McDonald's (MCD) 29 Jan 202019 Q4 Earnings call transcript

Hello and welcome to McDonald’s Fourth Quarter 2019 Investor Conference Call. At the request of McDonald’s Corporation, this conference is being recorded.

Following today’s presentation, there will be a question-and-answer session for investors. [Operator Instructions] I would now like to turn the conference over to Mr. Mike Cieplak, Investor Relations Officer for McDonald’s Corporation. Mr. begin. may you Cieplak,

and and quarter. for call With and Chris are everyone Kevin little this us earlier President Kempczinski Officer, Executive this me Chief Financial thank morning, Officer, joining Ozan. you a morning Chief Good on the

to call the forward-looking non-GAAP remind on those are today. release Both our statements our to our that on also today’s corresponding their mentioned are measures available any filing of financial X-K apply everyone reconciliations website comments want in earnings with I and on of measures. as the documents call GAAP

prepared open and and most website. is queue. and replay then questions. limit your Following webcast one you morning, Today’s this you via for our to pressing first conference yourself remarks than we your if the queue please ask the that being ask will also reenter have for is question recorded call one being more I please

it And turn now, I will Chris. over to

for great good earnings of morning. Thanks, on with McDonald’s. call as us. first to joining Thanks Mike my you be CEO and everybody It’s

for go my quarter first I months my observations highlights role. some want the briefly our into I from and full of this in few to talk Before year, about

and are customers conducting partners months, global seeing This been people, I and restaurants plan. For me functional the past invaluable we X reviewing our meeting town with time to velocity with and plans market sharing customers. behind have suppliers, growth the ideas visiting and alignment and employees, leaders, halls, spent and senior with reinforced vitality our with franchisees

share our reinforced deeply This that promise to of proud the time has our business energized. me of and Our our direction. They are in people our make of and brand confidence committed system. the my proud things also culture, are

the chapter to the McDonald’s grandparent college the every tell a in started a in across for to new system is At We first and gathering, person, a or working is with the to role. leadership crew begin company colleagues a and system. is McDonald’s in excited who with of story support there for the who in our life went create job opportunity a system teens, also employee their now

and values, hard a We to a times lives. simple, inspired House work and neighbors of community restaurant, moments and customers. congregate, and friends communities more but ones. space our who change That of in or are where and live tornadoes share friends walking family, the enter When stress. countless stories, other powerful vibrant McDonald’s our than community, those commitment Boston, a McDonald’s entering for spirit is can a into people delicious For held and just provide Brisbane, has enjoy Berlin Ronald loved you happiness are you hurricanes, whether that Charities McDonald place you with of through creation the

Being integrated solutions. face our customers and real we into with communities worldwide, we up challenges know the show very

It’s the As play our challenges. an make our that grown, down ability we the Kevin our will impact the over on to organization leading world. on the as an strength enables drill of we use world’s have of gain years past results. this lead with a quarterly XX to and responsibility to McDonald’s the humbling role on companies to some one globe’s most of traction our responsibility scale recognized the to have pressing business

I for the system that, to our In some billion sales. in you XXXX, milestone, a historic share headlines with system-wide like year. Before would marked $XXX

most put our guest is count at high. of in hours our U.S. and highs the McDonald’s partners markets in in growth. all-time owner/operator we X.X%, global largest we global people every countries comp near XXX in For increase franchise decade. now million flow of consecutive seen perspective, over year over grew and highest an in that serve have was nearly and our the cash it’s a XX To all-time XXXX the sales XX at year, third or comp

comp Markets of to highlights, underscored of comp sales every or growth This Turning or generated count comp International International year. guest time, segment At market the was both IDL, Licensee X.X% growth. IOM sales segment for the our by Operated delivering X.X%. in our segment, the and same segment, generated comp Developed sales

all positive largest three IDL markets. all Japan sales posted that markets, includes our Importantly, a comp Brazil, China, nearly and list of leading IDL our

strong the have U.S. also momentum in We

seeing results most of our U.S. turnaround fact, In now we are history. the ambitious of the

our since clear sales evidence year, XXXX comp grew Plan or our top our strong beef, initiatives fresh strong Growth power platform, EOTF U.S. over Vision deployed the combination the we Velocity franchise of which XXXX, partners growth franchisees. our in putting our a country, delivery, ago. the we best developed past XXXX Bolder and years the adaptation with customers. and to of the led For XX The by comp line Across This XXXX X.X%, X and of new value continued years. more, full seeing are were Bigger, with in met growth approval modernization

strategies the As conviction. great our me such Velocity of Plan Growth sense gives of restaurant care X around pride and world, execute watch a the architects one crew with million our to of

leadership confident shape recently, in speed. Joe our International had oversight company increasing across now returned around and the business, Head great as U.S. evolving customers’ equally I the the Joe the where responsibility we Erlinger, XX-year ability world. industry wholly that nearly continue of the increasing U.S U.S. McDonald’s markets President veteran have to place several he I for Markets, Operated confidence owned after our the of of to am XX,XXX to Most our ambition our meet is served years responsible and where an he is for right in needs of we outside grow our to our restaurants with operations country. and of have

