Search transcript
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0:2020 secondsPlease welcome vice president of investor relations Dexter Kong Ble.
0:3232 secondsGood morning and welcome to a McDonald's 2026 investor day. Thank you to everyone for joining us whether here at our
0:3939 secondsheadquarters in Chicago or via our liveream. Just a couple of housekeeping items before we get started. As many of
0:4646 secondsyou are aware, we issued a press release this morning summarizing highlights from today's presentation. We'll post key slides from the presentation on our
0:5454 secondswebsite. Also, please note that the forward-looking statements in our press release and AK filing also apply to our comments in the presentation today.
1:041 minute, 4 secondsThose documents will be available on our website, as will reconciliations of non-GAAP financial measures in today's presentation along with their
1:121 minute, 12 secondscorresponding gap measures. Now, this morning, we'll take you through our strategy to drive growth and productivity. We'll then close out our
1:191 minute, 19 secondswebcast with a Q&A session. And with that, we're ready to begin.
1:241 minute, 24 secondsPlease welcome McDonald's chairman and CEO Chris Kimchinsky.
1:351 minute, 35 secondsGood morning everyone. On behalf of the global senior leadership team, welcome to McDonald's investor day. We've got an
1:421 minute, 42 secondsexciting day planned. I also hope you're hungry. We're going to start this morning in Chicago at our headquarters
1:491 minute, 49 secondswhere Speedy Labs, our global innovation center, tested and validated many of the ideas you're going to hear about today.
1:571 minute, 57 secondsDuring lunch, our guests joining in person will taste new and upgraded menu items. And afterwards, we're going to head to a top secret warehouse location
2:062 minutes, 6 secondsto show you the McDonald's restaurant of the future.
2:102 minutes, 10 secondsWe'll end the day back here at our headquarters with a reception featuring some of our key leaders from around the world.
2:172 minutes, 17 secondsThroughout it all, you'll be hearing about McDonald's next. Our plan to unlock the next chapter of growth and productivity to drive system and
2:262 minutes, 26 secondsshareholder returns. A strategic plan to further separate McDonald's from the rest of the industry.
2:342 minutes, 34 secondsWe've set our ambitions high because McDonald's is a company like no other.
2:392 minutes, 39 secondsEvery day we serve more than 70 million customers. Our menu is iconic, reflected by our 17 billion dollar brands. Nearly
2:482 minutes, 48 seconds220 million customers regularly use our app and participate in our loyalty program, making it one of the largest in
2:562 minutes, 56 secondsthe world. This provides us with more data and better insights than anyone else, an asset particularly valuable for training new AI capabilities.
3:053 minutes, 5 secondsWe have unrivaled buying power across our supply chain. And of course, our financial strength enables us to make big bets.
3:143 minutes, 14 secondsAfter more than 70 years, the McDonald's brand has remained as vibrant as ever.
3:193 minutes, 19 secondsAnd as you'll hear today, our opportunities are massive. Our founder, Ray Croc, he had a great line which
3:263 minutes, 26 secondscaptured the restless ambition of our system. If you're not green and growing, you're ripe and rotting. Ray had a point
3:353 minutes, 35 secondsand that mindset has shaped McDonald's for generations. We never stood still and today is no different.
3:433 minutes, 43 secondsThat's exactly what we've done throughout our history. But to understand where we're going, it's important to reflect on where we've been.
3:523 minutes, 52 secondsSix years ago in 2020, we launched Accelerating the Arches. The strategy was born out of the challenges and opportunities posed by the global co and
4:014 minutes, 1 secondpandemic along with conditions unique to McDonald's.
4:044 minutes, 4 secondsWe focused our system on our three growth pillars, our MCDs as we called them. First was to maximize our
4:114 minutes, 11 secondsmarketing. We own one of the world's most valuable brands and we saw a big opportunity to better connect our brand to culture which we did through highly
4:204 minutes, 20 secondssuccessful campaigns like famous orders and partnerships like Minecraft. Second was to commit to our core menu.
4:284 minutes, 28 secondsThis would simplify operations and reenter our marketing investment against our most beloved equities. Since we made
4:354 minutes, 35 secondsthat commitment, we've grown core menu sales more than 50% and in the US gained significant share in beef and chicken.
4:444 minutes, 44 secondsAnd third was to double down on the 4Ds of drive-thru delivery, digital, and development. We anticipated that customers would increasingly favor
4:534 minutes, 53 secondstakeaway service channels and the phone would become the starting point for more orders. And today, sales initiated on
5:015 minutes, 1 secondthe phone represent about 40% of total systemwide sales across our top five markets. And after years of limited new
5:095 minutes, 9 secondsrestaurant growth in our own markets, we also saw the opportunity to accelerate our pace to fill in seams where we're underpenetrated.
5:175 minutes, 17 secondsSince then, we've added more than 6,000 restaurants, the fastest pace in our history, with more to come on our way to 50,000 restaurants.
5:275 minutes, 27 secondsThe strategy worked and shareholders were rewarded. McDonald's stock has outperformed our peers with less risk than the sector overall. And even as we
5:365 minutes, 36 secondsstepped up our investment in the business, we continued to return significant cash to shareholders. Since
5:435 minutes, 43 seconds2020, we've delivered $ 24 billion in dividends and 14 billion in share repurchases.
5:515 minutes, 51 secondsFew companies offer McDonald's combination of growth, stability, and cash returns. It's our secret sauce and one we guard zealously.
6:016 minutes, 1 secondBut beyond the headline numbers, something else was happening inside of McDonald's. Arguably, something even more profound. We were transforming the company for our digital first future.
6:126 minutes, 12 secondsInternally, our mantra was perform and transform.
6:166 minutes, 16 secondsOur legacy technology infrastructure was outdated, inefficient and unstable.
6:216 minutes, 21 secondsHundreds of finance and HR systems, every country on its own app, data puddles instead of data lakes.
6:286 minutes, 28 secondsTechnology wasn't an enabler, it was a handicap. So too was our structure.
6:336 minutes, 33 secondsBusiness functions including menu, restaurant design, pricing analytics, indirect procurement, and consumer insights were all decentralized.
6:436 minutes, 43 secondsWe've done the hard work to restructure our company and establish one McDonald's way of operating to better leverage our
6:506 minutes, 50 secondssize and scale. This includes common technology platforms, a single enterprise data foundation, operating
6:576 minutes, 57 secondssystems and capabilities that can be deployed across more than 46,000 restaurants. that enables us to identify
7:047 minutes, 4 secondsopportunities faster, test them rigorously, and deploy what works more efficiently.
7:107 minutes, 10 secondsThat's just one example of how we can use our unmatched scale as a competitive weapon.
7:177 minutes, 17 secondsWhich brings us to McDonald's next. The advantages and capabilities that we've built along with our financial strength
7:247 minutes, 24 secondsposition us to grow in the areas of greatest opportunity at a time when customer expectations are once again
7:317 minutes, 31 secondsshifting and industry dynamics will remain challenging.
7:367 minutes, 36 secondsCustomers want value, but they also want great taste and quality. Bargaining is becoming more personal, more
7:437 minutes, 43 secondsparticipatory, and more driven by direct customer relationships.
7:487 minutes, 48 secondsWith new service channels, restaurants are becoming more complex to run and AI is changing how businesses operate and customers engage.
