According to the news report by CNBC, McDonald’s Corp. is planning to lay off employees in an effort to streamline and slim down its corporate structure. This step is expected to reduce the fast food giant’s costs by $500 million by the end of 2019.
McDonald’s US president, Chris Kempczinski sent out an email to all its employees, franchisees as well as suppliers, stating that the company was going to re-structuring its regional offices across the country. In his memo, Kempczinski said that he understood that the change would be difficult and that the re-structuring would also mean that some employees that had been in the system would have to go.
While he did not give further details about how many jobs would be cut or which positions would be affected, Kempczinski promised that there would be further details provided during the scheduled town hall meeting on June 12.
McDonald’s spokesperson, Terri Hickey stated in her interview with CNBC that the company was always looking for ways to better serve their customers and grow their business. Keeping that in mind, the fast food chain was putting a new field structure in place in the US which would support the company’s franchisees better and would also make the company more agile and competitive.
After this news broke, the shares of the company shot up by 2.3% on Thursday. However, year to day, the shares of the fast food giant are down by 3.5% so far, as compared to the Dow Jones Industrial Average, which has gained 1.7% so far this year.
Fortune gave further details about the lay-offs. According to its news report, McDonald’s announced that it would be reducing the number of “layers” between the Chief Executive Officer Steve Easterbrook and the field consultants from the current 8 to 6.
It was also reported that McDonalds had already made a number of corporate job cuts, however, the number of jobs cut were not disclosed. According to Hickey, this is all a part of the company’s strategy that was previously announced to achieve a targeting G&A savings of $500 million by the end of next year.
This news comes immediately after the fast food giant opened its new headquarters in Chicago on June 5. This new facility will house approximately 2,000 employees. The new headquarters also includes a new Hamburger University training facility.
The fast food company is currently facing intense competition, especially from Wendy’s and Taco Bell. McDonald’s cut prices on its menu to beat competition, however, this instead has led to price wars which reduced the impact that could have had on the company’s sales. Now, fast food companies are all competing to get the lowest prices out in the market.
McDonald’s launched its “$1$2$3 menu”, while Wendy’s expanded its 4 for $4 menu offerings. Subway launched its revamped $5-footlong deal and Taco Bell increased the number of $1 menu items on its list.
The fast food industry as a whole is facing a crisis as customers move away towards healthier and fresher food options. Customers are now becoming more educated about how unhealthy fast food is, and are therefore opting for fresh, home cooked food instead. This has meant that fast food chains such as McDonalds, Wendy’s, Taco Bell, Burger King etc., are having to revamp their menus and re-think their strategies if they need to continue to survive changing customer tastes.
To this end, McDonald’s has already made changes to its menu, cutting the size of fries for kids in half, cutting sugar in their milk drinks by half, introducing juices and other healthier eating options.