franchisee of oversee role in years in XX IDL career with finance our we XX our leadership, to years his Canada three-legged has our high-performing of Under while track teams in of segment, Joe franchisee spent and building Joe’s department Both IOM our supplier drive profitable of XX Ian of North greater Ian role our developmental potential and collaboration strengthening for and an collaboration markets. markets deep his began McDonald’s we building role than Ian President most America. expanded partners segments. company, across full other. In growth, the these our will outside of both more sharing, It’s With and and ago all accelerate delivering from of transition, worked licensee best his markets have of XX and practice heritage across has resources. IDL and Borden as his each as stool important records our McDonald’s maximize our community. recent Ian innovation rich pace on learning with

respect Importantly, I over Ian, the hallmarks am them presidents the their years Joe trust, as both with and segment in few be I have worked working unity mission new closely past partnership the that embodying also thrilled are of to of and together culture. our of roles.

turn about Now, it Kevin fourth results. quarter Kevin? our will I to talk to

year results. our talked full impressive about Chris

the few So spend quarter. talking about minutes let a me

comp year, And the quarterly Our increasing X global operating quarter as marks over the segments each fourth sales meaningfully growth. with consistently of strong continued sales throughout our years line top of we global the growth. contributed X.X%. consecutive to in have seen momentum This comp

global a achievement of is Our prior comp and on sales significant performance market given a soft year strong top results. IEO

segment. and market across extended Operated across which to balance total has premium quarter in the of growth every all benefited benefited for offers, delivered sales from digital has X.X% The of reported that counts and been represents offerings. and with dayparts. a International XX% quarter nearly comp grown UK sales high core of the consecutive delivery continued income successful comp XXth share Segment, performance LTOs also in engagement the deployment its continued about consecutive delivery operating Our sales XX% quarter comp strong which markets. all with over drove segment’s market the the with positive growth France successful in along and market generated hours, positive nearly and it. compelling gain of revenues UK and digital national expansion, The the offer sales of growth, quarter to The quarter The comp market of all-time burger guest from continued remarkable XXth of share. restaurants with and breakfast EOTF. sales France

the comp to Turning for growth quarter with balanced U.S., sales the dayparts. increased across X.X% all

both the quarter. Future to mix product XXXX, Similar contributed negative, traffic the from While quarters and check in sales drive growth with to the pricing. strategic to significant positive in of was comp fourth Experience contributions prior U.S. average continues

XX,XXX nearly projects EOTF XX% X,XXX EOTF projects restaurants total full converted were estate. year. been The during a have the about XXX now for or the U.S. has Another quarter for the that about of to completed of

addition new fries said, fuel In introducing resonate breakfast to new daypart growth for also fresh and a top Delivery favorites, losses pounders beef our sell share. by continue is drive-thrus That Dynamic with and items growth menu Sluggish and of our the point. quarter. U.S. over also French an in unit to food quarter contributed Yield’s the the for a offering traffic operations, priority. as battle focusing suggestive in customers to and deployment contributor addition, growth was quarter average expansion particular, the on the of drove incremental partners aggressive fueled like at the returning In centered core traffic delivery count remains the continue compelling U.S. including the guest check. industry DoorDash GrubHub for XX,XXX orders growth better on technology to and price world and famous market in delicious running stemming at

across comp performance The quarter International each region. the Brazil, Developmental segment markets, China were with and in growth X.X% Licensed to for Japan. up were the geographic sales contributors largest Finally,

the quarter, margin the in basis year the the franchise adjusted constant all offset impairment was growth impact strong Consolidated margin the in comp growth excluding as mostly currencies, dollars more strong in well expansion points prior lease of X% bottom refranchising. standard. Franchise increase a year. and to across global reflect the when of related reflecting share per new declined tax rate revenue operating by for in EOTF law charges as both in as currencies benefits modernization prior X% the the sales change offset Results percent tax higher in the to franchise and sales Turning line, and prior depreciation U.S. year. XX $X.XX segments and higher a than constant current performance earnings was versus by increased impact

and than XX.X% Consolidated and XX.X% offset company-operated U.S. continued XX the and margins items, And basis company-operated primarily EOTF more current year. growth. XX.X% basis to restaurant currencies strong and Overall, points pressures wage to points increased full points excluding year prior $XXX IOM and healthy XXX special points the increased full our margins comp increased segment $XXX operating million million quarter, in margins XX.X% solid constant sales commodity XX for for company-operated to a over improved due nearly for sales to the for to margins as year. performance related basis depreciation. basis XX quarter increased margin the finally,

achieved investments our substantial This also of target of We $XX and significant Future to is returning shareholders. billion given profitable to growth. the our in drive a sustainable, Experience technology X-year accomplishment

also billion last in our we As $XX and have to XX% per cash $X in our reduced billion dividends about This progress drive increased dividends our We of over a over free XX% out in purchasing X $XX flow outstanding treasury to business we the by stock. years, the made invested perspective, and about share by paid enhancing profile. we speaks shares growth. billion the

structure XXXX, we years, a over refranchising the result stable a past to predictable our of our free flow more have several $X.X efforts model. In and cash cost and As business evolved billion, rightsizing flow ability XX% from significant conversion to prior flow And our convert line uptick earnings to was the from year. over bottom prior cash year. a the XX%, free free cash measures up which