7:587 minutes, 58 secondsAt the same time, the industry growth algorithm is changing. We expect industry traffic growth in our wholly
8:058 minutes, 5 secondsowned markets will be flat while inflation remains elevated.
8:108 minutes, 10 secondsFor McDonald's to succeed in that environment, growth must come from capturing greater share.
8:178 minutes, 17 secondsAs you drive traffic, you get operating leverage and margins grow. But you can't count on traffic alone to drive margin
8:258 minutes, 25 secondsexpansion. It must also come from operating more productively.
8:308 minutes, 30 secondsThe winners will be the companies that create more demand and deliver it more efficiently.
8:368 minutes, 36 secondsThat makes two priorities critical to generating strong shareholder returns. Share gains and productivity.
8:458 minutes, 45 secondsWe must be the first choice for more customers more often. And to create the capacity to keep investing behind that
8:538 minutes, 53 secondsgrowth, we need to unlock new levels of productivity across the system. That's McDonald's. Next, growth and
9:019 minutes, 1 secondproductivity, two sides of the same coin.
9:069 minutes, 6 secondsWe will elevate the taste, quality, and customer experience to earn more first choice visits. More first choice visits
9:149 minutes, 14 secondscreate guest count growth. Higher guest counts and greater productivity together improves restaurant economics.
9:229 minutes, 22 secondsStronger economics create the capacity to reinvest. And reinvestment makes the next turn of McDonald's growth and productivity engine stronger.
9:339 minutes, 33 secondsOur ability to make that engine stronger comes from our scale. And the four pillars of Next each leverage the power of our scale to capture opportunities few others can match.
9:459 minutes, 45 secondsMenu next creates more reasons to choose McDonald's.
9:499 minutes, 49 secondsOur focus is taste and quality across the categories with the greatest opportunity, chicken, beverages, and
9:569 minutes, 56 secondsbeef. We'll elevate the menu choices customers already love. Innovate where we see unmet demand. and leverage newly
10:0410 minutes, 4 secondsbuilt category capabilities to earn share. The outcome is stronger preference, more first choice visits, and guest count growth.
10:1310 minutes, 13 secondsImportantly, as we elevate our focus on taste and quality, value remains foundational.
10:2010 minutes, 20 secondsGreat value and great test taste are not competing ideas. Customers expect both and we'll deliver it.
10:2910 minutes, 29 secondsConsumer Next turns that preference into more demand. Through loyalty, personalization, partnerships, and a
10:3610 minutes, 36 secondsdeeper understanding of our customers will build increased frequency and create demand that drives more visits over time.
10:4610 minutes, 46 secondsRestaurant next catalyzes growth and fuels productivity. By simplifying operations, modernizing restaurant
10:5310 minutes, 53 secondsdesign, and deploying AI enabled tools at scale, we'll improve execution, strengthen restaurant economics, and unlock restaurant level efficiency.
11:0411 minutes, 4 secondsAnd people next turns our people advantage into hospitality at scale.
11:0911 minutes, 9 secondsBetter train, better equipped teams create better customer experiences.
11:1411 minutes, 14 secondsHospitality and better customer experiences strengthen preference, drive repeat visits and reinforce our growth
11:2111 minutes, 21 secondsand productivity. Agen engine across all four four pillars. AI serves as an accelerator helps us understand
11:3011 minutes, 30 secondscustomer behavior, innovate faster, simplify operations, and make better decisions at scale.
11:3811 minutes, 38 secondsBringing McDonald's next to life across our system requires a shared commitment to the customer experience.
11:4511 minutes, 45 secondsWe call it Make It Golden. It's our multi-year systemwide commitment to elevate the customer experience through
11:5211 minutes, 52 secondsgreat food and great hospitality that are uniquely McDonald's calls on every supplier, franchisee, and employee to
12:0012 minutesmake each visit worthy of the golden arches.
12:0412 minutes, 4 secondsThroughout the day, you'll see how Make It Golden supports growth and productivity across our strategy
12:1212 minutes, 12 secondsand McDonald's. Next will be deployed with discipline. Some improvements can begin now through stronger execution.
12:1912 minutes, 19 secondsOthers will build as technology, restaurant readiness, and economics support them. We'll sequence the work by market with a clear focus on franchisee capacity and returns.
12:3312 minutes, 33 secondsWe've spent the last six years building new capabilities. Now it's time to put them to work. The industry is changing.
12:4112 minutes, 41 secondsThe companies that will win will be the ones that create more demand and deliver it more efficiently.
12:4812 minutes, 48 secondsWe believe McDonald's is built for that environment. Our scale gives us better insight, stronger economics, and the
12:5512 minutes, 55 secondsability to deploy what works faster and more effectively than anyone else in the industry.
13:0113 minutes, 1 secondThat's what our strategy is designed to do. Make McDonald's the first choice for more customers more often and turn that
13:0813 minutes, 8 secondschoice into higher guest counts, stronger restaurant economics, and long-term shareholder value.
13:1613 minutes, 16 secondsLet me close with highlights of our McDonald's next commitment.
13:2013 minutes, 20 secondsOver the next few years, you'll see the biggest upgrade to the taste and quality of our menu in McDonald's history, driving one and a half share points of
13:2913 minutes, 29 secondsgain in both chicken and beverages while maintaining our strong leadership in beef.
13:3613 minutes, 36 secondsYou'll see us deliver about 250 basis points of gross restaurant level efficiency as McDonald's next elements
13:4313 minutes, 43 secondsare deployed across our wholly owned markets.
13:4713 minutes, 47 secondsand you'll see operating margins reach the low to mid50% range by 2030.
13:5313 minutes, 53 secondsThroughout the day, we'll show you exactly how we intend to do this. For those joining in person, we'll follow the live stream program with rotations
14:0114 minutes, 1 secondthat go deeper into the capabilities and experiences behind Next.
14:0814 minutes, 8 secondsThe last chapter was about strengthening McDonald's and building new capabilities. The next chapter is about putting those capabilities to work.
14:1714 minutes, 17 secondsUsing our scale to create more demand, using productivity to create greater capacity to invest, and making McDonald's the first choice for more
14:2614 minutes, 26 secondscustomers more often. That's McDonald's next. To begin, I'll hand it over to our global chief restaurant experience
14:3314 minutes, 33 secondsofficer, Jill McDonald, to show how menu next will create more reasons for customers to choose McDonald's. Jill.
14:4914 minutes, 49 secondsThanks, Chris. And uh it's great to be with all of you today. Since 2020, our
14:5514 minutes, 55 secondsfocus on our 17 billion equities has helped grow sales of our iconic core
15:0215 minutes, 2 secondsmenu by more than 50% to almost $90 billion. And we see more opportunity ahead.
15:1115 minutes, 11 secondsWe compete in three categories that account for the vast majority of our business. Beef, chicken, and beverages.
15:1915 minutes, 19 secondsAnd in 2025, across our top 10 markets in aggregate, these categories in the informal eating out sector remain sizable and growing.
15:3015 minutes, 30 secondsWe are global leaders by a wide margin in beef with more than 40% share in a $50 billion category that is growing
15:3915 minutes, 39 secondsaround 3% a year. Chicken is a nearly $130 billion category growing more than
15:4715 minutes, 47 seconds5% a year. We have a high teens market share and are category leaders in most of our largest markets.
