McDonald's (MCD) 27 Oct 212021 Q3 Earnings call transcript

Hello, and welcome to McDonald's Third Quarter 2021 Investor 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. At that time, investors only may ask a question by [Operator instructions]. I would now like to turn the conference over to Mr. Officer Corporation. Relations Investor Cieplak, for McDonald's Mike

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

call, via All of our your mentioned Today's available As in X-K with turn release I'll the as on along to and we'll recorded comments being prepared to the our our filing statements queue over remarks of on Both reconciliations this our and call it to website replay earnings is today. GAAP call reenter a conference questions. any one apply those website. morning, take and corresponding forward-looking And measures then questions. yourself Please measures. being reminder, on the webcast today's non-GAAP limit now, in additional Chris. is financial also documents their are for any also question for are

morning everyone. Thanks, Mike, and good

business our As we've for decades. X largest competitive size over built and the that a are restaurant advantage the scale nurtured and in world,

approaching suppliers, over special. a in that Company, we're the truly three our customer the which in vary in small scale XXX It's to to teams supply right in something driven I'm the and chain which of meet the and to XX,XXX across to size new how conditions operate. country, thanks COVID the scale, to adjust big customer in brand, our what operating can we the are to Rooted connections strategy scale McDonald's ability by from and to local restrictions stool, predominantly changing pandemic. strengths of ways accelerating whatever right restaurants variants evolving And and that any our to agility also that how the nimble even response in maintain market of restaurant labor The unique. industries by other one-year owner needs we shortages business and both by in our franchisees, confront in changing across operators, communities the legs all XX,XXX may system be Our and we right McDonald's local proving meet real-time. enabling be confident makes unknowns. It's focus local These the and the and us, to anniversary with it's deploy level use run to We're able to early Arches, both time. of customer experience resilience needs agility, connecting to embed and the the large pressures We're leadership. shape at the achieve countries and complements collectively, and inherent agility adapt challenges and took unknown community,

Our want to experiences XDs digital, are to our three world that and core creating continued the people and progress Quarter, the business. I thank use. pillars like digital trying past delivery excellent personalized, make under drive-through, are who We've this known seamless, McDonald's contactless growth and MCDs; easy over delivery of drive-through, as conditions. all to marketing, and menu, This and channels and our amplifying includes the guide performing

walk Let to it through me to over turn top-line Kevin our results.

Thanks, Chris.

XX% basis. global business XX% comp or results sales on third X-year of a broad-based up our nearly top-line world, momentum continuation Our the around quarter a represent with

stay-at-home first national pandemic. delivery, France, segment, and growth government as in of in marketing operated In low-single-digit even McChicken. launch X-year have ranging double-digit growth comp France have to with third taste by the and restaurants levels trends featuring several as the half as XDs France and fewer supported markets X-year for digital, strong accelerating continued the operated restrictions, restrictions. the entire other as most family. markets to and varied promotions benefited from on and U.K. crew the and and for from in UK the X-year activity, the the quarter slower program, Australia, markets The with Germany, a are as promotions adoption exceeded quarter. challenging delivery France international well vaccine in our performance across countries digital by third loyalty performance in strength Germany, for marketing was to Germany Our strong and menu within driven and recover lead pass still spicy was Grand third Market like those of Monopoly. momentum big growth promotion driven X-year expanded value strong of offerings like continued delivery lifted. core There's and Rewards, nearly of MyMcDonald's recover, and marketing growth including the the a both over 's delivery, successful like by restrictions the the X% Performance restrictions of channels, in the comp nuggets, quarter. impacted X extensions dine-in significant focus to in by time in segment conditions Australia of the IOM nearly Canada, XXXX strong in Canada sales affecting positive and drive-through, have customers was from the deployment McDonald's comp menu the quarter in and been with to continued In Mac countries.

was on grow flat were the quarter, for sales quarter. While delivery the record to continue and channel, its comp X-year sales positive relatively basis achieving delivery market a for the

QX or U.S., expect to our as the to with momentum XX.X% sales up As X-year nearly QX. relatively the trend comp segment comp we we IOM In XX% the X-year a look maintained we a basis. maintain similar ahead on quarter, fourth

sustained time, breakfast. all to see to same dinner double-digit continued the dayparts X-year record with cash on continue comps We restaurant positive at flow. basis, and high comps At franchisees across achieve a

remains labor growth. and continue areas pressures expect the Chris inflation and earning like XX Saweetie a has the will to rewards, share U.S., driven rooms larger few to strong In business. dining headlines our leadership. remain of launch short We've Sandwich Meal nearly us have over Chicken reopened efforts dining products high-risk still enrolled, in famous drive reflecting exceeded X-year double-digit and like sizes weather The performance kiosk in channels in the few have is we increases restaurants members adoption. prioritize pressure fourth maintain low COVID October. that the successful that investing orders levels. XX business have the paying loyalty by health continue continued we're quarter. members seeing basis, growth, ed and have we loyalty where The digital to in a with million elevated more on operational the made in roughly to rooms seeing average strong we check million We're In U.S. to dining across a U.S. closed the to sales the during the Our remained these program and active Crispy price across QSR in rooms, marketing of helped U.S. big The But we and never our comps front countering X,XXX currently dividends below U.S. expectations reopened in we and expect in the to has -pandemic are relieve positioned rest in safety driving XX% even through minutes. as that increased franchisees and into bets order and help the and brand drive-thru. been months, over already while with the of better modest grow. our continue and number increases. customers enabling underlying menu the we've sales growth loyalty the pandemic pre of Performance crew. Menu just our our