to opportunities first, buyback our shares. our forward, to to and in dividend; growing business; capital and unchanged: reinvest to existing third, the second, restaurants remain grow continue allocation Going priorities

cash to all cash return to of combination expect grow dividends flow to continue share flow expect we a and to our continue repurchases. We free and to shareholders free through

to Now, where talk Velocity I Plan Growth XXXX. are in back headed and will Chris to our about turn more we it

of young during in saw went. a good community. I than I Velocity atmosphere and our power I In word saw burgers my her community. were our had of to everywhere. gathering No franchise knew name in for by their were the was world, markets, Much society who counterparts recent made that busy customers Growth place Kevin. between adults restaurant fries. I having Thanks, a life modernized some rest a model like and vibrant having an and around There restaurants. struck to were beverages coffee. be and adults the travels singles owner/operator meal, a firsthand Plan everywhere in engaged more France, bites the the spirit moment seated visit Kids a come in the our appear to to appreciating this multitasking full of particular and of pairs, just others in European Parents famously a and restaurant and inviting other food values is

growing Velocity many convenience that pulling reinforced tasting pleasing and international a across others the good Growth owner/operator great scene experience, the food simultaneously the Plan levers With and France markets by fundamentals are value the of this other visits. and customer with of

growing are customer’s our system widespread. peak breakfast, energy experiences for doing visiting scores Velocity strategy dayparts ordering McDelivery. our for where the and is of result convenience behind commitment in, This Plan a at of or guests dine-in business our drive-thru a meeting It’s speed, dining excitement to and playing three is dynamic dynamic all and The this while in our where out job similar is drive-thru lunch A dinner. out great providing continues UK, the and satisfaction playing that differentiated across up deliver. is Growth expectations Italy in and through is customer and

customers. enhanced experience Experience is At the the to improving Future, accelerators: Future, the time, by for taste, our philosophy will is strategy there the hospitality of and do value convenience, customer and better enhancing we that With a the behind Digital three This convenience realization focused our guiding more greater same on Delivery. and and Experience personalization. deliver our can of is

modernized our satisfaction the where the scores all-time on all XXXX the for have greater said XXXX. completed end and Customer U.S., high. restaurants a of foundation our markets, are by Kevin made hospitality about X,XXX modernized, their for are the U.S. for changes we we success by be about Customers are now for projects restaurants convenience, As at just in our track the of long-term are benefit. in to creating IOM comfort an in and majority have guests. In we strong vast recognizing

around with we smoother technology. To journey, our accelerator another more teams leveraging the is personal digital McDonald’s digital most growing opportunity digital-only markets digital for Meanwhile, our world, a giving by In simpler, critical XXXX. and is create strengthened of the on and significantly community needs focused relevant customer in engagement capabilities more understand end, have customers example, registered redeeming users offers engaging experiences. that our customer giving to

digital across outdoor markets, our Dynamic to and of year, boards Yield recommendations the investments technology Across the deepening McDonald’s the is Throughout play now will accelerate our there to is digital no excitement menu great customers A the that about question is in to made role want. menu target global transforming are in make capabilities. we sell they it transforming and using capability all system, nearly likely to deployed both In smarter by the with items strengthening is are suggestive There customers. Australia. U.S. of relationships retail. we

digital including ambitions. customer we build recent know her to also to our of engagement of will ordering, force her hard team potential of roadmaps the digital development. great global digital platform will expansion developing Plan is solutions growth. to payments, do be experiences for with technology our most for platforms. work a realize team. Brady of behind the a accelerate driving been there leading and product fuel has leading McDelivery and our corporate industry new digital, loyalty So, is and business and and lot this to announced leading there technology our customers creation and role Growth Lucy Lucy customer-focused responsible recently strategy in Velocity new with the evolution is I rapid but partner they new a Lucy delivery team team initiatives, to personalization,

restaurants about the our U.S the have partner years, We recently $X of third for past Company offer from generating in worldwide this sales With to the over delivery, just with gone XPL are markets convenience for consistent year. McDelivery. In to two-thirds an sales nearly the most with where now McDonald’s Eat. billion today, DoorDash growth partners Just McDelivery agreement scaling UK, we restaurants $X and the more in including accelerator, billion of our of has multiple announced major rapid love franchise McDonald’s X bringing customers and we is in they XX,XXX showing

trial of down encourage to doubling see We to and and awareness efforts we ahead drive frequency continue us to retention. runway are our and on great