15:5615 minutes, 56 secondsAnd beverage is a nearly $230 billion category, growing faster than the overall informal eating out market. And we have share in the high single digits.
16:0716 minutes, 7 secondsWe are the second largest coffee player globally.
16:1116 minutes, 11 secondsOne category where we've led for decades, two where we don't yet have our fair share. All three are growing.
16:2016 minutes, 20 secondsNow menu. Next is our share gain strategy to capture that growth.
16:2716 minutes, 27 secondsTaste and quality are two of the top three drivers of customer choice. And when perceptions improve, share follows.
16:3716 minutes, 37 secondsFor example, a fivepoint increase in customer perception of great tasting chicken translates to more than half point of share gain in chicken.
16:4716 minutes, 47 secondsImproving taste and quality is a meaningful driver of growth.
16:5316 minutes, 53 secondsJust over a year ago, we put specialized category teams behind beverages, chicken, and beef. Each owning insights,
17:0117 minutes, 1 secondmenu, operations, supply chain, and marketing behind one objective, category growth from being the first choice for more customers.
17:1317 minutes, 13 secondsAnd two plans run through each category.
17:1817 minutes, 18 secondsGold standard execution elevates the iconic equities millions of customers already love to unlock their full potential.
17:2717 minutes, 27 secondsMenu innovation adds new occasions, new choices, and more reasons to visit.
17:3517 minutes, 35 secondsNow, let's start with chicken. It's the fastest growing in uh category in IEO.
17:4017 minutes, 40 secondsWe have strong foundations of equities that we're leveraging as growth platforms.
17:4617 minutes, 46 secondsChicken McNuggets represents nearly $15 billion in annual systemwide sales. The Mc Krispy platform, more than two half
17:5517 minutes, 55 secondsbillion, and the McChick nearly $4 billion.
18:0018 minutesNow, let me tell you about how we'll make our more than $30 billion global chicken business even bigger.
18:0818 minutes, 8 secondsFirst, gold standard chicken applies what we've learned from billions of servings to make our chicken even
18:1618 minutes, 16 secondsbetter. That includes small sounding changes such as optimizing cook times, calibrating fryer settings, and
18:2418 minutes, 24 secondsadjusting oil volumes. Changes that when applied across our scale have a significant impact.
18:3218 minutes, 32 secondsDeployment of gold standard chicken across our top six markets has begun and will be complete in 2027.
18:4118 minutes, 41 secondsSecond, we're expanding our strongest chicken platforms. A significant portion of our chicken headroom sits in pieces,
18:5018 minutes, 50 secondsstarting with chicken McNuggets, a platform that has grown nearly 40% over the last five years.
18:5718 minutes, 57 secondsWe'll build on that momentum by expanding the platform through new flavors, signature sources, product extensions, and cultural activations.
19:0819 minutes, 8 secondsThird, we're innovating to expand our presence across more chicken categories.
19:1319 minutes, 13 secondsWe'll build on the momentum of Mc Krispie by continuing to introduce new options of our Mc Krispie sandwich, scaling the strips made with a new
19:2219 minutes, 22 secondsrecipe already deployed in the US, extending the successful Mc Wings platform into additional markets, and
19:2919 minutes, 29 secondsintroducing grilled chicken sandwiches and wraps to meet growing demand for high protein options. And you'll hear
19:3619 minutes, 36 secondsmore from Sky about that in just a few minutes.
19:4019 minutes, 40 secondsFourth is hand breading. A significant opportunity to upgrade taste and quality. Across 10,000 restaurants in
19:4919 minutes, 49 secondsAsia, we have built meaningful expertise in handbredded chicken. In China and Malaysia, we are now the market leader
19:5819 minutes, 58 secondsfor great tasting chicken and are growing chicken sales and share.
20:0420 minutes, 4 secondsTaking learnings from these international developmental licensed markets, we have been operationally piloting a handbredded chicken portfolio
20:1320 minutes, 13 secondsin a handful of restaurants in Chicagoland.
20:1620 minutes, 16 secondsCustomer feedback has been fantastic with double-digit increases in chicken taste and quality scores, and we are now
20:2520 minutes, 25 secondsexpanding handbredded chicken to more pilots supported with advertising in both the US and Ireland in 2027.
20:3520 minutes, 35 secondsTogether, these efforts will drive more first choice occasions, guest counts, and drive about a point and a half of share growth in chicken by 2030.
20:4820 minutes, 48 secondsNow, let's talk about beverages, one of the most attractive demand spaces. A few years ago, we saw increasing demand in
20:5620 minutes, 56 secondsthe fast growing subcategories of cold coffee, refreshers, crafted sodas, and energy.
21:0421 minutes, 4 secondsthrough learnings from Cosmix, the rigor of advertised sales tests, and deployments in these new beverage spaces
21:1121 minutes, 11 secondsthat are now live across nearly 18,000 restaurants. We've built, validated, and scaled a new multi-year growth platform.
21:2221 minutes, 22 secondsThese great tasting new beverages combined with McDonald's unbeatable speed, value, convenience, and our loved
21:3121 minutes, 31 secondsfood is proving to be a compelling customer proposition.
21:3521 minutes, 35 secondsBeverages are no longer just an add-on, but a reason to visit. More than half of beverageled visits come after lunch,
21:4321 minutes, 43 secondsopening an incremental occasion for McDonald's at a time of day where restaurants have higher capacity.
21:5021 minutes, 50 secondsaverage check is approximately 50% higher because people are pairing fries or a burger with their drink.
21:5921 minutes, 59 secondsWe see high repurchase intent and improved perception of McDonald's having a wide range of great tasting beverages.
22:0822 minutes, 8 secondsSustaining volumes are due in part to customers exploring the entire range of loyalty members who purchased a
22:1522 minutes, 15 secondsspecialtity beverage in the first six weeks. nearly half returned for a specialtity beverage from a different subcategory by week 12 across all
22:2422 minutes, 24 secondsmarkets and it's high margin and it's coupled with low complexity which our restaurant teams have embraced.
22:3322 minutes, 33 secondsImportantly, these drinks are overindexing with Gen Z, giving the next generation more reasons to visit McDonald's.
22:4222 minutes, 42 secondsLet me tell you how we're going to build on that momentum. First, we'll continue expanding the platform through new
22:4922 minutes, 49 secondsflavors and recipes. And we'll also keep scaling to more restaurants, including most markets in Europe in the first half
22:5722 minutes, 57 secondsof 2027 and expansion across more international developmental licensed markets throughout 2027.
23:0723 minutes, 7 secondsSecond, we know for many customers, a first choice occasion starts with a great cup of coffee. Gold Standard
23:1523 minutes, 15 secondsCoffee focuses on enhancing the taste of all 8 million cups of coffee we serve a day through fresher beans, new recipes,
23:2523 minutes, 25 secondsand upgraded equipment. New espresso machines in the US will give customers more ways to personalize their coffee, including alternative milk choices.
23:3623 minutes, 36 secondsGold standard coffee will be deployed in most of the international operated markets by the end of this year and
23:4323 minutes, 43 secondscontinue to deploy in China, the US, and additional markets in 2027.
23:5123 minutes, 51 secondsTogether, expanding our beverage platforms and elevating our coffee experience will earn us status as the
23:5823 minutes, 58 secondsfirst choice for more of our customers around the world, which will drive more guest counts. And that's how we'll add
24:0524 minutes, 5 secondsabout one and a half points in beverage share by 2030.