to a China. comp up quarter, largely quarterly were in segment, of the in America, comps international Turning by by the Japan in partly positive and two-year was comps results Performance an years sales for maintained X X% XX% consecutive momentum comp QX achieving or driven impressive offset nearly license basis. XX%, with on serve Japan growth, Latin negative about marketing China channels, developmental the as limited to up despite and and government by strong lasted drive-through continues COVID market's and driven our with economy. impacted softening continued operating through a throughout restaurants is safely quarter, promotions. conveniently commitment be The as which in resurgences, a well digital both customers performance being June time to and restrictions. by and restarted sales

a comps While continues now its the digital the members. active to market million digital for XXX as quarter build presence over have were they negative,

one where remains restaurants important long-term In addition, roughly already opened restaurants have With our in opportunity. China. original market confidence year, open China we've expect in plan. growth over for now XXX new critically the year, and exceeding to us, this for new a XXX we the restaurant we accelerated

in for the be in With to this the year, plan performance full So, new sales restaurants first quarters the wide of system our we year. aggressive currencies the now more expect in X to high-teens in opening get for up sales constant strong we even overall market.

Chris driving our turn about pillars I'll to global it back growth Now more talk to business. MCD

Kevin. Thanks,

Marketing the Global C testament are and Truths that to teams our in is in out pivotal Officer. a results and Fan Our strategy on momentum role continue. focus confident Morgan a we're Ds, U.S., role into will the playing of After building Stanley growth through transitioning driving of Chief M, our our

famous BTS, Spain again, markets their instantly order. the where in Following borders third orders, that and you McDonald's Russia These successful quarter. with global into go-to or big developed are how the cross with with no the idea launching truly Morgan everyone are or iconic matter in both you famous campaigns world, local celebrities has the campaign leaned

Marketing the momentum QSR platform Sandwich, we promotional share U.K., the continue we U.S.A. promotion spicy to As which significant maintain for Sandwich the McNuggets our family our sales the exceed the effect results the This U.S., on chicken confident a chicken to generated best behind as the years known In craveable market's Hassan McDonald's with marketing. we're sales. global Crispy Sandwich culturally-relevant halo marketing continue Canada, Tariq and Crispy McNuggets in Tariq success I've for Mc Officer Tariq role, will core our Digital marketing to to Morgan support translated many McDonald's as Customer In U.S. as And our welcome to excited market had on Chicken menu. and Chief elevates into in I'm McSpicy in launched expectations. Experience growth record. Chicken

Ireland the as to a This offer. a both McPlant introduced Austria McPlant the in goal restaurants, available we Netherlands and in number market pull a January. down out quarter roll based And of the nationwide demand. in sandwich and customer for other with is McPlant to U.K. launched the limited-time on limited

Being about them. does more customer driven bring what ready our McPlant, delivering When Listen best: customers also do when continue It's and means digital, will That McDonald's many ready delivery. we'll the to customers. we customers engagement can are so as items. for menu and always, drive-thru, our the for feel-good Golden possible. about to experiences across increase we to just is As our than be where want people McDonald's, as Arches

that, increase it do billion we're these year-to-date our X in mix In of XX markets, about channels. app, restaurants, or we channels, an whether over our or As came delivery. seeing top our sales was in through sales kiosk across XX% digital through

compared increase program our higher a program more loyal more to take we're seeing which Rewards we has for our be already for and to consumers point quickly strong We're of loyalty years bring with Delivery markets, Canada a satisfaction delivers and to frequency non-digital. to to the amassing relationship loyalty which responsive, active to of another and before year, that our be to the for also Rewards has to instant inclusive France, in customers the touch first will and been U.K. Australia millions In and creates Germany, launched that X of COVID, MyMcDonald's among a years. made loyalty believe programs on come. by had September, personalized of And fan-favorite will staple by end half customers. customer track one It our another and in digital places. continue we means increased loyalty customers. great bet Our in an customers the long value most many program engagement is XXXX, mid-XXXX, top we

X,XXX more XX,XXX X restaurants delivery from our across Over countries. just restaurants the grown footprint past years, to our than XXX has of

around where this with customers have discussions reach in of enabled more these soon. engaged delivery change, gross us to our the our to But example scale us delivery our competitive support needs extraordinary We sales delivery increase look our growth business. another the We're forward information confers partnership advantages. of has largest yet continued actively is our global As world. on to providers in sharing upon the to in

throughs. drive - our Lastly,

will taking. a elevated second AI now to -pandemic program, ideal today, previously taking presence in advantage now In great With relationship size partner feed foster testing pre six several the shown care McDonald's, that continue for accelerate and strategic Labs the our to a in top customer has been of unique the my levels, communities. development to markets voice restaurants in as our that scale drive-through reopen. our sales McDonald's drive-through their into acquisition scale To We is deployment order dining our now by is we -powered the with none, have We're stay have entered rooms and McD our acquire of IBM and on crew versus at Tech IBM. taking solutions automated shared to and substantial across order expertise experience. the U.S. drive-through known given IBM McD was building to focused customers in this recognition. the enable plan, executing of This in automated running as development tests position XXXX. These of benefits strong Labs restaurants, Tech and Apprente, and even enabled further mind,

it and will more to back QX outlook forward, Kevin. turn financials our I For on our moving over