As speed, the focus accelerators the largest flexibility noticing. fundamentals of agility on the of their our Delivery, seconds. to of running takes the receive order Digital it and reduced Experience markets, and into great time by average are we customer and a of continue restaurants we to our inject have XX we through an Future, system customers Across

overall satisfaction For this markets change, customer most XXXX. in saw improve

and continuous our Our into a in customer McDonald’s. uncertainties us system with tune new value geopolitical grow to to That means to intensifying and growth building align for growth, that foundation Velocity this franchisee with challenges, successful that our And initiatives the our we in food, provides community whether that our The adapt Plan topics need with collaborating slow changing overcome. XXXX have business first, solid and continuing puts industry for must needs and to labor means to customers beyond. for provide no on accelerate flexibility call to shared and IEO market that to convenience Yet, are tasting plan around we technological and impact sustain means great we execution. always evolving growing before stay will opportunities sustainable and Growth competition, be due disruption. anyone costs continue know surprise or The local a conditions. before

that, on me let turn build To Kevin. over it to back

anticipate achieving our to through XXXX has expense in this results. mid expect higher We in will depreciation performance the a the financial of Investor in longer we model provide the of host continue position in gains from to most XXXX years most operating to expectations. operating which an Growth a Plan major several to roughly XXXX effects of long-term EOTF efficient we With reinforcing the confidence half our want year the update second of of on XXXX, take over expect an million in range head walk that our margins. strength. the about We the resulted franchise to includes margin strong vast versus into and in refranchising in business restaurant our with complete, for I term to majority related of be XXs following: year. deliver expectations gains half to sales Day U.S., $XX on sustainable Velocity an with the XXXX. minute The the in past business some the in With we ability XXXX of amount

and will as over have have more invested become performance run we are including contributing that development. growth, areas we business And to required accelerate business few to efficient and the that technology years, we with already research and believe G&A continue last the in to

due acquisitions XXXX these related to includes year full X% Dynamic to investments. Convention. in and increase Worldwide year with As currencies G&A of costs the a and to constant Biennial This Apprente, Yield R&D expect associated operating to X% result, XXXX costs we our spend full

half the of in second increases significantly G&A will the of year. expect percentage than half higher year the We first the be

will XX% expect our also We be to XX%. tax rate annual

currency and by the on translation the rates, to negatively in year. based similar will $X.XX exchange full current EPS $X.XX quarter a impact for first anticipate amount Finally, we

through only move As usual, will guidance directional this as change the is year. rates as we

billion Moving capital, our in XXXX on expenditures $X.X we expectations. with to ended with of capital line

growth previously a including the capital total XXXX, of expect U.S., roughly similar restaurants X,XXX About in amount. development markets As to EOTF We this projects. be plan half year to of about all we the equation. the in completion Restaurant spend important U.S. open have our X,XXX substantially outside we will to an new to driver dedicated be of also indicated, continues the

our affiliates which spend in restaurants China. and XXX over will to openings, for approximately about and our capital XXX licensees capital wholly will spend open are $XXX of in We markets owned their developmental planned the of million our remaining

are XXXX, year to total higher have while So, to investments. capital we expect new reinvestment be shifted $XXX we from which will this million about similar returning restaurants,

that sustained, for am enter shareholders. we we positioned our and growth system deliver As XXXX, the to long-term are well profitable I confident

turn to Chris close. back Now to I will

the We all, have transformation. last the an been a even as we And journey made few it years turnaround forward path on ambitious through from have changes. to landscape

these brands. demands new customer expectations With changes, leading the evolve, placing on world’s

for business ready development every are challenge, in We values a that the and social embracing strength for it make McDonald’s economic positive enduring with community that our force across serve. and we

it As we an strength who to XXXX, and new and strength position Growth driving the with in the keep of innovations and and do we from people agile accelerators us new Velocity partners open nimble, and enter a unwavering incredible possibilities. our so Plan, of commitment

across Convention to you the helped of have billion everyone sum am success Worldwide past exciting new thank would year. and milestones franchisee McDonald’s system-wide things April. final It’s to XXXX, us and including year. many some us offer $XXX as world. milestone the in our supplier, of who their around we sales collective achieve grateful in began system done I proved by note, We crew employee, everyday a of heartfelt a this like member On in ahead every I commitment for right, of the this

that, With begin Q&A. let’s

[Operator Instructions]

Our Charles is first Andrew question with Cowen. from

which growth alignment you versus you the with in to can to at year Experience Future But same-store confidence other outline of by be your will but the On achieved? this on is be the traffic versus lower know operators from sales hand, what better help ago, the simplification place. intensify set benefit of efforts one prioritizing the year this in Joe breakfast I XXXX, in and Chris, are likely that you XXXX? put the U.S. a start can XXXX competition aided here, is have saw you there’s shortly in hand, guys

Yes. Good Thank Andrew. morning. you,

So as number getting the X as is Kevin alluded about, for priority. guest count you us U.S. to and growth positive talked the to,

make the our to feel franchisees that have this think or mentioned, certainly a this about to that point, better be confidence ability me as do really I things with that is, give at alignment me you needs we strong priority.

the fully I of One the second about U.S. our the U.S. or appreciated franchisees. that’s, of Over – sometimes operator franchise franchisees and think, owner not in it’s things basis, family it’s business a largely a are half largely third-generation

one And to so passing or completely family for them, they thrives survives fewer from that no next. by on customers the recognize business generation

that’s that’s daypart a understanding the it’s for have only drive important starts this. Breakfast of the we with to good an part It to really then industry to take guest And So second in breakfast. the in what counts traffic seeing us is the of is going U.S. growth. positive

a competitive There’s on of second rest-of-day is going to need breakfast. or focus have putting rest-of-day XXXX. that to and on the be recognition then at We And to value, a that we that. deal win we’re in obviously lot be that that on attention

to I really, see, pretty that, four this it’s to between we early with QX, need quarters. call over in I on trend – think where too think, sequential to good did for it. or keen five focus, between we of franchisees, modest got certainly happen is understanding about We’ve a improvement on I So there see But not alignment this. the us, feel a

going so will asking And us be guys going you to it’s something as paying to about be be and it we’re to I’m well. attention sure

on come to that. more So

with KeyBanc. Our next Eric question from Gonzalez is

become more breakfast? typical rolling promotional to And closer your gets as Would bit at then has environment agree It the your the is time recent the in year. you all weeks competitive or response competitor start since in has year? seems out like to the view current the a for this of of changed industry that with that

