McDonalds 2002 Annual Report Download - page 3

DEAR SHAREHOLDER:
1
Since becoming McDonald’s Chairman and Chief Executive Officer,
I have had one mission: to make this Company great again.
By way of introduction for those of you who don’t know me,
I have ketchup in my veins. I have spent 28 remarkable years with
McDonald’s—many overseeing the growth of our international
presence to more than 16,000 restaurants today. I have a passion for
this fabulous System and an intense pride in having participated in
McDonald’s emergence as the leading global food service organization and one of the
world’s most powerful brands. So, I was honored when your Board of Directors asked me
to take the reins of the Company after a brief retirement from my post as President.
Over the past several years, McDonald’s has lost momentum...and lost what it takes
to make customers feel special. We have struggled to grow our business in the face of weak
and uncertain economic conditions around the world. The result has been disappointing
financial performance. This is not acceptable.
It didn’t take me long to realize that some difficult—albeit necessary—decisions had to
be made.
To start, we are targeting a lower earnings growth rate. Given the nature and size of
our business, the prior earnings per share growth target in the 10 percent to 15 percent
range is no longer realistic. Yet, we are committed to returning the Company to reliable,
sustainable annual sales and earnings per share growth. We also have decided to lower our
capital expenditures compared with recent years until we achieve significant improvements
in sales, margins and returns at our 30,000 existing McDonald’s restaurants. We will
concentrate our capital spending on those investments with the greatest potential. This
strategic allocation of capital will free up a significant amount of cash, which we intend
to use to strengthen our financial position and improve returns to shareholders.
In short, McDonald’s is in transition from a company that emphasizes “adding
restaurants to customers” to one that emphasizes “adding customers to restaurants.”
I am confident that the basic McDonald’s concept is strong—that we are doing
many things right. However, there’s no denying that we’ve disappointed way too many
customers. That has to stop. You see, McDonald’s has a new boss...it’s not me...it’s the
customer.
We need to improve our restaurant operations: our service must be consistently fast
and accurate, the ambience in our restaurants must be consistently contemporary and
welcoming, our food must consistently taste good and the customer experiences we provide
must be consistently relevant and fun. We will monitor improvements in restaurant
execution with more stringent measurement processes. We will recognize those restaurants
that take good care of the customer and address those that don’t. Our franchisees fully
support this renewed emphasis on improving the customers’ experience, and they are an
important part of making it happen.
We don’t claim to have all the answers yet, and I’m not promising a quick fix.
However, we already have taken action.