McDonalds 2013 Annual Report Download - page 11

McDonald’s Corporation 2013 Annual Report | 3
ITEM 1A. Risk Factors and Cautionary
Statement Regarding Forward-Looking
Statements
The information in this report includes forward-looking statements
about our plans and future performance, including those under
Outlook. These statements use such words as “may,” “will,”
“expect,” “believe” and “plan.” They reflect our expectations and
speak only as of the date of this report. We do not undertake to
update them. Our expectations (or the underlying assumptions)
may change or not be realized, and you should not rely unduly on
forward-looking statements.
Our business and execution of our strategic plan, the Plan to
Win, are subject to risks. The most important of these is whether
we can remain relevant and a brand customers trust. Meeting
customer expectations is complicated by the risks inherent in our
global operating environment. Challenging economic conditions
continue to pressure our operating and financial performance. In
particular, in some of our major markets, IEO segments may
remain stagnant or experience modest growth, reflecting broad-
based consumer caution, price sensitivity, and intensifying
competitive activity by both traditional and non-traditional
competitors. Further, certain menu, pricing and promotional
decisions may continue to yield results below desired levels and
could continue to negatively impact sales, guest counts and
market share. As our business model is built around growing
comparable sales to realize margin leverage, given these
conditions and persistent cost pressures, we expect our results for
2014 will remain challenged.
We have the added challenge of the cultural and regulatory
differences that exist within and among the more than 100
countries where we operate. Initiatives we undertake may not
have universal appeal among different segments of our customer
base and can drive unanticipated changes in guest counts and
customer perceptions. Our operations, plans and results are also
affected by regulatory, tax and other initiatives around the world,
notably the focus on nutritional content and the sourcing,
processing and preparation of food “from field to front counter,” as
well as industry marketing practices.
These risks can have an impact both in the near- and long-
term and are reflected in the following considerations and factors
that we believe are most likely to affect our performance.
Our ability to remain a relevant and trusted brand and to
increase sales and profits depends largely on how well we
execute the Plan to Win and our global growth priorities.
The Plan to Win aligns the McDonald's System around the
three global growth priorities that represent our greatest
opportunities to drive results - optimizing our menu, modernizing
the customer experience and broadening accessibility to our brand
in order to remain relevant to our customers. It also keeps us
focused on a common approach to execution through our
continued emphasis on people, products, place, price and
promotion. The quality of our execution depends mainly on the
following:
Our ability to anticipate and respond effectively to trends or
other factors that affect the IEO segment and our competitive
position in the diverse markets we serve, such as spending
patterns, demographic changes, trends in food preparation,
consumer preferences and publicity about us, all of which
can drive perceptions of our business or affect the
willingness of other companies to enter into site, supply or
other arrangements with us;
Our continued innovation in all aspects of the McDonald's
experience to differentiate the McDonald's experience in a
way that balances value with margin levels;
The impact of changes to our value menu, which has been
and will continue to be an important component of our overall
menu strategy; our ability to continue robust menu
development and manage the complexity of our restaurant
operations; our ability to adapt our plans to deliver a locally-
relevant experience in a highly competitive, value-driven
operating environment; our ability to leverage promotional or
operating successes across markets; and whether sales
gains associated with new product introductions are
sustained;
The risks associated with our franchise business model,
including whether our franchisees have the experience and
financial resources to be effective operators and remain
aligned with us on operating, promotional and capital-
intensive initiatives, especially during periods of
underperformance, and the potential impact on us if they
experience food safety or other operational problems or
project a brand image inconsistent with our values,
particularly if our contractual and other rights and remedies
are limited, costly to exercise or subject to litigation;
The success of our tiered approach to menu offerings; the
impact of pricing, product, marketing and promotional plans
on sales and margins; and our ability to adjust these plans to
respond quickly to changing economic and competitive
conditions;
Our ability to drive restaurant improvements that achieve
optimal capacity, particularly during peak mealtime hours,
and motivate our restaurant personnel and our franchisees to
achieve consistency and high service levels so as to improve
perceptions of our ability to meet expectations for quality
food served in clean and friendly environments;
Our plans for restaurant reimaging and rebuilding, and
whether we are able to identify and develop restaurant sites
consistent with our plans for net growth of Systemwide
restaurants and achieve our sales and profitability targets;
Our ability to respond effectively to adverse perceptions
about the quick-service category of the IEO segment or
about our food (including its nutritional content and
preparation), promotions and premiums, such as Happy Meal
toys (collectively, our "products"), how we source the
commodities we use, and our ability to manage the potential
impact on McDonald's of food-borne illnesses or product
safety issues;
The success of our sustainability initiatives to support our
brand ambition of good food, good people and good
neighbor, which will require Systemwide coordination and
alignment, including with our franchisees, and whether we
will be effective in addressing these and other matters of
social responsibility in a way that inspires trust and
confidence;
The costs and risks associated with our increasing reliance
on technological and digital systems (e.g., point-of-sale and
other in-store systems or platforms) that support our
Systemwide restaurants; the risk that we will not fully realize
the benefits of the significant investments we are making to
enhance the customer experience; the potential for system
performance failures, security breaches involving our
systems or those of third-party providers; legal risks
associated with data collection, protection and management,
in particular as it relates to information we collect when we
provide technology-related services to franchisees; and
litigation risk involving intellectual property rights;
The impact of campaigns by labor organizations and
activists, including through the use of social media and other
mobile communications and applications, to promote adverse