January time always Eric. year. highly competitive Yes. Thanks, the is a of

unusually it So activity think I I we’re as characterize seeing pronounced. right the that being now, wouldn’t

I and think point little think, year. again, what going industry this that about growth the at share. Traffic you that beginning very have is I is happened to always industry at But recognition in mentioned you’re stealing pretty traffic this of to is the muted. a this in come really growth. through talking something the There’s is what

you’ve if fact, got headwind there. you’re growing not In a units,

I one are seeing, wanting can get make really So that cost sure offset growth lot just they they you that’s and certainly, headwinds. some able think, think to recognition to I people to the that of a be need of the

has seeing uptick two things, I competitive I but So think to environment, between those going it been be a right wouldn’t environment, I’m it’s competitive a continue to now. say an

David from Our is with question next Tarantino Baird.

of question on is My on some the investments made you the technology side.

sort the and support that it to up G&A so, last looks of staffing You made with technology year you’re like across your pretty big bets investment or spending. some

big as of fee or considered one, that two, have cost through your technology wondering, or recouping are on some have franchisees of more there in that others some investments a just you the similar horizon you needed? And see place? investments something then those put So the of sharing

the year, as last would typical capability; we Apprente, Yes. buy. capability. to going sell is two did do through not for approach Well, which and drive-thru we our you partner Dynamic bought noted, with was acquisitions say that help voice recognition bought of our is we which Yield, us suggestive I

make enough think, situations. be I situations foresee will buying to were, an nimble both where are forward. that for reasons going approach And tech that there we companies is don’t come our different be want I somewhat that those, so But of to going up acquisition. unique we do

of with kind be there of Yield, was of across to to I really there technology for in our think the markets rollout most we our what Dynamic of believe saw major suggestive the an in what accelerate the leading sell opportunity case us industry. we

year with forward, fully Yield. And about so the in do Apprente than with leading of modeled had a It’s And consistent an a and later, made we’ve comp of in we wanting rolled seeing and the with U.S. a that lift, when XX,XXX-plus handful in to we’ve Similarly, a a restaurants, Australia. drive-thru. idea remain Dynamic with drive all that. it was even with restaurants Fast we acquisition of in got done. we’re Apprente, acquisition Dynamic U.S. Yield got really we very partner, out acceleration optimistic what less test

a do So with seeing When I for can huge what we us, opportunity we to really be driver us. people digital partner on just – think an believe really the it has traditional you’re an kind acquisition, is, emphasis to growth for the if to take our we off are and But not going do that’s our times table. that we’re certainly model, that always of need under preference. there

there the and I about like something getting in with your shared I Dynamic is one on franchisees, a question of when that with think service gets you benefit Yield, lift we model rent get we terms participate think obviously how is through that are that.

certainly the So rent we growth, and are we top see service. say I’d from line when to these that, all first participate drive part meant is and of

sort of separate part ongoing ongoing costs do of operating kind costs. passed On tech our of to normal development the tech ongoing through get costs between costs, costs fee, and the we franchisees the as

costs We will own, the the development our our costs ongoing for with and tech what franchisees. gets a shared then arrangement on pay typically through are fee

long changing. see that time. that’s kind of don’t our period for model of I So a model been

Glass Morgan with Stanley. John question Our is next from

Just following for we XXXX? of growth how U.S., kind check with the same are It’s that, would experienced more in the XXX% on you you’ve that check that And given if growth Dynamic for what than experiencing lift it proposition Or the brand? possible willing the comp. to comp hurt Is the Yield may are the see up XXXX? in that you comfortable you value Chris, comfortable of in that are modeled currently? share, is it the you less you’re

John. Thanks,

of the of come at a with not really things that gotten, I that is of things. feel has when There one-trick we’ve growth U.S. been about on the check One number sort good through that. look you it’s pony different do the a

there. menu straight mix just majority as of mix, We’re is to But are a seeing as growth factors you price. number then opposed that worked through decompose the that of you’ve of got kind coming

You’ve average delivering got is order. the delivery, which check a of regular Xx

Yield, add-ons order. to leading to Dynamic which have an You is typically

we know kiosk. do You have orders our they kiosk, have people tend to where that self-order when self-order larger

our like $X really of donut items as add-on $X some D value, $X which seen driving activity. are a You’ve sticks, promotional

get me, for that through there, better heavily about on think, I so have think growth out been we to into a So we The check as We head we to having XXXX, which that the U.S. between opening how growth and toward just that we’ve does with I I to and working need everybody franchisees, get is we’ve need growth, sure conversation gets and this. pricing it balance. went do the was that. XXXX in to to mix-driven question, there right have make that’s in is balance now. particularly feel the because labor But got inflation back is we’re from a transaction to what after priced we the element seeing side check