24:1124 minutes, 11 secondsNow, let's talk about beef, which 70 years later remains at the heart of our brand. We have four billion dollar beef
24:2024 minutes, 20 secondsassets. Big Mac, Quarter Pounder, McDouble, and the Big Tasty with generations of customer trust and
24:2824 minutes, 28 secondsloyalty. And we're bu building the next big equity with big arch.
24:3424 minutes, 34 secondsOur opportunity is turning these equities into even bigger growth engines and extending that strength into large
24:4124 minutes, 41 secondsburgers, the fastest growing subcategory.
24:4524 minutes, 45 secondsFirst, gold standard beef builds on the success of best burger, which drove a 1 to 2% lift in sales in the US 6 months after it launched.
24:5724 minutes, 57 secondsWe're now making great execution easier and more consistent across the system with updated procedures and a new
25:0525 minutes, 5 secondsdedicated training program starting in 2027.
25:1025 minutes, 10 secondsSecond, as we already have in the US, we are exploring fresh beef quarter pound patties and hot off the grill preparation in more markets.
25:2025 minutes, 20 secondsThird, we're looking to add more choice in beef for those seeking more flexibility in portion sizes, for example, a burger bowl.
25:3025 minutes, 30 secondsAnd fourth, we're leveraging the full potential of our $5.5 billion quarter pounder equity and expanding in large
25:3825 minutes, 38 secondsburgers with big arch and double quarter pounders.
25:4325 minutes, 43 secondsNow the quarter pounder consistently outperforms the competition in the US on value for money and repurchase intent
25:5225 minutes, 52 secondsand Australia shows what's possible when we make quarter pounder the center of innovation and marketing.
26:0026 minutesthere. QPC contributed more than 5% of sales in the initial launch window, significantly outperforming previous
26:0926 minutes, 9 secondsbeef LTO's, which contributed closer to 1% of sales. We've seen the strongest results when we invest consistently
26:1826 minutes, 18 secondsbehind quarter pounder through taste and quality, relevant innovation, and sustained marketing support.
26:2626 minutes, 26 secondsWe plan to share a broader pantry of QPC innovations across markets along with greater freedom to develop locally relevant flavor and variety extensions.
26:3926 minutes, 39 secondsAs customers move from a single to a double, QPC strengthens average spend and creates a natural pathway into large burgers.
26:5026 minutes, 50 secondsWe are leveraging our global system to accelerate double QPC innovation and bringing new recipes to extend the Big
26:5726 minutes, 57 secondsArch platform which has delivered lifts to sales and higher guest counts upon launch, strengthening our ability to win more first choices in large burgers.
27:0927 minutes, 9 secondsWe already lead the world in burgers.
27:1327 minutes, 13 secondsTogether, these moves will strengthen preference, increase frequency, and earn us more first choice occasions across
27:2027 minutes, 20 secondsthe category. And that's how we maintain our market leading share in beef.
27:2727 minutes, 27 secondsNow, to tell you more about how we're futureproofing our menu, I'm going to turn it over to president of McDonald's USA, Sky Anderson.
27:4527 minutes, 45 secondsThanks, Jill. It's great to be here with all of you today. Over the last several months, I've invested a lot of time back
27:5227 minutes, 52 secondsin our US restaurants from Sacramento to New York City to Omaha and Dallas. There
27:5927 minutes, 59 secondsis tremendous belief in this brand and our future. But there's also a recognition that winning requires us to
28:0628 minutes, 6 secondsbe more focused, disciplined, and foster.
28:1028 minutes, 10 secondsAnd that's why I keep coming back to two simple questions. How does this serve our customers better? And how does this help our restaurants win?
28:2028 minutes, 20 secondsOur delicious food is a big part of what made McDonald's famous in the first place. And while there's so much our
28:2728 minutes, 27 secondscustomers love, we are falling short when it comes to consistent execution. We're tackling that challenge head on.
28:3628 minutes, 36 secondsAnd that means active conversations with owner operators, suppliers, and employees about what's working and what's not.
28:4528 minutes, 45 secondsdedicated taste and quality training and removing distractions at the restaurant level so our crew can execute every order to the gold standard.
28:5628 minutes, 56 secondsAt the same time, you'll see us put greater emphasis behind the care and preparation of the food itself in our marketing.
29:0429 minutes, 4 secondsOur ambition is to strengthen the core reasons customers choose McDonald's in the first place and build the kind of
29:1129 minutes, 11 secondssustainable baseline growth that creates long-term value.
29:1729 minutes, 17 secondsAnd that's an approach we'll take with new innovation to futureproof our menu.
29:2229 minutes, 22 secondsWe're strengthening our category plans and making deliberate investments in the things our customers value most.
29:3029 minutes, 30 secondsWe've been closely monitoring adoption, behavior shifts, and many preferences, including the rise of GLP-1 medications.
29:4029 minutes, 40 secondsIn the US, approximately 10% of adults use GLP-1s.
29:4429 minutes, 44 secondsAnd of those households with GLP-1 users, guess how many visit McDonald's? 84%.
29:5329 minutes, 53 secondsLet me say that again. 84% of households with GOP1 users visit McDonald's.
30:0130 minutes, 1 secondThis is an opportunity.
30:0330 minutes, 3 secondsWe don't need to win a new base of customers into McDonald's. Instead, we need to keep giving them more reasons to
30:1030 minutes, 10 secondsmake McDonald's their first choice as their eating habits evolve. They want more protein, greater portion
30:1830 minutes, 18 secondsflexibility, and food that leaves them feeling satisfied without feeling like too much. Our menu already gives
30:2630 minutes, 26 secondscustomers built-in choice. They can choose the protein, the portion, and the format that fits the moment. And we see that reflected in behavior.
30:3630 minutes, 36 secondsHouseholds with GP1 users are increasingly choosing some of our strongest equities, including chicken McNuggets, filet of fish, and happy
30:4530 minutes, 45 secondsmeals that combine protein and portion flexibility.
30:5230 minutes, 52 secondsThis trend extends beyond GLP-1 users, way beyond.
30:5730 minutes, 57 secondsSo, while there's roughly 30 million GLP1 users in the US today, there are nearly 60 million Americans who are
31:0531 minutes, 5 secondsactively seeking more protein in their diet. That broader protein seeking audience creates a much larger growth opportunity.
31:1531 minutes, 15 secondsMcDonald's has a strong right to win in protein-led categories including grilled chicken, chicken bowls, protein forward
31:2331 minutes, 23 secondsbreakfast and snack wraps. And our approach is balanced, tasteled, protein
31:3031 minutes, 30 secondsforward innovation with disciplined deployment. All calibrated to minimize complexity in our restaurants.
31:3931 minutes, 39 secondsWe're exploring bowls, grilled chicken, and egg bites to expand protein forward options across breakfast, lunch, and dinner.
31:4831 minutes, 48 secondsSuch opportunities bring together what these customers want most, great taste, the protein they're seeking, and flexibility.
31:5731 minutes, 57 secondsSo, you'll all get to taste and learn more about some of these uniquely McDonald's solutions at our rotations later today.
32:0532 minutes, 5 secondsWe already have the customers. We already have the protein credentials, portion flexibility, and scale to set us
32:1332 minutes, 13 secondsup to win as taste change. Now, we're building on those advantages to create more reasons to visit McDonald's more
32:2132 minutes, 21 secondsoften. I'm going to turn it back over to Jill to close out menu next.
