MCD McDonalds Corp

By Micah Maidenberg 

McDonald's Corp.'s new Chief Executive Chris Kempczinski is taking full responsibility for the plan he helped design for the burger giant to upgrade its restaurants and lure in more diners.

Mr. Kempczinski, who spent much of his career selling products from bottled water to macaroni and cheese, took over as CEO after McDonald's board on Friday fired his predecessor Steve Easterbrook for a consensual relationship with an unnamed company employee.

Mr. Easterbrook hired Mr. Kempczinski in 2015 from Kraft Heinz Co. to focus on strategy, business development and innovation. In January 2017, he took over as president overseeing the U.S., where the fast-food chain derived more than one-third of revenue last year.

Shortly after he took over the U.S. business, McDonald's moved to refocus on its core customers and set out to modernize its domestic restaurants by asking franchisees to remodel stores and add new equipment like self-ordering kiosks.

Some 9,000 restaurants in the U.S. have been renovated, but the initiative frustrated some franchisees who say they haven't seen much of a return on their investment amid declining visits. In 2017, McDonald's offered to pay 55% of the cost for the changes, with operators picking up the rest. The company in August 2018 said it would invest $6 billion together with its franchisees to modernize restaurants.

Travis Heriaud, a franchisee who runs 22 McDonald's restaurants in the Phoenix area, credited Mr. Kempczinski and Mr. Easterbrook for articulating a vision to remake McDonald amid major shifts in the restaurant industry.

Of Mr. Kempczinski, who he worked with as chair of an operators' advertising fund, Mr. Heriaud said, "His style is very analytical. He has a way of really simplifying complex opportunities."

Mr. Kempczinski, known as Chris K. within McDonald's, was the public face of the transformation, which executives say will provide a competitive advantage over time. But making pricey investments while traffic counts have fallen has frustrated franchisees, some of whom say they are skeptical of Mr. Kempczinski's status as a relative newcomer to the company.

The typical McDonald's restaurant in the U.S. generated about $360,000 in cash flow, an executive said in March, down roughly $30,000 compared with two years earlier. Franchisees have formed an independent association to press their interests.

Franchisees operated 93% of McDonald's nearly 38,000 stores across the globe last year, the company said.

"The history of McDonald's is you earn your credibility by being an operations person," said Richard Adams, a consultant who works with McDonald's operators. "Chris K. is the first person to run the U.S. who has zero experience doing that."

Mr. Kempczinski said in an interview on Sunday that operators are enjoying a record year for cash flow. Average cash flow for franchisees has grown for 11 consecutive months through September, executives said last month.

"We have about 2,000 owner-operators in the U.S. It's a place where there is always lively debate," Mr. Kempczinski said.

Mr. Kempczinski wrote in an email to employees, franchisees and suppliers after his promotion that each part of the company was vital to success as was customer feedback. He said he would hold a global town hall meeting with employees on Wednesday.

"I'll share a bit more about my background and perspective, but most importantly, I'd like to hear from colleagues around the world," Mr. Kempczinski wrote.

An avid marathon runner, Mr. Kempczinski eats McDonald's ice cream every day, the company said. The married father of two was born in Boston and describes himself as a sports fan, especially of Duke University, where he earned a bachelor's degree in 1991. Mr. Kempczinski worked for consumer-products giant Procter & Gamble Co. and earned an M.B.A. from Harvard Business School in 1997, after which he took a job at Boston Consulting Group, the Boston Globe wrote in 2000.

He left Boston Consulting in 1999 to work as director of product management for an internet portal called Myway.com, according to the Globe. Mr. Kempczinski didn't stay long at the site.

"It was a real seat-of-the-pants business style that was totally new to me," he told the newspaper.

He joined PepsiCo Inc. where he worked to sell noncarbonated drinks including Aquafina and Lipton teas. He later went to work for Kraft and moved through roles focused on packaged dinners, Kraft Macaroni & Cheese and the company's Canada division.

In Canada, his team wanted to create protein drinks under the Philadelphia Cream Cheese brand, said Barry Calpino, a consultant who worked with Mr. Kempczinski at Kraft.

"He was just known as a guy you could give the point to on a big strategy project," Mr. Calpino said in an interview, adding that Mr. Kempczinski also worked at Kraft on new marketing for Velveeta.

As Mr. Kempczinski takes the top job at McDonald's, the company has also faced criticism from labor organizers and #MeToo activists who say the company must do more to address harassment in restaurants. McDonald's said in August it would implement antiharassment training for roughly 850,000 workers in 14,000 restaurants in the U.S.

Mr. Kempczinski said at The Wall Street Journal's Global Food Forum in October that McDonald's always tries to act responsibly, mentioning efforts related to workplace safety and climate change. He said, though, that the quality of its products remained the company's main focus.

"I've worked in the food industry a long time," he said. "The consumer ultimately buys on taste."

--Heather Haddon contributed to this article.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

November 05, 2019 16:43 ET (21:43 GMT)

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