Chris. Thanks,

McDonald's $X.XX, per the performance as quarter ownership for strong gain in Our excludes share the divestiture completed adjusted the of resulted our earnings in of partial we which Japan.

to million restaurant a for by sales driven Company exceeding our X.X% as for be full sales for this operating system-wide compensation quarter. G&A generated higher $XXX segments was margins Year-to-date the about restaurant quarter, in improved expense increase other strong of constant higher about an currencies increased reflecting income year. the operating all adjusted We about the and of year. across in G&A to XX% last the margins compared still XX.X%, Our incentive-based plan performance, expect of margin year. result

a translation benefited expect X.XX of Based per currency with we benefit estimated $X.XX. $X.XX to rates, QX impact Fourth full-year share. on minimal results have current to by Foreign exchange EPS, on Quarter an currency

guidance through And X% as our marked further as the $X.XX of September, the accelerating this years The year. move annually. likely confidence rates of usual, As directional of our dividend equivalent as approved in will dividend a we rest This of our XX change finally, reinforcing to Directors Arches. only in shareholders, Board the increase increasing for

We resumption also share announced of our the program. repurchase

reminder, suspended of system. to credit returning a debt pandemic that additional strong took debt on support our focused As investment-grade liquidity had support McDonald's pre-COVID provide we then, beginning been share the as ratios the to buybacks to we've at the on rating. we Since

already our Going cash operating growth performance will to free profile. flow strong that forward, continue our in confident fuel we're

a our As to allocation capital result, committed we're priorities. historical

of through business. repurchases in grow we over invest First, a time. flow the free shareholders opportunities cash combination to Then to restaurants, to new restaurants, and dividends to expect return all existing share and

I'll back to it to turn Now, close. Chris

past much even simple And our accomplished business so changed pandemic altered that XX are We've than we we're the and the has our Kevin. together months. much so though better fact greatly apart. in it world, the Thanks, hasn't

the of places world, taking shape. see a time, reached new mass But separation to had long to have as a some we're critical working. U.S. bridge around For of different the we and and in with physical people future beginning technology ways vaccines

replicated on person. protect true to for our same global XX, To Finally, McFamily. get for around we're few have back in with employees that the After staff, creativity, and short doing the up we're spurs and for The monitor seek be simply to that our and a our health cities teams connectedness system coming communities, see being could of vaccinated, over and together guidance been McDonald's new collaborating are public going we've found thing of closed inspiring to a Even reopened again normal. to continuing same world back a together data we screens, level our based the from all soon. working in safety the officials. in - only corporate was the and we're open and collaboration, beginning it though from we and the health not office global again U.S. weeks, get local to a and to our October required behind be year-and-a-half, headquarters is

to discuss in for April, in customer innovation pipeline up Arches Next our experience the Orlando, be suppliers, an X already will to the the bright shaping McDonald's our enhancing power franchisees, and in plans experience, in for the showcase learn Accelerating first how It's convene time employees restaurants, growth Together, convention for we'll our unlike person and any other. plan. worldwide We'll of technology the drive is demonstrate future. years.

that important that said communities As and long-term our a climate we not before, grow, we it's centerpiece positively a focus that action we equally for the strategy sustainably while and has ways I've of only our been it's has grow important in now, serve. sharpened. Driving impact

public In our we by our established XXXX. to goals were fact, and in XXXX, entire beef. sustainable intended including of ingredients, coffee more key system to sustainably Among source commitments make XXX%

what bolder was beginning this become a just much agenda that are back, pursuing of Looking urgency. with the we would

plan set schedule XXXX goals threats the grown, new more to a plan with entire that achieved the to we upon targets. for have are ambitious for build we of responding ambitious ahead many As industry. and ourselves our We of and our momentum

XXXX, by use toys our in Change global X. responsibility next by achieve we Glasgow week. store with XXXX. announced delegates announced privilege net climate to by Meal we past in across we We X plastics to known generations communities, as more globally to of joined of this ahead the the COPXX come. Climate to most We and and than help and guided sustainability begin our we lead to just sharing emissions for XX% I on values With lies business, a Arches, remain This operations confident matter planet protecting a we for future makes issue future UN impactful Just I forward by look communities believe the what locally in ambition of United our recently at in issues have both successes would serve. for Nations more by important and also reduce the is but The to that, our that Happy the Conference the optimistic September, there about conventional and accelerating is we'll that race virgin And me no not purpose why continue McDonald's, that fortified our of Q&A. our

Thank you.

reminder, do [Operator and investor you ask X to re-queue yourself We question, you limit a are As would question questions. to an any like to instructions]. for if and a ask that additional

