The Long Road to Revival for McDonald's Corporation

By Markets Fool.com

Steve Easterbrook became CEO of McDonald's(NYSE: MCD) in Jan. 2015. Upon taking the job, he announced new efforts to revitalize the company, which failed to impress ... anyone. But almost two years later, he has actually executed on that turnaround, which has impressed investors -- enough to boost results at the company while pushing the share price as much as 30% higher.

Continue Reading Below

In this clip from the Industry Focus: Consumer Goods, Motley Fool analysts Vincent Shen and Sarah Priestley paint the scene for Easterbrook's first months as CEO and the difficulties of making measurable changes at such a huge organization

A full transcript follows the video.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

This podcast was recorded on Aug. 30, 2016.

Continue Reading Below

Vincent Shen: Our first companyisMcDonald's,now led by Steve Easterbrook, who'sbeen at the helm for about 20months at this point. Sarah, what is Easterbrook's story? Let'sstart with that. How did he get to that position? We'll go from there.

Sarah Priestley:Steve Easterbrookstarted January of last year. He's pretty young. He's only 49. He's been working at McDonald'salmost since he left college. Hestarted in 1993. He attendedHamburger U, which is the internal training program. He headed McDonald's U.K. and then went on to head international, and left for a brief period of time to CEO forPizzaExpress andWagamama, in the U.K., which I know that you're not familiar with. But if you envision, if you will, a mix betweenChipotleandOlive Garden that's kind of what you've got. It's a step above fast casual, becauseit still has table service, but it's in that realm.

Shen:So,he's obviously spent many years with McDonald's -- pretty much his entirecareer except for that short hiatus of just two or three years. Prior to Easterbrooktaking the role, I think a lot of people who follow McDonald's,in general, who see headlines ... Comparable restaurant growth at the company was trendingdownward into negative territory across a lot of its major markets since 2012. The brand was losing, I think,a lot of its luster among consumers and investors. Competition inthe restaurant industry was definitelyvery intense. You had fast-casual entrance, in general, among the bigincumbents.

So,Easterbrook takes the job. What do you think,at the time, were the biggest issues on the docket that he needed to address?

Priestley:Well, I think foranybody coming into this position, it's the scale of the company. The company is so huge that any change they makehas to be pretty impressive to move the needle. To justgive you a very brief idea of how big the company is --they once considered including blueberriesin one of the menu items. In one day, overnight, they looked at buying one third of the U.S.'s capacity for blueberries. It's a massive company. Anything they do really has to be quite huge.

Then,I think you touched on a couple of the issues. There was definitely a lack ofconsumer favorability toward the brand. Andyou even saw this in the restaurants,they started to get a little bit degraded. And then, I think,competition from fast-casual companies. We'vementioned already Chipotle. And also,generally, the environment is movingmuch more toward healthy eating options, which theydidn't cater to very well.

Shen:Sure. With that context, there'sdefinitely been a lot of initiatives that he has kicked off, orthings he has put into placeto start what you call the turnaround. Thestock's definitelybounced back quite a bit, I'd say, from the approximately $90 per share thatit was trading at in January 2015 when he started. We can get to that a little later,I really want to focus more on the qualitative side. What do you think were the things that worked and didn't work? In general, what did he kick off since taking the reins, essentially?

Priestley:He started these initiatives. At theend of this year, they're going to transition from these turnaround plans to a more long-term progression. It'sinteresting, when he announced the turnaround, Forbes called the video in which he released itspectacularly awful. It was called a yawnfest. Andthe stock actually fell 2%. So you can see,initially, there wasn't very much supportbehind what he was saying. My personal feeling on this is thatSteve Easterbrook happens to be British. I feel like we are not particularly good atshow business and showmanship,and I think that's probably why his presentation was lacking a little bit feeling behind it.

Shen:Sure, like that pizzazz.

Priestley:Absolutely, which you are all very good at. So,some of the things that he started,I would split it up into fourdifferent sections. There was a general shake-up. Helooked at efficiencies, better care of employees,all driving toward a better customer experience.

Sarah Priestley has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.