And I Dynamic then countries. lift, of is different would don’t quantifying Yield of be in specific it comp. our regarding What kind components we will the potentially say quantify different generally

right than Australia. in So now, in U.S. in rudimentary certainly had bigger the sell a lift a Yield Dynamic suggestive the already drive-thru. In from we’re they Australia, getting

other global that lifts ultimately, kiosk and we’re Dynamic take the can But plans to So about decisioning the continue wasn’t able we that as lift – further as in in we app getting would mobile that and so a sales our engine-type use U.S. put in certainly as there digital big is also. similar Yield logic experiencing a mechanisms Dynamic positive be be Yield, to further need larger

Bittner question is Oppenheimer. Brian from Our with next

strategy December a just about in forward? the were do just even you more the believe that CapEx bit CapEx New little you to occur? moving you talk sounded would how it ultimately, in what your happening met there were we talk really When areas about starting look XXXX. past Can a CapEx of year about you maybe invest I in this? to was thinking you somewhat And that what you strategy CapEx Can does York, elevated. could pivot see moving steady-state like? expect And in keep forward like

Yes. Thanks, Brian.

similar. always ‘XX about, would talked we be we ‘XX said and as So

XXXX. as potential indicated, billion currently that we’ll So XXXX, we’ve CapEx there. one in and in business And reviewing expansion we had in area is and to we have we’re a XXXX. amount The relatively $X.X our similar some down evaluating expect international come unit

in very As there’s international believe is potential for business of you markets, our know, very restaurants returns on further markets. those and investments unit those strong, we many high see growth in in we new

invest outside in evaluating U.S. currently opportunity the of new to some units we’re the those So

gone XXXX, should, little units our X,XXX in that in the XXXX, roughly a we have see ones growing You’ll that and openings up opened growth. we X.X those new to sales in our between about contribute bit

one the area we’re evaluating. So that’s currently

to this far evaluation, I longer term, as about further think this want that later we talk our year. have we Investor when we’ll through Day then get as

Our next Stifel. Chris question with is O’Cull from

are $X sounds to is systems’ improve believe few this I question will $X about feature D a everyday like necessary the the value items share My only market value $X value. relative year. franchisees It be on menu. And required to

So how aggressive they’re franchisees value convince the everyday given with to pressures cost be does the company more facing?

Yes.

it’s everyday the is there’s think what deal just the call value, of and off part would on also of – of sort are equation, type I that which is value. we post not value

margins. it way, our point, the terms value a can from to for way, both in be opportunities in traffic latter are it’s smartly more the think I there a drive to year do throughout so do and And of how that, going we where vantage disciplined this, protect pulse and us deal and in probably on can of

of on a been that. we’ve So having conversations lot

as there is in be growth. situation here, we growth about plan it. going we’re actually in to points a go transaction a imagine, couple talked this we’ve think earlier I’m the the how about to would not that U.S. both of getting you telegraph where to As I back that check of strong But terms we the as call with alignment need to well owner/operators on

do to now there’s everyday it’s alignment through it’s so is going us And deal I up think come to And necessarily good deliver to probably more value. on than it, it. to it but

embedded value think we’ve a everyday platform already. I good got

is Guggenheim. next Matt with Our DiFrisco from question

has closing market, year, how give don’t wonder guys in you China. some at you that’s us but least exposure can been I revenue of the operating sort stores a There reports your guys income? understand worldwide to – for I have whether or some about much that specific shareholders you help in know guidance the MCD

priority on fluid the expect, really our they employees, China customers, is now, Well situation and make our yes. is we of. as you on Right are Sure, it’s obviously, safe concerning. care everything would to our that and can in doing sure taken

been the working vein, with we’ve particularly province. local lot that in in the Hubei a so authorities, And

that in is are restaurants closed. We restaurants the still that do importantly, in the have open. several all have hundred we closed have X,XXX still But which been country province, Hubei about restaurants

closed, that using it’s in which So authorities from there. provide several in meals with still task control local doing to our And X,XXX something open. place everything care the we’ve hundred We’ve put epidemic hospitals. an team, again to we’re China the workers help combination but are also, and in prevention with health kitchens force, is

for customers restaurants. things screening come giving doing in some our medical to who We’re of terms of

business point. potential a to it’s is hands to its effort because the So we it’s critical from that probably as for vantage strategic that but more opposed in materiality today. think an us of really market see on deck" "all I China the market, that

when global of about it of about system-wide you X% does to about X% it’s restaurant about only Just represent X% sales but to income. put op our and it think count, China, in it’s of perspective, X%

small, market so again, it contained about us stays going and concerned we’re China. is the over And China impact a situation there, critical while, that business again, on our actual fairly is assuming, for very to its to be

is question Sara Bernstein. next Senatore from with Our

also and follow-up a question please. A

on for you having month, that any as I think terms tech So the make owner/operator how I going certainly at think declining to you sort outlook spend the and than going that? question more was we But you very can a you grows should of similar reiterated perspective the acquisitions. in investor franchisees range, thinking guidance sort should or the think last a some could of G&A give to then to more a mean, now, of the line that from the of are I just mid-single-digit just G&A, year flows? couple flexibility that reason cash event about the of that forward? to that case-specific would owner/operator the technology I bit just investments for trying have had quantify forward, that Does little address higher was I we having U.S. convention. But that? kind expected. in be about than is to this years of And franchisees more of flow about Maybe anticipate the in value just talked item after of you labor other clarifying faster looking record protect year this cash know