Our first with Cowen. question is Andrew from Charles

ask you. about Kevin, Thank I environment. staffing Chris the to wanted or just

bit, from be would progressed, just on and I think as a more very touched you the positioned, help little a You -- very immune. we're seems given a a in but with issue curious. not and From quarter, McDonald's that Thanks. for that bit same-store be numbers any was but October. be that I'd parse a you that degree headwind out you to seeing strong little challenge to Obviously a help very bigger going you're is can deceleration the in what double-digits but about everybody if saw strong in the there's it's same-store XQ, bit a sales curious better it strong, so that's the quarter hearing, U.S. how low sales, to if sales to to it XQ talked of

challenging U.S. wage in points it's the calls start on environment few so Kevin I'll very then U.S. us, But little challenging we but are fill mentioned in I've that and inflation. ago, in let staffing still the other Europe, Europe. A less a there for a as is in Sure. seeing, certainly, bit this. In any

some to they Our (ph) need. benefits. helpful you to and inflation is Taco our are in wages Certainly, that of very over higher on right But having also we're wage challenging that seeing increasing We're we're you find that Mar seeing just talent over that it's pay, stay you competitive. XX% it XX% franchisees up allows wages, year-to-date market the the is the are restaurants. in that now wages, level

add. we service seeing And from not see us, anything situation being dialing difficult might going on be McOpCo manager hours expecting maybe you last also speed I the able doing. next what's motivated, managers was that little we so, strong It's want year-to-date not a quickly keep maybe for certainly, of to back pressure crew, difference. have know going function And you over to to shift it kind be the also don't restaurants a pressure we're putting on more the make tell a unsolvable to the like for we would That's I but example, restaurants we late some and really some around to to ordinarily a continue down that where hoping last bit think you of have is are is fully to Kevin, if putting materialized. that the were focus little I But and things that it night, and several and providing what keep I quarter. speed the shift on even of can our the operating be a where training to either, that improve the the in the quarters. for of with environment it's than crew staffed, would engaged a in service bit

couple have of certainly Just two-year low double-digits. the bit comps I - to have for X-year benefits, the for be third that. U.S. One level. benefits, to And quarter. we're pretty be say. service been pleased historical there that to the your gone restaurants on on comps fact things reopening, that of our able pretty we're think I'd would sustain about second rolling a unemployment QX higher we'd and decelerating touch stimulus changes think happy than long that they're That's and time, off. from full in period to there A little point I more see Certainly, related if some a with of

And comps. so, to are still able we're weren't would our pleased results how we the achieve pretty that impact sure much and that double-digit

quarter I now U.S. so, think feel about the And in good right fourth we into pretty going

is Our KeyBanc. with Eric Gonzalez from next question

The question can on and the pricing. whether level level if on is what wondering maybe back. you current appropriate is I'm the just comment in system think consumer U.S. environment pricing of push you the in discuss and current the you're seeing any

for roughly Yeah. been and I bigger how few had pressures Thanks they the over year-over-year question, -- Certainly, were cost a I last focus talked the Last U.S. we quarters increase the in last are pricing seeing Eric. than a about quarter, X% previously. think

cost, second, a a that seeing are basis, the that we're still seeing. cost that's certainly for and full year is pressure all some XXXX around out chain pressures expect some both labor level on some back commodity on -- pressures commodities, much right cost disruptions, really and If for pretty and step availability which that environment labor over we we're cover global We X%. all that that seeing there etc., we obviously, pressure. XXXX, are that's supply the the And to putting on pressure

historically. our than We any haven't more seen if we've increases they price seen to resistant are

and are And we the to that customers. are that been focus balancing being favorable. to perceptions a cost continuing certainly has by cover So perspective received pressures We and we to sure see customers from have sure continue making those well able from our do a by that scores value be with very pretty X% customers. make to value favorability positive surveys still those big

relatively were it through so for the to year a an expect continue X%, perspective. we X% Commodities keep the but to nine or be roughly will up a And eye line be quarter, for X.X roughly perspective, on going little first to bit expectation months, That into we'll additional in put which on to and from cost paper our expect So, commodity -single up those full food pressure a with is of the we now. the then obviously. industry digits. from next year mid roughly up would fourth right cost

eye using deep will the third years And if you have a we party over the will, franchisees keep pricing consumer-based side side. both an a cost pricing to continue of last research Both for the using so, approach. and we and been on advisory pretty couple services, our

science account And think, into et that into conditions, competitive market take built pricing decisions so, we more our cetera. have, factors, I

said, a like eye right far, and by been received keep we'll I on So, close now, cost pricing, okay it's but so customers.

with Our next from Goldman is Jared Sachs. question Garber

segments. across the Great. Thanks in shift to over growth of and equation. labor much bit the a and unit update wanted both permitting on of us topic question. little the if what U.S. I unit give side to so an can and for the seeing the equipment, opens international of the And availability you terms both you're and and construction

terms IOM year. unit this increased the net quarter, in a came the segment but bit growth you unit in of the light think also I opens for

So will framing really and be takes, that puts color just on out some the any of helpful.

I'll question. take Yes. Thanks, Jared, for the that.

are You world is restaurants historically. say, open to times. say say I'll there mentioned it related All the certainly fair across and to technology get to are challenges kitchen that thinking global know, the supply environment, a challenge just disruptions, again, than things about the equipment, I'll I chain making pandemic-related equipment. various slower bigger it things permitting think you

few -- now For will U.S. and There's spill a be roughly were be else. over will this where anything that our in bit from of year, XXXX. a we markets. It's down a previously. than still That's more little into we there IOM expect issue timing

year to bit may XXXX. a be we things beginning of able some longer, the of of taking And so, openings we little spill because done will thought into that get this

our Going forward, as license I both in to China developmental few primarily year. The openings wholly-owned a driven of openings. as that expect markets. we're and now next on increase right increase XXXX still We saw still our development being well markets other you our by think for licensed markets bullish is

bigger frequently a our the feel it the it's about process, because we've of up challenge our But sure suppliers, does a it's the I pretty why where compared that that are overall contingency chain of just touch it in be than job phenomenal our historically. bigger to strength that's So We're challenge good I'd all I managing may plans. than supply been, this a fair to is But making has and say think year. it's with whole overall supply where extremely just but we of others openings say been are got chain. of