32:3132 minutes, 31 secondsThanks, Sky.
32:3432 minutes, 34 secondsNew gold standard moves across chicken, beef, and coffee. Further elevating our billion-dollar equities,
32:4232 minutes, 42 secondsexpanding our chicken portfolio, deploying new Mc Krispy strips, and bringing Mcwings to more markets, adding
32:5032 minutes, 50 secondsinterest and relevance to chicken McNuggets with new flavors and sauces, and bringing handbredded chicken to more markets beyond Asia.
32:5932 minutes, 59 secondsA baseline building new cafe beverage platform now scaling globally. New recipes, flavors and line extensions for
33:0733 minutes, 7 secondsQPC, double QPC and Big Arch and more protein options in beef, chicken and beverages with greater for portion flexibility.
33:1733 minutes, 17 secondsAll led by specialized teams obsessed with growth in our largest categories.
33:2333 minutes, 23 secondsAnd when we combine taste with McDonald's advantages in value, convenience, speed, and scale, we drive
33:3133 minutes, 31 secondsmore first choice visits for more customers. Increase guest counts and share follow.
33:3833 minutes, 38 secondsOur menu gives customers more reasons to choose McDonald's. Consumer Next turns that reason into more visits. to share
33:4733 minutes, 47 secondsmore. I'll hand it over to our global chief marketing officer and head of new business ventures, Morgan Flattley.
33:5733 minutes, 57 seconds[music]
34:0034 minutesThank you. Good morning, everyone.
34:0434 minutes, 4 secondsSo, to win in the environment Chris laid out for us earlier today, we need to be the first choice for more customers more often.
34:1534 minutes, 15 secondsConsumers Next is our strategy to convert our customer relationships into more visits.
34:2234 minutes, 22 secondsNow, we start with an advantage that no one else has. Our iconic brand and unmatched fandom.
34:3134 minutes, 31 secondsMcDonald's captures approximately 40% of positive brand mentions on social across
34:3834 minutes, 38 secondsthe leading QSR brands. That's more than our next three competitors combined.
34:4534 minutes, 45 secondsThis is not an audience we have to buy our way into. We've already got them. They're ours.
34:5334 minutes, 53 secondsThese fans are the foundation of our new marketing model, which includes engaging them in big global moments and building deeper individual relationships.
35:0635 minutes, 6 secondsSo, we're evolving exactly how we build our brand to be more efficient and effective at moving culture to support customers, making us their first choice.
35:1935 minutes, 19 secondsFirst, big globally scaled campaigns that are purposefully designed to be carried by fans and creators.
35:2835 minutes, 28 secondsWhen fans amplify our campaigns, it's more effective because their voices are more trusted.
35:3535 minutes, 35 secondsBut better yet, when our fans produce and spread content, less paid media is required to reach the same audiences.
35:4535 minutes, 45 secondsSecond, our campaigns will be built on McDonald's collection of iconic IP, not someone else's. This makes our marketing
35:5435 minutes, 54 secondsmore distinct, more ownable, and baseline building for McDonald's.
36:0036 minutesAnd third, a simplified marketing calendar with fewer but bigger ideas.
36:0736 minutes, 7 secondsWe're roughly doubling our investment in longerrunning baseline building programs focused on core credentials like our
36:1636 minutes, 16 secondsbrand taste and quality and value while reducing the number of short-term promotional campaigns.
36:2436 minutes, 24 secondsIt's simpler for our crew and it's clearer and more consistent for our customers.
36:3136 minutes, 31 secondsManu Styart, president of International Operated Markets, is going to share how this evolution is already coming to life.
36:4536 minutes, 45 secondsThank you, Morgan. [music] Morning, everyone.
36:4836 minutes, 48 secondsSo, our international operated market segment spans 19 markets. It's more than 10,000 restaurants and it represents over 50% of total systemwide revenue.
37:0037 minutesNow, great ideas can start anywhere in our system. Our scale turns a local insight into global demand.
37:1037 minutes, 10 secondsSo, our recent global menu heist campaign shows how that works.
37:1537 minutes, 15 secondsOne thing we know about McDonald's fans is when they travel, they go to the local McDonald's and they love to show us what they found.
37:2437 minutes, 24 secondsWe turn that energy into a traffic driving program built around our own iconic local menu with a simple invitation for fans to join the heist.
37:3537 minutes, 35 secondsLet's take a look. McDonald's fans, brace yourselves. Everyone is going nuts. It's the biggest heist of the year.
37:4337 minutes, 43 secondsEvery fan knows the only thing better than McDonald's is McDonald's in another country.
37:4637 minutes, 46 secondsThe Moroccan McDonald's. Look at the options.
37:4937 minutes, 49 secondsMcDonald's in Japan is meant to be the best in the world. Yep. McDonald's world menu envy is real. Why can't we have this?
37:5437 minutes, 54 secondsHang on. They have one over there and we don't.
37:5837 minutes, 58 secondsSo, we decided to do something about it by stealing the best of McDonald's from around the world. McDonald's World Menu Heist.
38:1138 minutes, 11 secondsNetherlands, Switzerland, Poland, Italy, Belgium, Germany, Ukraine, [music] Czech Republic, Australia.
38:1738 minutes, 17 secondsOne global heist.
38:2338 minutes, 23 secondsFirst, we dropped crates in secret locations.
38:2638 minutes, 26 secondsThere's something coming. What's in that crate?
38:2838 minutes, 28 secondsSomething big just dropped in Switzerland.
38:3038 minutes, 30 secondsFans could be the first to get their hands on the stolen goods. Voila. That's what we want. Unbelievable. And they did.
38:3938 minutes, 39 secondsCheck out what Matthew just [music] released.
38:4138 minutes, 41 secondsPart of the getaway plane in their thousands.
38:5038 minutes, 50 secondsThen the hype was at its maximum. We unleash the goods on the masses.
39:0139 minutes, 1 secondThe goods have arrived.
39:0939 minutes, 9 secondsWhen one market's campaign ended, goods were handed over to the next.
39:1539 minutes, 15 secondsCrates have arrived from Austria to Spain.
39:1739 minutes, 17 secondsWe have twoour cues in Ukraine. There is some food I need to try before it disappears. I'm running out of stock.
39:2439 minutes, 24 secondsIt's been all over my page. Teriyak chicken. A true McDonald's first.
39:3239 minutes, 32 secondsA truly global heist. McDonald's World menu.
39:4539 minutes, 45 secondsGive us our goods back.
39:4839 minutes, 48 secondsSo, as you've seen, our local social insight became a global conversation, expanding across more than 20 markets.
39:5739 minutes, 57 secondsFans shared their discoveries and did the marketing for us. We received millions of views and thousands of comments from France excited to try
40:0540 minutes, 5 secondsJapan's Mcrunchy teriyaki, Belgium's Biskoff McFlurry, and Canada's Mcshaker fries, all in one place.
40:1340 minutes, 13 secondsWe sparked searches across markets and in Italy tripled the amount of user generated fan content compared to previous campaigns.
40:2240 minutes, 22 secondsAnd importantly, we achieved incremental guest count in our restaurants and grew sales with our own equities and IP. And that's a pattern we've seen before.
