McDonald's Closing 175 Restaurants
From Associated Press
CHICAGO -- McDonald's Corp. announced today that it will cease or restructure operations in seven Middle Eastern and Latin American nations, eliminate up to 600 jobs and close about 175 restaurants in 10 other countries.
The Oak Brook, Ill.-based company is struggling with a crowded restaurant market, complaints about poor service and a depressed stock price. McDonald's says it expects the moves to reduce its fourth quarter pretax income by 0 million to 5 million, most of which will be non-cash.
"These actions are the right things to do for McDonald's shareholders, the brand and our business," said chairman and CEO Jack Greenberg. "We remain focused on growing our existing restaurants' sales and we're committed to making the changes necessary to succeed in the challenging worldwide economic and competitive environments in which we operate."
McDonald's shares fell 9 percent, or .81, to .50 each in midday trading on the New York Stock Exchange.
The company did not name the seven countries in which it will cease or restructure operations beyond saying they are located in the Middle East and Latin America. It said the decision to abandon three markets was driven by the lagging return of investment.
In the four markets in which it will restructure its operations, McDonald's will transfer restaurant ownership to development licensees. Under that structure, McDonald's will receive a royalty based on percentage of sales.
McDonald's says of the jobs it will eliminate, 200 to 250 are based in the United States. These reductions will be achieved in part through attrition and the elimination of open positions, the company said.
McDonald's and its more than 13,300 U.S. stores lead Burger King and Wendy's with 43 percent of the quick-service hamburger market, according to data compiled by Chicago-based Technomic Inc. It operates more than 30,000 restaurants worldwide.
Systemwide sales totaled .5 billion for October and .5 billion for the first ten months of 2002, a 2 percent increase from the same period last year, according to the company.