Our Barclays. next question is from Jeff Bernstein with

much. very Great. Thank you

accelerate Seems IOM whether flip and the you. maybe or leg Just reasons like you and those thoughts expect comp you Canada will those your or the believe staggered. I'm markets. markets on thoughts next provide to Thank would ultimately the picture why you said France, structural the a recovery recovery there whether to think you growth, there is side in markets Germany, of whether of in think the U.K. comp mentioned Any you on somewhat great. question be I wondering Australia, bigger levels lag in, terms will continue maybe are just the and there otherwise.

restrictive like poised a getting Those COVID portfolio bouncing very miss I Delta overall, to then, the a be an Australia, navigate can seeing variant optimistic We a healthy and that environment. off very certainly are way. to appeared things in a But we're the have more The here. peak when about year start did better pick had international I'll to markets markets in spring the were like that those relaxed. we that markets earlier they France, get back. before up mentioned you bouncing and Kevin sure. again, where our restrictions anything I remain in think, Yeah, back back businesses

So, able to in become as those markets markets as from they being favorable how to way conditions, more our going to conditions the perform -pandemic. those healthy operating because terms start expectation, in soon that's were very of to we return pre a performing normal are in expect

So, back. structural there's their bounce would ability us to that nothing concerned make about

where are thing also, of little a and are only The tourism. there countries, on other I'd add of a bit Spain France couple they more reliant is the

there too. countries that of and these vaccine countries customers as back But as the challenges all the structural coming some anything more with in. lot, that are coming of as back add should having returning from countries, logistical strong. those to that tourism a just as tourist some those slower So said, getting some of But countries passports heavy well some help back Chris come isn't prevent starts checking

Our next Bittner with Brian from question is Oppenheimer.

morning. Good you. Thank

You had EBITDA consolidated margins performance your XQ a breakout now operating year-to-date margin above are XX%. in in

this so elevated margin so, do margin think post-XXXX I there, there's an G&A be question us more lot in and Is leverage inflation And know level? you leverage any opportunity keep about there expanding world? the to opportunity a how color would EBITDA is, of but to to out opportunity there's the from helpful. EBITDA a want also D&A,

in last Yeah. Thanks margins, to and operating margins Relating I pretty be the XX's. about year, for would our the think much talked our thought question, operating investor Brian. XX update for XX, we mid-to-low we in

at commodity potentially moderation, the in. to be XXs the improving. for There midst both the to exactly and specifics, sales working also that's our thinking think are of about don't year. will been still this generally it, I and low through kick I currently XXXX near-term right now. way mid is as leverage some of we've so in We're for our get But next as expect plan, restaurant we some that margins costs year costs labor thinking but I think have

is question from Tarantino next with Our David Baird.

program there give it's I you're little of morning. stages, elaborate and Hi, currently. in loyalty was business early in that bit and what just the the seeing doing you terms good a to would hoping on also, what more next to with the that as into use collecting to you the you're you're data collecting if planning or could move what some you're do then, you on the few how data perspective Thanks. And and years.

Sure. about seeing the nice What similar we're learn loyalty. we in very more Germany off the in we're so pleased more get it really loyalty start and how a Canada, is starting the optimistic with U.S., loyalty, about that we to

program population a us terms increase frequency. of for the get roughly once to business of XX% a is we means operate, the And year. benefits the in long-term, visits markets ability the McDonald's what in with the certainly think that for I where the loyalty you

places -- frequency. that does opportunity. that frequency reach So, have the we business about customer in driving deployed It's where it's a seen have and not in we've it increase this absolutely that we loyalty

really encouraging. us, that's for So,

customer, you point to actually you about did of the we we preferences only set all and things about know more did that they an of had of data, I to able loyalty wanted transactions imagine more customers is think is they buy who is. with customers the with to then get to engage previously. that what information customer aspiration broader the you. is their able that we can what do customer X% earlier to be and where the share of And you buy, the number that way our do of where the where out get you're customers you And what and have XX% customers. who probably certainly you're know when learn known your sorts Today,

us, the what very about to started going do it, of doing we're we'll loyalty and about year, so for this loyalty by have So, even to I with business. to getting exactly I it's top a that markets, specificity the what our be think can mid-next but think more scale on in of a you have business, we think rollout, better kind we're just And I talk idea able X optimistic once ability give it. to for

with Geiger UBS. is Dennis from question Next

I throughout U.S. you despite asked gains momentum been you've suggested year how going the the the And could into folks that forward? continue just you've would the you've against. maintain question strong to And a up momentum lapse roughly consistently and Chris, having that this the got year. the that more done Thank I know you strong market gone coming the you. wondering that. bit some if you've momentum of speak and results just think have the in share you and

have perhaps already into just next you've going So maybe into any at that XX, year. about you you. support U.S. additional upcoming on. you that'll momentum momentum initiatives how touched key any help Thank of from the about just think thoughts high to here things curious existing kind as that a if level, go you're And of framing that some up

great Well, own I have our be you mentioned, think, momentum team reasons Sure. for to out cetera. through continues come et labor U.S. the shout this job commodity a that up call; of the what all and inflation, challenges, a as doing on challenging sustaining to that operators environment for

