In April 2015, McDonald's Corporation, faced with declining revenues and profits, reported that as a part of a larger restructuring plan it planned to close 700 of its company-owned restaurants by the end of 2015; 350 of these closures had already occurred. Most of McDonald's 36,290 restaurants are owned by independent franchisees, but the company itself owns 6,734. In addition to the closures, the company also announced that it planned to refranchise 3,500 of the restaurants it currently owned and operated.
The restructuring plans were reported in the company's 8-K filing with the Securities and Exchange Commission on April 22 and May 4, 2015. Below are some excerpts from those reports.
From Steve Easterbrook, CEO:
Today we are announcing the initial steps to reset and turn around our business. . . . As we look to shape McDonald's future as a modern, progressive burger company, our priorities are threefold-driving operational growth, returning excitement to our brand, and unlocking financial value. . . .
The immediate priority for our business is restoring growth under a new organizational structure and ownership mix designed to provide greater focus on the customer, improve our operating fundamentals and drive a recommitment to running great restaurants. As we turn around our business, we will look to create more excitement around the brand and ensure that we build on our rich heritage of positively impacting the communities we serve. . . .
Our new structure will be supported by streamlined teams with fewer layers and less bureaucracy, and our markets will be better organized around their growth drivers, resource needs and contributions to the Company's overall profitability. McDonald's new structure will more closely align similar markets so they can better leverage their collective insights, energy and expertise to deliver a stronger menu, service, and overall experience for our customers.
From Pete Bensen, McDonald's chief administrative officer:
As we restructure our organization and instill greater customer focus, McDonald's turnaround will be governed by stronger financial discipline, faster decision making, and clear management accountability. . . . This new organization structure will unleash more entrepreneurial spirit and more innovation across our system while bolstering what makes McDonald's a formidable leader in the industry: our incredible network of dedicated franchisees.
Required
Assume that you are McDonald's vice president of human relations. Write a letter to the employees who are affected by the restructuring. The letter should explain why it was necessary for the company to undertake the restructuring. Your explanation should refer to the ideas discussed in the section "Emerging Trends in Managerial Accounting" of this chapter (Appendix).