points, and and we’re about couple investing back in Dynamic saving G&A, then and And either like things let top and we’re R&D, Yield how are I’ll we to Chris or gotten day-to-day technology franchisees. come and our with things about investing in so cost Apprente. G&A efficient potentials. more drivers value G&A, a and talk the I’ll Alright. we’ve line of the talk Related the have first, talked about

kind some how that’s we these think of So investments. specific of about

to that’s X% some spend. XXXX spend in year in around of actually lapping G&A as our We XXXX in constant amortization have currency XX% a more investments. a XXXX. to X.X% year year as in and of X.X% you have X% full But We do decreased I’m that so acquisitions, in to those full overall G&A And today, non-cash year technology percent partial is due – roughly – G&A spend, to chunk roughly we from G&A relates XXXX. of depreciation sales because indicate, that as of expect will prior – we the it be to on now up is related than to

is haven’t for certainly So say G&A any I’d long-term all of growth that we’re the we so analysis thinking XXXX will G&A. our also other And term. we do anything script, not that long midst seen But changes of of and of I first second half we’ve only going than talked significantly thing XXXX. with as as XXXX forward. be the guess, mentioned level of expect on the half of But in updating in I then models our far, significantly my higher rates the increase, or about

have expect differently about I So do a don’t little going forward. larger think to increase an of any it don’t ‘XX, certainly, years in to that run did ago. increase your ‘XX. a we a But we increase rate But today – we obviously, increase couple had than point, in we I be have

exciting probably in a a so the On system about surpassed prior about flow. that. cash U.S., through XXXX, did in blew something the another like cash that I see kind they And for it’s you in by cash resounding the record when record question set franchisee the or they flow or point flow, franchisee $XX,XXX of way. and mean,

invest to because it’s to who the business. it that be mentality wealthy franchisees are means So lot thing a really good you when have is money a of making in aggressive their

it of investments Now more form in the take take putting capital take that restaurants some could the we’ve take different can the been can and a can of the it form of value as restaurant labor of investments talking the doing, you and forms. that number in That about.

are owner/operators me, U.S. in spot really now. So our it’s more to right about point that the healthy a

going. they I in want to and keep also sentiment, their reflected think that’s it

to require And the that. going business, going confident do I’m they’re so and aggressive staying on that’s to

about Sorry, operator I to asked Sara. about but was that other have $XX convention forgot The million one every our roughly million. and – year other is thing $XX you that, we convention, convention

from Our Barclays. Bernstein is next with question Jeff

mentioned about perspective. starting we from as year line a Chris, top the think question the know you’re strong financial you performance, the XXXX I So

some On elevated maybe side, the talking the flip term. about G&A in guess, short you’re I

we long-term some this is just you that growth, high to wondering you your any single-digit playing year think cash target. for years? that one normalized achieving that is just know necessarily finished return year, And a how multiple which within free you out, we long-term relation three-year wondering that, should one growth. year or all wondering EPS one in target guide of specifically of how now versus it potentially you for comparison see algorithm, a in more I’m you’re where think know I whether, that to could thoughts just expect cash whether perhaps as your I’m return to I any but going to So going your about on giving just forward, you don’t mentioned,

Jeff. Yes. Thanks,

Let me – of it’s couple a hit different things.

talk first me Let about XXXX.

for to If growth we’ve all for as the have full given, rate to that even being XXXX because that of rate. rate similar EPS do we of EPS helping the tax year, guidance And the the you at basically, of we rates math, you year as hopefully an XXXX. do growth growth look places get you meet is some target the we high-single-digit target. we mentioned, it with growth not is through are, expectation may where quarter be But high-single-digit Certainly, expect within quarter-by-quarter the of which do individual lower a pressures.

amount that cash shareholders. want significant to a amount the to flow investments still the be and we’re return and of both return, substantial business able cash Regarding fund in fortunate to to we a make generate

remarks, free in was which $X.X cash XXXX, up billion cash As my I flow mentioned in our conversion around flow was Free XX%. was XX%. over

a over cash of with a discussions three-year internal to and but reiterate discussed philosophy but do our that. is shareholders, we to several there specific capital for I had because give large our want target there no to change we allocation As decided not – is return, dollar period

same: next continue all continue priorities each and year to shareholders. incremental the third, free $X restaurants to business; cash first, expect in return As buy to grow second, existing opportunities remain anticipate to and we do the net modeling, We billion of dividend; to flow our shares. few And to the growing in our reinvest roughly the I debt mentioned, to years. back for

So that. you out an return that where of of to give comes kind idea cash Thanks. the should

with Carril Our next from Chris is RBC. question

competitor, a other becomes to for the dayparts industry? assess large more breakfast so your focused morning opportunity with of in attention a of the the by much the breakfast daypart given So rollout the focus strengthen competitive on how you as position do

Yes.