were business the XXXX, digital get in we for really delivery. sort it the around of and the momentum things is of back-end, about which the have couple COVID. through, and able of something set we fact foundation This that in seeing something I investments state, our place that we've those the could years. was improving that think none modernizing making last years U.S. just now was that us all put not food, the the business is in in the XXXX, well several of think came to call I us predicted, through with up in that And U.S. ago embedded we're what started experienced the foundation in what

place with extended for in business feel perform time. for to So, is this of I quite for I think well or us, got we've the the good foundational elements period outperform U.S. about what

going digital. that, the and we have it's XDs driving great strategy accelerating focus outperforming to with to you delivery on back the It's drive-thru do marketing, be on As that a how and urges. to menu the core

for about to all teams got in talking we about going. so, execute good that got want right a message and to confident. I'm it, that mindset get strategy. And keeping keeping hunger, internally on have I'm of and us, the you then the dimensions, give on execution, do high the also think It's momentum about up And that I really level. don't can't is at dialogue If But you've we've and it that's three now we we those the a now. complacent, just going there's once a to level right healthy U.S. right that

with Morgan from is question John Next Glass Stanley.

Thanks very much.

just gave COVID, it now where -- a been delivery, you What I can delivery and on total versus in post acceleration stands there's -- know the prior. makes quick First, digital update? of maybe since - up that mix. that you

-- also financials due -- to You just sure we know I could expand picking your you're just material to being it just Labs Tech is either G&A more anything would the to probably in or transaction? should you if transferring that or talked selling about in partners your about, I that. that understand, delivery. And Chris [Indiscernible], that maybe strategic there on make anything wondered if want impact partner

that. of to parts We're all trying get the

on the suffice I'll But for other do to this. a has so, notes, The important going to the parts be his while delivery is breakout share of delivery delivery, Kevin for business question, don't grown specific say, through us. continues but driver a by us we Delivery start get several and even where remains back fair we're it's in share, think to normal and see I as dining billions, to and markets billions get they're etc., able room, back open. over things years the to the to places to reopen elevated. last continuing really

don't years a become And maybe us a delivery what appreciated, ago. that even is meeting so, of was any customer has I think apparent for us, I need think few fully

conversations that approached delivery that the trying had So, Company it's with were do our discussions basis. on at some previously of we're XPO those many partners a in for here global to and happening stay. of partners, were to market our size cases our we What the way levels. when partners, great scale believe the proposition And we you McDonald's, are a XPO a with

XPO onto that apps have an to drive And these in so, is think restaurant reflected what through none, are with our second is the that and paying leverage the we're be the do we that Company world the in to we're we rates to conversations partners. largest XPO should traffic we that ability that trying that fact

on I generally, a We on had I'd good I a up sides of of need we proceeding, than shouldn't but able that. to of are that maybe the associated transaction IBM be There with much optimistic question next good of statement XXX that conversations And those both financial related recognition impact other. we'll So on forget impact your And that our about there to people with is to resolution that the couple follow a be less and think say that months. that. were business. potential to then just each get in a I'm

work us deploy someone the with can to will scale. with have able folks reason with the now that be take finish to this then now right the this be go those development far able so is help we've to IBM. And gotten Really we're and and how at solution doing IBM

learned big that And so, impact. financial that. going AI their say and they've expertise Plus, in everything certainly use it from or Watson, statement from is we're going I’ll a forward minus, But to indeed etc.

is question from Chris RBC. next with Carroll Our

morning. good the question. Thanks for Hi,

drivers? you group sustainability guest comment from of ordering, business, It of you the check following your order a on larger U.S. expected. on sizes pricing gave while around seems view the recent maybe some longer recent than to Can on track average little like remaining behaviors which average of are consistent perhaps noted ago. the up menu some benefit the Just detail and you us

around and going your curious this So, or helps forward? to perhaps drive maintaining as your on ability thoughts check growth, digital how focus

It's a question good let you're add right. on to I'll and because try I'll Chris one. this

pandemic, on in our believed are are to continue sales be the And would you things check the than I least has. the and reason average several ordering decline still at delivery, of think right it quicker early think that as certainly the drive-thru through because like we that people. mentioned, much through think I I for going is digital going channels which people now,

of for some of are than orders I for seeing And we getting order you're if couple -- it lot sizes least folks are getting will so be If for thought. a stickier you're at through may larger getting think a And delivery, drive-thru continue. family least or several people, we at that of have those your originally going the people,

the average near-term returning it at was level -pandemic. don't pre we to in check back certainly So, anticipate the

we my check I said, channels I grow. think to as to not point. of but continue seeing continue like those we're -- And the I degradation I any do that think at to continue lost this of train check grow thought, will see

here is stuff. things still are in few fill quarters just selling to CFO and quote something sandwiches; We're ago, which my still we more more we're Maybe selling from and a said fries. I'll selling more that he several back go

And of good unit a is the continuing business. while volume to we're the this what standpoint, barometer really a we from selling looking are at that's for health traffic, absolute And grow. so, about me, certainly of

customers on that be the think smaller -- start sustained to I just the whether so the we continue. these whichever that they goes sustained, to we'll larger we're have check what to we're go. If what to mix right that, ticket I follow channel check, as that sizes the certainly, we're want around that. fine way whether that to seeing execution, and expecting I on you're order But now and larger mix that think with going expecting to customer to think come of focus long seeing split and as and the we're continue back the benefits is some the we

with Next is Silberman Credit Lauren question from Suisse.