40:3340 minutes, 33 secondsFans rallying around a unique brand experience like Grimace Shake, Adult Happy Meals, and Famous Order. And now
40:4140 minutes, 41 secondsit's even more powerful in tandem with menu next and more efficient.
40:4640 minutes, 46 secondsWe worked with around 10 major partners for menu heist versus the 40 that would traditionally have been used if each market had to execute locally reaching
40:5540 minutes, 55 secondsgreater scale than any market could achieve on its own. Morgan, back to you.
41:0341 minutes, 3 secondsThanks, Manu. I have to say that's such a fun example. Menu Heist really exemplifies the first part of our model.
41:1241 minutes, 12 secondsNow, let me show you the other. From moments that rally millions to one-on-one relationships between us and
41:2041 minutes, 20 secondsour fans, we can use customer intelligence to bring people back more often.
41:2741 minutes, 27 secondsIt starts with the relationships we've built. 5 years ago, we launched our loyalty program. Today, we have nearly
41:3641 minutes, 36 seconds220 million 90-day active loyalty customers, growing 45% in just the last
41:4341 minutes, 43 secondsthree years. If they were a country, it would be the seventh largest in the world.
41:5141 minutes, 51 secondsNow, our original reason for launching loyalty proved true. Active loyalty members visit us two and a half times as
41:5941 minutes, 59 secondsoften as non-members and they spend more over the course of a year.
42:0542 minutes, 5 secondsLoyalty allows us to know our customers better to deliver more meaningful value and promotions to them, but we haven't met our full potential.
42:1542 minutes, 15 secondsNot yet. Now we can with personalization.
42:2042 minutes, 20 secondsLet me tell you what we know about our loyalty customers and how we're using our customer engagement engine to earn more visits with relevant offers and experiences.
42:3042 minutes, 30 secondsOur 220 million active loyalty customers span a range of behaviors and needs. To illustrate how we use customer
42:3942 minutes, 39 secondsintelligence, let me focus on two important customer groups.
42:4542 minutes, 45 secondsFirst, we have our frequent loyalty customers who visit more than once a month. They tend to be especially
42:5242 minutes, 52 secondsmotivated by deals, events, and what's new.
42:5742 minutes, 57 secondsOur goal with frequent fans is to recognize and reward their brand love, deepening our relationships with them with more value, convenience, and access.
43:0743 minutes, 7 secondsTo do this, we plan on launching a tiered loyalty program, giving our most engaged fans even more from McDonald's.
43:1543 minutes, 15 secondsNot just savings, but offers tied to incremental occasions and trade-ups on things they like most.
43:2343 minutes, 23 secondsThis could include exclusive benefits and access to things only McDonald's can provide, like earning points faster,
43:3143 minutes, 31 secondsearly access to limited menu items and merch, or a coveted invite to a McDonald's launch event. These things really matter to them.
43:4243 minutes, 42 secondsNow, second is our casual loyalty customer who visits at least once in a 90-day window. They also care about
43:5043 minutes, 50 secondsvalue while also placing more importance on a greater experience and the familiar McDonald's favorites they crave. Our
43:5943 minutes, 59 secondsfans visiting occasionally. The goal is to bring them back with more reasons to routinely come back to McDonald's and
44:0744 minutes, 7 secondsmake them feel recognized and appreciated when they do.
44:1244 minutes, 12 secondsRather than broad discounts, this includes highly personalized experiences based on the foods, rituals, and moments that matter most to them.
44:2344 minutes, 23 secondsWe'll tailor offers to their interests.
44:2544 minutes, 25 secondsA customer who comes for breakfast might receive tailored breakfast rewards, while the family could unlock offers and
44:3244 minutes, 32 secondsexperiences designed for group occasions and even share bonus points with loved ones. will drive action that rewards one
44:4244 minutes, 42 secondsmore purchase. Tiers in gamification like personalized missions and menu discovery challenges, giving them more
44:4944 minutes, 49 secondsreasons to return with tailored benefits that are clear, concrete, and achievable.
44:5744 minutes, 57 secondsNow, what's really interesting is there's an untapped group beyond our frequent and casual loyalty customers.
45:0545 minutes, 5 secondsThey are customers who initially signed up for loyalty but haven't visited us in a few months.
45:1245 minutes, 12 secondsAt any given moment, we have roughly 150 million infrequent loyalty customers
45:1945 minutes, 19 secondsto re-engage. And our goal is to give them a reason to reconsider McDonald's.
45:2545 minutes, 25 secondsNow, this group is less likely to respond to brand merchandise exclusives or experiences. Their proposition needs to be immediate and practical.
45:3645 minutes, 36 secondsThey're activated by incentive that makes them want to re-engage like a birthday bonus or surprise rewards for coming in.
45:4545 minutes, 45 secondsIn addition, they're seeking value that extends beyond our restaurants. So, we're expanding to offer new partner benefits.
45:5445 minutes, 54 secondsStill to come this year in the US, we'll be offering Uber ride credits and Disney Plus subscriptions.
46:0146 minutes, 1 secondThis works across all cohorts to ensure McDonald's stays present in our customers lives between visits.
46:0946 minutes, 9 secondsEvolving from a points program to a partnership platform has been clearly effective for bringing customers back into our ecosystem.
46:1946 minutes, 19 secondsWe've seen that with these partners, using Germany as an example, up to 20% of the customers who participate are new or infrequent loyalty customers.
46:3046 minutes, 30 secondsPersonalized and more relevant offers, rewards, and experiences are at the heart of our customer engagement engine that builds
46:3846 minutes, 38 secondsdeeper individual relationships and earns more firstchoice visits.
46:4546 minutes, 45 secondsIt's one part of our broader revenue growth management strategy that creates value for customers and strong restaurant economics for franchises.
46:5646 minutes, 56 secondsThe other part is the everyday prices customers see on our menu boards.
47:0247 minutes, 2 secondsInformed by insights from millions of transactions and a broad range of market data, our menu pricing engine is an
47:1047 minutes, 10 secondsindustryleading tool that provides franchises with pricing recommendations down to the restaurant and item level.
47:2047 minutes, 20 secondsfranchises retain control over independent pricing decisions, but with better information.
47:2747 minutes, 27 secondsTogether, these capabilities help us continue to strengthen our value leadership and drive more visits, fueling long-term growth.
47:3747 minutes, 37 secondsNow, all of this is powered by data and technology.
47:4147 minutes, 41 secondsTo make it possible at McDonald's scale, we need a common foundation.
47:4647 minutes, 46 secondsLet's welcome Daario Baron, president of McDonald's International Developmental Licensed Markets to tell us more.
47:5847 minutes, 58 seconds[music]
48:0348 minutes, 3 secondsThanks, Morgan.
48:0548 minutes, 5 secondsFor context, IDL footprint covers a population of 5 billion people. It includes some of the most
48:1348 minutes, 13 secondstechnologically advanced markets in the world.
48:1648 minutes, 16 secondsConsider China, our most digitized market with 98% of sales coming through
48:2348 minutes, 23 secondsdigital channel. Our teams there are on the forefront of social commerce and new ways to drive loyalty, frequency, and
48:3248 minutes, 32 secondsengagement. IDL is a great learning lab to incubate innovation before our best ideas are scaled across the system.
48:4248 minutes, 42 secondsDigital experiences at most companies are built market by market. Each country with different technology, separate code
48:5048 minutes, 50 secondsbases, fragmented road maps, and inconsistent capabilities.
