McDonald’s: Steve Easterbrook departure a surprise

New CEO Chris Kempczinski well-suited to lead 

R.J. Hottovy, CFA 4 November, 2019 | 9:03AM

The sudden departure of McDonald's CEO Steve Easterbrook is a surprise, but we ultimately believe newly appointed CEO Chris Kempczinski is the best positioned executive to lead McDonald's in future. Easterbrook, who left McDonald's "following the board's determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee," had been instrumental in the company's turnaround efforts since 2015. This includes a successful global segment reorganization, refranchising more than 4,000 locations, and eliminating US$500 million in annual SG&A expenses. During that period, McDonald's also undertook several "velocity growth accelerators," including (1) an experience of the future layout, which features a combination of ordering flexibility, customer experience, and a more streamlined menu; (2) mobile ordering and payments; and (3) delivery alternatives.

When Easterbrook was appointed CEO in January 2015, he was also tasked with adding outside perspectives that would help to develop new growth strategies that capitalized on McDonald's key strengths: its brand, its franchisees, and its scale (also the key components behind our wide-moat rating). Kempczinski was one of the key hires during this time, joining McDonald's in September 2015 as executive vice-president of strategy, business development & innovation following leadership positions at Kraft and Pepsi. Kempczinski had been actively involved with the velocity initiatives--including digital and delivery--and worked with franchisees to adopt these platforms since becoming the head of McDonald's United States in January 2017. We also believe Kempczinski's focus on menu innovation, restaurant operations, and international expertise (from his time at Kraft) make him a strong CEO candidate.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
McDonald's Corp190.72 USD3.14

About Author

R.J. Hottovy, CFA

R.J. Hottovy, CFA  R.J. Hottovy, CFA, is a consumer strategist for Morningstar.

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