plant-based you And about U.S. wanted with in you. from a to the heard talk you've Can option. test about respect I ask for to demand Thank from consumers then, the what conducted menu test cities. being a looks the the backdrop? on what's plant-based is option demand franchisee perspective, given operating offer And in it diverse deliveries to like McPlant current or the the

of markets the across share you on So, franchisees? anything and perspective consumers can demand both in differences from the

Yeah.

we're the be It's than kind what now. it's point I would right test XX operations early largely think I U.S. out U.S. in to readout it's of in on restaurants making an learning. in really any the less

it are The is is more U.K. that U.K. evidence need that QX. full restaurants going Now, in to think be in their are existed unmet markets the along. the doing a XXX on situation, national certainly they're menu. we further an rollout and that other planning have In in U.K. I on there in that filling

seen the success -- early in on in in have as So couple roll very A with the McPlant U.K. out well that. encouraging. Europe the are markets in other results

it we've decide all in are think concept. acceptance I the one is the best to let on said them to down this interested markets customer where is this So, pull what when along, time we're going based

there I where in is think think point is a definitely of quarters. couple we'll certainly there U.S., say that at acceptance learn that are markets European I a can for the several I Whether the broad-based this acceptance over next it. customer

Our is with from Brian next question Milan Deutsche Bank.

unit Just to follow-up on IOM specific segment. growth the the topics

over you're you prior development go putting Do issues. -- You're pandemic? increase been there aside the for the see upper of actual of limit there comfortable makes of and of is opportunity do few Is might think constraints of business. opportunity, faster with terms related have there to to that versus is to managing too? next spend CapEx number a for or any planning there it are the if about level in what function years that previously gross see any you just the And sense you transitory kind timing-related operational on openings

Yes, thanks the for question, Brian.

be thinking opportunity that in happened some And even I our about the that. changed in fair; accelerating growing markets. our think operated thinking think to at pre the started pandemic many continue just to openings has to we Certainly, reinforces that's internationally, related -pandemic. those had I all of international anything, if of nothing

in can constraints right opening pipeline, the think the a I constraints, a of way to market a the any what really in disruptive perspective, isn't of terms estate as far are representatives, As building it market. of a the is they there from open spot real having rest that sweet

tools of markets. have to what that appropriate is we determine we for So, level do a use the lot opening the

for of operative plans opportunity. than fair the markets I continue is our many quicker those think to and say have think next to of So international expectation lot don't a markets would being through expect will in we little go been, grow I X% those I right think increase lot that to in the I lower in at contribution where -- kind X.X% to about open because will XXXX to we to going just many for that, sales likely midst we is really be we're growth expect continue higher we've believe get there's opportunity "XX where end X% a growth. as openings. have and level that year of yet for of do Right that now, above we about 'XX have I now a of still are for to it XXXX, we talked We're that while we it more X.X% but that would they we on, that unit to and specifics to openings contribution. of closer to But our relates XXXX, not than our in than

John with from JP Ivankoe The next question is Morgan.

A you've all about an not The asset do further and consumer longer-term the just asset, pivot dine-in we off-premise on up, even that using opportunity focus to of have off-premise you the to more as consumers think and part it. are leveraging of in environment dine-in, seen, a you their post drive-thru, and various of in lot is terms thinking COVID question as in on markets about really behavior. various respond delivery. about digital What

it as and Manu as Manu's it is, that It's we're question, Customer one great thinking portfolio, And Steijaert. a that That's is both quarter, well the now in I announced, one last restaurant of plate was Manu as for operations, -- is experience. about. that we he's on something think design the that is he things has Officer. fits the Chief customer the

was a space? to come still be consumer anything restaurants. space level the for pre certainly have there's the something dine-in thinking we add just about. until that just about reuse play little dine-in would of the this numbers up, coming for are our the what dine-in about a thinking bead about of What what dine-in you basis sustain right but that. that for the we sustaining But on going for in -pandemic. lot hasty do back is want to still if And on is think out us get are better scenarios and we don't think it's think it's implication does then that and just of now what a I So, the to here acceptance I so, because to how a to the place I doesn't noise be places plate now starting might potential in it preliminary implications bit

and only that dine-in back is is dine-in of mean, international almost an I'd is as Europe, return. business on business, Europe, sales the usage we a about in and bigger and to -pandemic, very where the to around The same add of important that seen getting and side, it the to is family kiosk was what ' in business. other our certainly have thing so percentage careful do part pre I is it far dine-in customers view got we isn't business, because side of important so Chris world the be it point, the and how we as

