McDonald's to See More Executives Announcing Exits This Week -- Update

By Julie Jargon 

More senior executives are slated to say they are leaving McDonald's Corp. this week as the burger giant reshapes its leadership team in an apparent effort to revive sales.

Karen King, the company's chief field officer, plans to retire at year-end. Ms. King, 60 years old, is in charge of overseeing more than 14,200 McDonald's restaurants in the U.S.

Erik Hess, 51, a senior vice president of customer experience focused on menu and strategy and insights, is also planning to retire.

"While Karen and Erik will be greatly missed, their retirements provide an opportunity to change our organizational structure to further enhance our connectivity with our owner-operators and our customers," a McDonald's spokeswoman said.

The departures come after the company said in August that McDonald's USA President Mike Andres would retire at the end of this year. Mr. Andres brought Ms. King back from retirement in 2014 to help improve the U.S. business and brought Mr. Hess back from Asia, where he was in charge of strategy. Before Ms. King returned to McDonald's, she had retired from being the East Division president of McDonald's USA.

Two other top McDonald's executives -- David Hoffmann, head of the high-growth markets division, and Chief Administrative Officer Pete Bensen -- also recently said they would leave the company. Mr. Bensen is retiring and Mr. Hoffmann became president of Dunkin' Donuts U.S. and Canada.

McDonald's is trying to turn around its U.S. business, where the introduction of all-day breakfast last fall fueled recent sales growth until a second-quarter slowdown. Same-store U.S. sales rose 1.8% in the second quarter, far below the 3.2% growth expected by analysts. McDonald's is scheduled to report third-quarter results on Friday.

Steve Easterbrook, who became chief executive of McDonald's in March 2015, has tried to make the chain relevant again to consumers who executives say have gravitated toward competitors offering fresher ingredients and custom-made meals. Young customers, in particular, have turned to so-called fast-casual restaurants, including places that serve gourmet, customizable burgers.

Mr. Easterbrook, who describes himself as an "internal activist" intent on challenging "legacy" thinking at the company, appointed a virtual outsider to fill the role Mr. Andres is vacating. Chris Kempczinski, former president of Kraft Foods Group Inc.'s international business, joined McDonald's last year as executive vice president of strategy, business development and innovation. Some former McDonald's executives say it is unusual for a noncompany veteran to hold such a high post at a company known for its deep bench of internal talent. McDonald's normally promotes from within.

The top executives who had reported directly to Ms. King and Mr. Hess now will report directly to Mr. Kempczinski, who will become McDonald's USA president on Jan. 1, the McDonald's spokeswoman said. Charlie Robeson will take on expanded responsibilities as U.S. chief restaurant officer, overseeing operations of McDonald's company-owned restaurants, franchising and restaurant modernization.

Mr. Easterbrook's plans to change perceptions of the burger giant also include switching to cage-free eggs and chicken free of certain antibiotics, as well as removing preservatives from menu items including Chicken McNuggets.

Mr. Easterbrook is also cutting costs and selling more restaurants to franchisees. He said last year McDonald's will cut $500 million in annual general-and-administrative costs by 2018 and sell 4,000 restaurants to franchisees by that time.

He is also moving the company's headquarters to downtown Chicago from its longtime home in suburban Oak Brook, Ill.

"The move downtown is representative of a dramatic change. Oak Brook is in our DNA," said one of the people familiar with the executive changes. "I look forward to seeing Steve continue to shake things up. It creates some angst, but I think it's what is needed."

Write to Julie Jargon at [e-mail]

(END) Dow Jones Newswires

October 16, 2016 18:03 ET (22:03 GMT)

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