Why McDonald's Cost Savings Plan Fails To Live Up To Its Promise

McDonald's Corporation (NYSE: MCD) CEO Steve Easterbrook recently announced a $300 million annual cost savings plan which will include selling restaurants to franchisees and reorganizing business units.

Stephen Anderson, restaurant analyst at Miller Tabak, was on CNBC Tuesday to weigh in on Easterbrook’s turnaround plans for McDonald’s.

Not A Nuts And Bolts Plan

“What happened yesterday was that, I think, the plan was long on concept, but short on actual substance,” Tabak said. “And it seems to be more of a garden variety restructuring of the corporate infrastructure rather than any nuts and bolts detailed plan on how to improve operations at the restaurant level, which is what we think is the key to unlocking the increase in same restaurant sales and shareholder value.”

Removing Complexity

Anderson was asked what else needs to be done to improve McDonald’s relationship with its franchisees. He replied, “Well, I think it’s not a new point that’s been addressed, particularly not just at McDonald’s but the entire quick service universe. One thing we did not understand […] yesterday was that the company is still pressing forward with the Create Your Taste burger customization platform and as we understand that the franchisees are not on board with this one, at least in the U.S.”

“In our view, it’s something that really adds additional layers of complexity, which is something that the coming restaurants don’t need right now. They need to be reducing the layers of complexity, reducing the actual numbers of items in the menu,” Anderson said.