you I look I it, strong think and mean, we about plan, XXXX breakfast as at a at I our have, plan. think I when you our look a pretty balance. think, certainly business is good there

at We combination menu breakfast. a have of news

we’re of things on there We other in driving we looking have a calendar. value have at the breakfast. from certainly, on breakfast. is service, some at standpoint that remaining that But things we still really And then competitive plan lot a

and been of into a and be ago, think And performer going there. in talked you of it a keep committed and there, aggressive on going about burger, in we’re I the really years see Obviously, has an to And things food we couple you’re on around so expect think do there’s don’t really couple a it standout was QPC focusing going to desserts. years. but And business, get opportunities of focus there burger chicken driving coffee. if XXXX, so should be us discussion that about going timing a be to segment, beverages, for well the lot competing see for way in and that to as which last chicken what something there’s us, really then do we’re we to updating our you we would that about specifically chicken, doing news, want continue to to

of on unfolds, expense it’s to year breakfast, I not the you’ll think at So of but as day. strong the staying us see rest going be

is with Dennis next Our from Geiger UBS. question

touched Just more been and perhaps there wondering globally, I drive-thru to operations if times, think opportunities how and that’s throughput bit touch the on could specific a on you you progressing.

an maybe the part what plays times. much in and throughput specifically XXXX, is perhaps So technology in those of the U.S., improving how operations and in that opportunity

that really XXXX. I U.S., team performance Well, think in the pleased up the with in put I’m Sure. the

simplification performance talked there’s up It’s As think there. saw XXXX. we’re it’s that nice the excited in customer good ops think driven right record combination by I The additional what and And seeing do there’s there. a about seconds XX, we of go moves. making activities. of a the certainly We combination is we But have it and really satisfaction did of also We number we training across that about scores at. drive-thrus. at that sure in we comments, looking think we’re menu of a operations, get we’re U.S. job combination in we’re team a our speeding want can to in a XX more XXXX our It’s metrics broad-based we really to try that focus.

that. We I’d into are say driving component doing driving things to part or create of going rather. a don’t the be then speed flow necessarily of technology right what’s bring technology service, competitive being fun restaurant see to huge XXXX, now, there. to kind is I in And a cash that rivalry to of

on an how to gives ZOOM the timers, team pinpointed internal speed is in journey that service. that drive-thrus. through go our of kind breakdown the really most the drive they have as We we deployed of very can now a restaurants. thing of each very customer which of of use, We be But detailed part that’s

service to So going lot very help XXXX, tackling. do to in like I about we’re and it’s be helps is get acquisitions with future. something Longer done service, to in certainly speed with commercialized why of can which us speed we’ve we a going that’s the to did excited and blocking Apprente. be If able we’re think of that obviously deployed, technology what term, of the with that

Francfort Merrill question America one of Greg Bank for more from of time Lynch. have We

of other to it much know just versus horse customer a is per not up that but think And just – customers think maybe want I beating can I launches, that something is your would that a then doing. on But I getting getting dead guess, touched about on else I as and spend talk a it basis? replicate customer try much kind on it couldn’t can like chicken of ticket, Is in space get maybe per terms there we I you’re is on check, This nothing actually equipment? McDonald that improve of new of are X% two-parter. there’s the the customers you flavors? how chicken per about right quality. Is you quantify just in you here, check question, you that don’t are the might focused framing is the constraint know of your that to what Or McDonald’s but competitors to doing trying timing into that a new be

been the mix roughly cover Chris and I’ll on So A year about things relatively of right is – but said XXXX. then say, it’s in couple And quick XX% and range I’ll check real XX% I check is think we of so throughout that that’s throughout talk can consistent, check, the probably pricing. chicken. for really roughly now, two-third,

ticket. are We a in seeing we’re general, seeing little – higher customers per bit

a If kiosks, bit the like things between generally of delivery evolving customers have you business we the think about per ticket. way and number higher the is now little

with many we want knowing to even guest of be markets, So But that I those that change changing, in we counts grow don’t in able dynamics. international U.S., guest is that, we would able of grow the imply say even to we it. have guest in that but dynamics are should counts been so piece a to still believe that, can grow our counts the

And detailed chicken what of our competitors we there. your a understanding very question, on are doing have and intimate you’re right,

works product finding that us, about for restaurants. a our think, it’s I in really all

component. so And operations has an that

is menu, Our more competitors. than much our you of broad as know, some

that have what we’re just are what some And number want the out equipment service. approaches we we terms we want of testing now, But what have might right restaurants of menu think some – of there something you of do an a things but have. on or in of to we our chicken, different mindful from would what rest of as might from we a that’s from from a knock-on in probably of know. need do do speed we of have be standpoint. terms then terms there operations we the there might are are standpoint an things in testing been might you are effect how – standpoint, in So equipment to competitors that in product What our that not equipment versus differently about might to in a test differences differently

net cube menu of going feel we’re about like in what on looking little where So to Rubik’s think I anything operationally chicken. the under I the a customer a of for, McDonald’s, that. works business add But with it’s what’s and good bit then fundamentals

something to to close having getting we’re we’re think customers. bring excited I that to

Thank joining everyone you you, Chris today. call and Kevin and a thank the day. in good Have

This concludes call. conference McDonald’s Corporation investor