Fed up with shrinking sales, McDonald’s replaces head of its U.S. business

August 22, 2014, 3:24 PM UTC
A McDonald's restaurant opens its doors early on July 24, 2014 in Shanghai. Chinese police on July 23 detained five people from a unit of US food supplier OSI Group, officers said, in a case involving expired meat sold to fast food giants including McDonalds and KFC. AFP PHOTO / JOHANNES EISELE (Photo credit should read JOHANNES EISELE/AFP/Getty Images)
Photo by Johannes Eisele AFP—Getty Images

McDonald’s (MCD) CEO Don Thompson has run out of patience with the burger chain’s declining U.S. sales.

After urging Wall Street earlier this year to give it a full year to fix that, the CEO of the world’s biggest restaurant chain is turning to an alumnus to revive its U.S. business, where the company has struggled with more intense breakfast competition, price-conscious consumers looking for cheaper menu items and operational screw-ups last year that ended up slowing down service.

In 2013, McDonald’s reported a decline in U.S. same-store restaurant (those open at least 13 months) sales and a big drop off in customer traffic, breaking a 10-year streak of gains in a market that generates 30% of sales. And so far in 2014, things have only gotten worse, with McDonald’s diners staying away in droves.

McDonald’s said on Friday it has brought back former executive, Mike Andres, most recently CEO of Logan’s Roadhouse steak and burger chain, to be president of McDonald’s USA as of Oct 15. He succeeds Jeff Stratton, a 41-year McDonald’s veteran whom CEO Don Thompson tasked in late 2012 with bringing growth back to the U.S. but instead faced market share attrition. Stratton is leaving the company.

The fast-food giant has now had about two years of uneven U.S. sales, and is facing new forms of pressure — customers have cut back after McDonald’s raised prices to offset higher beef and chicken and labor costs.

Thompson, who became CEO in 2012, announced a “reset initiative” in the United States earlier this year, with moves such as fixing staffing levels to improve speed during peak hours and focusing more on affordability and core menu items, such as the Big Mac, which generate some 40% of sales. It is also planning to slow the pace of new product introductions after customers were irritated by slow service issues last year as workers were overwhelmed with learning how to prepare so many new items at once. It is also planning to slow its pace of opening new restaurants to 250 this year.

The 2014 reset includes an emphasis on breakfast by pushing its McCafe items, widely viewed as a success. But many chains are challenging McDonald’s breakfast business: Starbucks (SBUX) has introduced new pastries, while Burger King and Dunkin’ Donuts have beefed up their food and drinks options.

Andres has a big job ahead of him. For one thing, he will have to tackle McDonald’s image problem: a reader poll by product testing organization Consumer Reports released in July found McDonald’s burgers ranked as the worst in the U.S.

For another, he will have to figure out how to get McDonald’s many lower-income customers to come back. McDonald’s U.S. traffic has been on a downswing since it pared the selection of items on its Dollar Menu last year. It hasn’t reversed the decision to shrink the Dollar Menu selection, but it is by stepping up promotions in its “Dollar Menu & More” offerings and breakfast.

Andres, who will also be in charge of Canada, started his 30-year career at McDonald’s managing his family-owned McDonald’s in Northern California. His earlier roles at the company included being CEO of Boston Market when it was part of McDonald’s, and from 2010 to 2012, he headed McDonald’s Central U.S. Division, where he is credited for strong comparable sales, guest counts, and income.

That inside knowledge of company will serve him well in taking on this enormous task, Thompson said.

“Mike brings a wealth of knowledge of McDonald’s and has built strong relationships across the system, as well as broader experience in the Informal Eating Out industry,” said Thompson, who was himself head of McDonald’s USA from 2006 to 2010.