48:5548 minutes, 55 secondsIt is slow, is expensive, and it's inefficient.
49:0049 minutesOver the last three years, we rearchitected our digital foundation from the ground up. unifying ordering,
49:0849 minutes, 8 secondsmarketing, loyalty and data into one single global backbone.
49:1449 minutes, 14 secondsThat share foundation makes the next leap possible. GMA1 also known as global mobile app one.
49:2549 minutes, 25 secondsThis our first true global mobile platform turning everyday digital interactions into dynamic highly
49:3249 minutes, 32 secondspersonalized journeys at McDonald's scale.
49:3649 minutes, 36 secondsWe redesign GMA1 around the high frequency moments that matter most.
49:4249 minutes, 42 secondsLightning fast reordering, intuitive reward redemption, dynamic meal building, and frictionless checkout.
49:5149 minutes, 51 secondsThis includes the highly personalized rewards, offers, and incentives that Morgan was talking about.
49:5949 minutes, 59 secondsIn our early research, the results were definitive.
50:0450 minutes, 4 secondsCustomers preferred new reward experience about two and a half time more than what they use today.
50:1250 minutes, 12 secondsThey preferred the new reordering and meal building journeys by more than double.
50:1950 minutes, 19 secondsGMA1 is the breakthrough.
50:2250 minutes, 22 secondsA breakthrough that allows us to build functionality once and deploy it everywhere.
50:2850 minutes, 28 secondsWith J1 and the single unified codebase, global deployments takes weeks, not years.
50:3550 minutes, 35 secondsThe new platform unlocks monthly features across near every market. And because this architecture is modular, it is AI ready.
50:4650 minutes, 46 secondsIt is built for speed to plug directly into emerging conversational commerce channels without re-engineering our core.
50:5450 minutes, 54 secondsOur pilot begins in France later this year.
50:5850 minutes, 58 secondswith plans to scale across our top 10 largest on markets by end of 2028.
51:0551 minutes, 5 secondsNow, to show you how we're turning customer engagement into our next major value driver, I'll hand it back to Morgan.
51:1851 minutes, 18 secondsThanks, Dario.
51:2051 minutes, 20 secondsThe more our fans engage with us, the more we learn about them as individuals.
51:2551 minutes, 25 secondsAnd the more personal and relevant we make each interaction, the more demand we create around our iconic brand.
51:3351 minutes, 33 secondsNow, on top of that, we have more than 70 million daily customers globally across every generation and day part and
51:4251 minutes, 42 secondsan unmatched footprint from our app to kiosks, menu boards, and restaurants.
51:4851 minutes, 48 secondsWe are identifying more ways to leverage these assets to create new high margin sources of value for McDonald's and our franchises.
51:5951 minutes, 59 secondsMcDonald's media network is the first example.
52:0352 minutes, 3 secondsCommerce media is one of the fastest growing areas in advertising and is expected to reach more than 100 billion in the US alone by 2028.
52:1452 minutes, 14 secondsLast month, we moved into markets testing with a pilot across 450 US company-owned restaurants.
52:2352 minutes, 23 secondsWe're at the beginning of our aspiration to build McDonald's media network into a billion dollar business across the McDonald's system over time.
52:3452 minutes, 34 secondsIt's an opportunity to generate revenue for the system with little in the way of additional cost, no operational
52:4152 minutes, 41 secondscomplexity, and no disruption to our customer experience.
52:4752 minutes, 47 secondsYou've seen the power and potency of our marketing model. When more customers choose us, we have to meet them with
52:5452 minutes, 54 secondsgreat food, speed, convenience, and an experience that feels worth it. And we will. Jill will tell us how this all
53:0353 minutes, 3 secondscomes together in one place with restaurant next.
53:1453 minutes, 14 secondsHello again.
53:1653 minutes, 16 secondsEverything you've heard this morning comes back to one place, our restaurants. Our plans to be more customers first choice more often and
53:2553 minutes, 25 secondsgrow share are already in motion through menu and consumer next.
53:3053 minutes, 30 secondsBut in today's landscape, alongside the power of guest countled growth, we are also focused on driving further
53:3853 minutes, 38 secondsrestaurant efficiencies to expand our margins.
53:4253 minutes, 42 secondsWe expect to deliver about 250 basis points of gross restaurant level efficiency over time as we deploy
53:5053 minutes, 50 secondsproductivity bundles across our owned markets. Let me show you how.
53:5753 minutes, 57 secondsFirst, we're reimagining the design of our restaurants to deliver a more appealing, modern customer experience.
54:0454 minutes, 4 secondsNew kitchen layouts and equipment to both future proof capacity and make it easier for crew to serve great tasting
54:1254 minutes, 12 secondsfood and drinks and unlock productivity gains.
54:1754 minutes, 17 secondsThe new designs include upgraded playplaces, improved dining rooms, and more open kitchens with visible macafe
54:2454 minutes, 24 secondsbeverage preparation that will strengthen customer perception of great taste and quality.
54:3154 minutes, 31 secondsOperational changes to kitchen layouts with the in introduction of beverage cells, a new servery station to make it
54:4054 minutes, 40 secondseasier for crew to assemble orders, delivery lockers, and improved drive-thru operations to better serve digital customers.
54:5054 minutes, 50 secondsFastforward windows and drive-thru as standard where space allows, adding up to 25% additional capacity.
55:0055 minutesNow, we've also consolidated designs to fewer variations built from more shared components, which further improves our scale procurement advantage.
55:1255 minutes, 12 secondsSecond, we're deploying Arch IQ, our new AI powered restaurant operating system.
55:2055 minutes, 20 secondsIt reduces complexity and frees up labor hours so our crew can work more efficiently and focus on improving
55:2855 minutes, 28 secondscustomer experience with hospitality and great tasting food and drinks.
55:3455 minutes, 34 secondsWe've brought these capabilities together with new menu and restaurant next innovations into a single operating
55:4155 minutes, 41 secondsmodel and are testing them across four operational concept restaurants in Chicago and in a warehouse restaurant
55:4955 minutes, 49 secondslearning lab that some of you will get to visit this afternoon. And it's working. It's visibly working.
55:5655 minutes, 56 secondsWe've surveyed thousands of customers from the US, UK, Brazil, and Australia.
56:0256 minutes, 2 secondsAnd the pattern is consistent. Nine in 10 prefer the new designs. Perceptions of great tasting chicken and beverages
56:1156 minutes, 11 secondsat Chicagoland concept locations are significantly higher. In some cases, up to 10 percentage points higher than at nearby restaurants.
56:2256 minutes, 22 secondsNow, that is what customers see behind the counter. We're seeing an impact, too. And here to tell you more about
56:3056 minutes, 30 secondsthat, I'm going to turn it over to McDonald's Global Chief Information Officer, Brian Rice.
56:4356 minutes, 43 secondsThanks, Joe. Technology is central to helping our restaurant teams deliver the experiences that make McDonald's the first choice for millions of customers.
