steve Easterbrook will now be reduced to six from eight.

The last two years has seen the company make a number of cuts in corporate roles, in a fast-food market where rivals have increasingly competed with aggressive deals, like Burger King’s offer of 10 chicken nuggets for $1.69 and Wendy’s four for $4 menu.

Burger King’s focus on inexpensive meals saw it post a 4.2 percent increase in the first quarter in U.S. same-store sales, well ahead of McDonald’s 2.9 percent growth.

McDonald’s said it is looking to reinvest some of the costs saved in technologies such as digital ordering and believes it will lead to growth.

According to a report by the Hill, McDonald’s has invested in store improvements like electronic ordering and table service. Last month, it started to serve fresh Quarter Pounders instead of frozen beef.

A press release on McDonald’s website dated April 30, addressed the first quarter results and quoted Easterbrook as saying: “We're keeping the customer at the centre of everything we do as we continue enhancing their McDonald's experience. Guided by our Velocity Growth Plan, we are satisfying the rising expectations customers have for the taste and quality of our food and greater convenience as they visit our restaurants or enjoy meals delivered to their homes and offices. We are confident in the strategies guiding our business for today and for long-term sustained growth into the future."

The reduction in costs is thought to be around $500 million by 2019.

WSJ quoted several franchisees they interviewed as saying the move was in the right direction as too much bureaucracy had impeded decision making. Over 90 percent of McDonald’s restaurants in the U.S. are run by franchisees, who pay the former a percentage of sales in revenue in exchange for the right to use the brand.

Fortune reported McDonald’s stock rose by about 2 percent Thursday morning, following news of the layoffs.

The New York Post said shares had risen by about 4 percent in early afternoon trading.