Senatore Our question next of from is with America, Lynch. Bank Sara Merrill

Thank customer-facing really back think of about, would see do within about the on or it's how to IBM you. maybe just know the Are -- of you're the own technology McDonald's this whereas expertise some to that's as But maybe specific data, about piece. And I specifically, be useful? So, there as technology one thinking other versus I behind-the-scenes things partner, I loyalty, of not big they as IBM capabilities. data. go is UI where have think what tech characters it's versus the particular with outside it. to in that because with more should broadly to or that I the technology you expertise. more it's has expertise opportunities maybe wanted partnering loyalty, signal in-sourcing or companies really In where whether you're outsourcing? you a

as over this you more change but not the about day, we Thanks. and longer-term broadly? signal your time, that just can So with just Does front think budget. about technology anything

blow what's had, thanks, don't Sara. this same where back times this quarters my My is go as I the was it I to then know, can is there thinking about some then technology now, us one scale technology conversation sure a think for who level But are where technology, to sense that, reaches make now, that getting of development it and a the makes partner needs. may insource, I'd do the acquire and point, make outsource. of development, a topic accelerate is ago which bespoke how think I we certain more what's think go probably globally Yeah, to sense. it we it you McDonald's on it And thinking of can is where to several at it I so that out that

to consistent print that there's really some day of philosophy, all with year. results had we've did beyond still we with I couple how the it the permutations, think, progressed if various We're lot that. very with in team a it etc. is been seeing into it. restaurants work for very that development a what other languages, much encouraging which has pleased is And is the so, XX,XXX have the restaurants But of introducing the scale of you do go menu across being And needs to core able our that we with of I've that competencies, will. work the

us. IBM a natural think in I so, is partner this for case, And

be just bring But to industry. to versus as it's with going day first much to call from case-by-case the a partner the everybody's about when go think X of when very we time. something I nice basis thing a in-house a period for McDonald's it the going where we is comes we might forward, -- partner being on we're in restaurant

of for I where time-to-time out so, may overall learn to But the sustaining are externally in accelerate visibility us and really from on we good there's basis partnering. partners long-term to able there, to various again, others use think, view is have be we a period a it to best certainly, have being and for And a benefit there time. our

with Our question Fargo. next Wells from is Jon Tower

just the Great. been some through I you your it years. like innovation, you've into a either I than could customer it hoping wondering in to of customer And talking the earlier questions. to into was younger specifically, for terms to product shifting mediums ordering or get even question. U.S. talking be taking marketing, in seems for was obviously new you're tie if Thanks demographics how in may

be if So, mind expanding, changing if the which data term a wouldn't frequencies in longer up that wondering But that's the if amongst indicator and showing group good you that'd I'm obviously great. for business. is actually for lead demand

I'd Well, desires and and Sure. youth beverages, restaurant, youth preferences I consumer think not consumer say just of our the it's industry across, demand, apparel, the whether The most drive in but industries. in etc.

most And age so, to formed target because media of most natural very demographic it over becomes demographic get lifetime target. preferences the the is coveted, customer. at brand XX That from the probably standpoint, to expensive XX of that a value sustained early that that's a and an the reach to

we brand of part haven't a culture, lean to how McDonald's probably on And spot we enough we believe and I we that. observing the demographic. that we brand a that absolutely connect culture. you're And have, we can to have more my and think our demonstrable continue. it's could have against I to not that one be So, And and -- going into that that's done that in view, expect made that of that push stature

The markets. also message of concept on and properties, that. the like I culture, other a getting resonate other but markets up a upside results resonate very pick this, with for opportunity. think finding big in Spain us we're started U.S. seeing we're Russia, famous more seeing on some And similar like finding broadly but orders youth, is that

to Just with can to do the and it. ability this brand we what me, it speaks of

the past. it is how I to big up the pretty and a of big this, It's think show on I also yet we're are changing a that still mix? in we're move early having we it's us our that of This certainly seeing think we. within the nor powerful in sustain as is frankly, again to making is for demographic sure has but about it over as shift the -- going something in been one here, so seeing sentiment in days terms but that brand is did future not so I brand several terms improving, think business, and boat years is it's the that

question with time Palmer have Evercore. We one for from last David

could a used Company imagine be especially sales asked I two-year? to a urban quick A remember free would franchise Company the moving IOM anticipate achievable technical I between owned you centers, on that bigger agree, in particularly which the to over in maintenance and estate Thanks. you're of answer. flow. cash picture restaurants. CapEx, I how my us Thanks. you you growth between would Thanks there? Do there flow the squeezing have time? give question the me do slower recover. you about if in be question. franchise on CapEx can cash gap But into because at the would for Was yield depreciation over course, imagine think same-store was you of a thinking you and be XXX% growth, on stores window perhaps would when in. given get And lot up I and that real which would And gap free

Yeah, let me comp question, start with your I guess.

operated. bit U.S. so little the with were For IOM been a That's than at than not the while [Indiscernible] in franchisees least the quarter, that's third trend. generally for both higher and a Company different they with were comps dramatically

that free coverage XX%, a year. of and cash is But certainly expect stay of surmise if over little our to say flow, over flow said want don't Company-operated to for for to it with to comp year-to-date and location we've we and this a in cash both Company general, bit running I on operated in others. a are to going I'll is driven could that the saw our than free we're quarter Some XX%. are XXX%; depending to that when year franchisees basis, this stores of going of in forward. the Related third be on conversion what the now, what get ahead -- we or greater basis, versus both on U.S. where

a opportunities mentioned as still earlier, seeing question our we The that to converts right to and planning are flow. couple what and now, capital related P&L in in cash flow phase of to look again that I mentioned means have opening through at free we our pretty of that a think I requirements that healthy the we're some etc. I times, big

what flow to dollars got looks expect out profile free certainly several cash those we've account So, at for I And years. cash free figure do that conversion all high to free the take We continue into levels. expect would grow. cash to to stay flow flow pieces to

everyone day. Thank you, joining. a Thanks you, Thank for great Have Chris. Kevin.

This Thank investor conclude McDonald's conference call. you. does Corporation

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