McDonald's Corporation

Hello, and welcome to McDonald's Second Quarter 2023 Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. Following today's presentation, there will be a question and answer session for investors. At that time, investors only may ask a question by pressing star 1 on their touchtone phone. I would now like to turn the conference over to Mr. Mike C. Plack, Investor Relations Officer for McDonald's Corporation. Mr. C. Plack, you may begin.

Good morning, everyone, and thank you for joining us. With me on the call today are President and Chief Executive Officer Chris Kempczynski and Chief Financial Officer Ian Borden. As a reminder, the forward-looking statements in our earnings release and 8-K filing also apply to our comments on the call today. Both of those documents are available on our website as are reconciliations of any non-GAAP financial measures mentioned on today's call, along with their corresponding GAAP measures. Following prepared remarks this morning, we will take your questions. Please limit yourself to one question and then reenter the queue for any additional questions. Today's conference call is being webcast and is also being recorded for replay via our website. And now, I'll turn it over to Chris.

Thanks, Mike, and good morning. Last quarter, I talked about consistency. Consistency in our numbers, consistency in the drivers of our business, and consistency in the excitement across the system about the opportunities ahead. This quarter, the theme is, well, if I'm being honest, the theme was grimace. I mean, grimace has been everywhere the past few months. All over the news and more than 3 billion views on TikTok. Not bad for a 52nd birthday. This viral phenomenon is yet another proof point of the power of marketing at McDonald's today. Aside from grimace, what really stood out about this past quarter was our continued consistency. In Q2, we delivered yet another quarter of strong performance, achieving global comparable sales of 11.7% with double-digit comparable sales across each of our segments. We're operating from a position of strength and continuing to gain share in most of our major markets despite headwinds and a challenging macro environment. The reason for this continued consistency is simple. Our Accelerating the Arches playbook is working to help create a better customer experience. Renewed focus on the fundamentals, in part fueled by the reintroduction of the PACE program, has led to operational improvements and continued increases in customer satisfaction across most of our major markets. To further strengthen our foundation of running great restaurants, we recently created a Chief Restaurant Officer role in markets to keep Our market teams focus on driving our strategic plan, execution, and performance. Market CROs will also help ensure that innovative ideas generated in local restaurants can be leveraged in markets across the globe. Our success is fueling even greater ambitions. We're continuing to double down on our existing growth pillars while evolving our strategy through accelerating the organization to stay front-footed with an eye towards the future. As we've previously shared, accelerating the organization is an initiative to reimagine how we work to bring the full breadth of McDonald's skills and experiences together to come up with the best solutions that can be scaled. We're bringing this to life through one McDonald's way, horizontal ways of working, and digitizing the organization. While we're just beginning to change our ways of working, we're already seeing early benefits. I've often said that the next great solution will come from our markets and in our restaurants. As I recently visited markets like China, Italy, and Germany, I continue to be inspired by the entrepreneurial spirit of our system and how market teams are embracing these principles even more consistently. Visiting China truly brought to life the power of a highly digitized economy and our potential for global growth moving forward. With about 90% of our business currently coming through digital channels in that market, it was remarkable to see how the market has forged digital relationships with customers. China is also making tremendous progress in running the restaurants more efficiently, all with the use of data and technology. This will provide great learnings for the rest of our system. Our Canadian team is implementing a rigorous initiative review process to relentlessly prioritize work to actively stop projects that are less important and focus on solving the most meaningful problems for our customers. Using a new framework, the team has already cut their number of key business projects in half. We intend to learn from and scale this process to other markets as well. Additionally, our UK and Ireland team recently traveled to Germany to learn best practices from the market's best burger rollout. This is a prime example of the agile scaling of solutions and horizontal ways of working. And finally, last November, we launched our largest globally unified marketing campaign ever. Want to go to McDonald's to celebrate the FIFA Men's World Cup? We're thrilled to extend this award-winning brand platform with the FIFA Women's World Cup and write a new chapter in the story to meet this iconic cultural moment. This campaign will be brought to life in 28 markets through fully integrated social, digital, streaming, and content strategies that tap into local fan excitement. These are just a few examples of how a one McDonald's way approach to common challenges will drive greater connectivity and efficiency worldwide. Key to enabling the company's scale solutions with speed and agility is the work of our new Global Business Services Business Unit, or GBS. GBS will unlock further efficiencies and capabilities of our people and resources. We will do this by developing digital tools for the organization, making data and insights more accessible across the system, and growing our future talent pipelines. We'll continue to keep you updated on how our ongoing investment in this area will benefit the enterprise in the years to come. In addition to our accelerating the organization efforts, we're also focused on evolving our approach to capturing incremental customer visits. Central to that is restaurant development, also known as our fourth D. Our strong performance and strength of our brand has earned us the right to begin accelerating the pace of restaurant openings in our major markets over the next several years. While our primary focus is on opening traditional units, we are always testing and learning new ways to meet the needs of our customers. One example is the takeaway-only restaurant in Fort Worth, Texas that opened in 2022. The restaurant site is considerably smaller than a traditional restaurant and, as the way customers order and receive their food has changed dramatically over the past few years, is geared toward customers based on their needs state wherever they are. Another recent example of innovation I was able to see firsthand during my visit to China is the use of food lockers at busy locations with high in-store traffic. Upon arrival, delivery couriers can quickly unlock the designated locker and grab the customer's order without even entering the restaurant, removing friction for both the kitchen and the courier. And our new business ventures team is in the process of developing a new concept we will call Cosmics, which we will test in a small handful of sites in a limited geography beginning early next year. Cosmics is a small format concept with all the DNA of McDonald's, but its own unique personality. We look forward to providing you with more information about our development plans and new format innovations at our investor day at the end of the year. Finally, before I hand it to Ian, I want to recognize our teams and business partners in France who have handled the unrest in the market with remarkable strength and grace. It has been extremely disruptive to the business on top of an already challenging operating environment. Thanks to everyone connected to McDonald's France for your dedication and commitment to the business as well as your efforts to keep everyone safe during this volatile time. I'll now turn it over to Ian.