56:5256 minutes, 52 secondsWhen our crew has fewer complex decisions to make, when our managers have real-time visibility, and when repetitive tasks are automated, we
57:0157 minutes, 1 secondelevate both the crew and the customer experience. Put yourself in the shoes of a restaurant manager today. They're
57:0857 minutes, 8 secondsbalancing food quality, staffing, equipment maintenance, inventory, and customer demand across more ordering
57:1657 minutes, 16 secondschannels than ever. That's a lot. Over the last few years, we've made significant progress in building the
57:2457 minutes, 24 secondsdigital foundation to make running our restaurants easier than ever. First, since announcing our partnership with
57:3157 minutes, 31 secondsGoogle, we've deployed Google Edge technology to thousands of restaurants across seven major markets, and we have
57:3857 minutes, 38 secondsplans to complete the rollout in the US in 2027.
57:4357 minutes, 43 secondsThis brings high performance AI compute power directly into our restaurants. At the same time, we've unified our point
57:5057 minutes, 50 secondsof sales systems across nearly all of our markets. We've moved from fragmented, bespoke, local systems to a consistent platform built for rapid
57:5957 minutes, 59 secondsinnovation. And as we know, AI is only as good as the data feeding it. We've also built a standard restaurant data
58:0858 minutes, 8 secondslake that is connected directly to restaurant level operations. This allows our AI models to make accurate split-second decisions. By
58:1758 minutes, 17 secondsinterconnecting the operational heartbeat of over 46,000 restaurants worldwide, our data lake captures
58:2458 minutes, 24 secondsbillions of data points daily. This creates an insurmountable advantage and a continuous learning loop that competitors can't replicate.
58:3358 minutes, 33 secondsThe standard foundation is what now enables ArchIQ, bringing automation, diagnostics, predictive alerts, and
58:4258 minutes, 42 secondscoaching into a single platform used by our crew, restaurant managers, franchises, and our operations team. In
58:5158 minutes, 51 secondsour concept restaurants, where Archiq is deployed, our crew tell us they have higher morale and more confidence to do their jobs. Let's have a look.
59:0159 minutes, 1 secondMcDonald's is a really fast restaurant.
59:0459 minutes, 4 secondsWe don't have like everything prepared for the shift. It can slow us down. So, you have to multitask. If the crew are stressed, you can tell right away and it throws everybody off.
59:1259 minutes, 12 secondsThe way it used to be set up before, we were very crowded.
59:1659 minutes, 16 secondsWhen Uber Door Dash, they would come, they all pile up. But now, since we have the lockers, all they do is type in the code and take it out.
59:2259 minutes, 22 secondsWith the new layout, I get to move around. So, now it's easier for all of us. This layout has helped so much. The new technology is better for us.
59:3159 minutes, 31 secondsWe have Archie that takes orders now.
59:3359 minutes, 33 secondsSometimes I can even make three drinks at a time while Archie taking the order.
59:3759 minutes, 37 secondsArchie is basically like another employee to us. The scales that help our order accuracy on the scale that's new. We have like
59:4459 minutes, 44 secondsmore 100% correct orders. Everything is in the bag. We're not missing nothing.
59:4859 minutes, 48 secondsWhen things go better, the customers also feel comfortable.
59:5159 minutes, 51 secondsSo with the technology, obviously it does take a lot of stress off our employees. It benefits our customers because now there's more interaction with them and now they get faster service.
1:00:001 hourStep outside and maybe ask about their day. If we're not treating them correctly, they're not going to come back.
1:00:061 hour, 6 secondsJust we get their food ready, give it out to them right away. Boom. They're good.
1:00:091 hour, 9 secondsWe had the customers even coming up to us saying like, "Your employees so great. We're doing something good here." Have a nice day.
1:00:191 hour, 19 secondsArchite is a game changer. This afternoon, you'll get to experience ArchIQ in action across four key
1:00:261 hour, 26 secondsinnovations. First, voice AI in the drive-thru, which we call Archie. Archie takes live orders in both English and
1:00:341 hour, 34 secondsSpanish with accuracy above 90%. This frees our crew to focus on hospitality and driving growth. In our early test
1:00:421 hour, 42 secondsrestaurants with Archie, drive-thru customer satisfaction is above national trends. And as Archie scales, it will free at least 50 labor hours per week.
1:00:521 hour, 52 secondsThis is one of the most significant and tangible benefits of ArchIQ.
1:00:571 hour, 57 secondsSecond, automated inventory. We're eliminating one of the most tedious and timeconuming tasks in the restaurant. We
1:01:041 hour, 1 minute, 4 secondscan now track stock in real time through Bluetooth low energy tags, saving about five labor hours per week and reducing
1:01:121 hour, 1 minute, 12 secondsfood waste by 15%. We believe this is an industry first. Third, using connected
1:01:191 hour, 1 minute, 19 secondsequipment and computer vision, the team will show how ArchIch IQ improves food quality and consistency while also shifting equipment management to
1:01:271 hour, 1 minute, 27 secondspredictive operations. This drives about a 50% improvement in key equipment and menu availability in each restaurant.
1:01:351 hour, 1 minute, 35 secondsThat's unprecedented.
1:01:371 hour, 1 minute, 37 secondsAnd fourth, you'll see how our intelligent accuracy scales verify millions of orders every single day.
1:01:441 hour, 1 minute, 44 secondsThese enable our crew to catch and correct 10% of those orders before they ever reach the customer. This is why we're excited to show you all of this in
1:01:521 hour, 1 minute, 52 secondsaction today and give you a firsthand look at how ArchIQ is making it easier for the crew and better for our customers. Now, to tell you more about
1:02:011 hour, 2 minutes, 1 secondhow Restaurant Next reaches the system, I'll hand it back over to Jill. Thanks, Brian.
1:02:111 hour, 2 minutes, 11 secondsNow, many of the capabilities behind restaurant next are already proven and are scaling across our system today.
1:02:191 hour, 2 minutes, 19 secondsArchIQ is built on learnings from over 8,000 restaurants in China where a tool called uh Restaurant General Manager
1:02:261 hour, 2 minutes, 26 secondsBoss already provides a single source of insight and data for restaurant managers through real-time visibility into
1:02:331 hour, 2 minutes, 33 secondsoperations, scheduling, and automated inventory management. and it's helping drive margin improvements.
1:02:411 hour, 2 minutes, 41 secondsWe have accuracy scales in over 10,000 restaurants today and expect to double that by 2028.
1:02:491 hour, 2 minutes, 49 secondsCreated in France, these scales significantly reduce the number of inaccurate orders before they reach the
1:02:551 hour, 2 minutes, 55 secondscustomer, drastically reducing delivery refunds and unlocking more drive-thru capacity at peak hours.
1:03:031 hour, 3 minutes, 3 secondsBeverage cells and courier fulfillment areas from the UK and delivery lockers again from China are also helping
1:03:101 hour, 3 minutes, 10 secondsrestaurants handle growing demand more efficiently.
1:03:151 hour, 3 minutes, 15 secondsNow based on our years of experience deploying largecale restaurant innovations such as experience of the
1:03:221 hour, 3 minutes, 22 secondsfuture, we know how to thoughtfully deploy restaurant level change. Next is the destination for our system.
1:03:311 hour, 3 minutes, 31 secondsBut each market's path to get there is based on restaurant readiness, local economics, and customer needs.
1:03:391 hour, 3 minutes, 39 secondsThe plan to scale the new restaurant designs, including new kitchen layouts and new lobby designs, follows the regular 10-year remodel cycle.
1:03:501 hour, 3 minutes, 50 secondsOther next elements are incremental to the standard remodel and represent opportunities to unlock greater growth
1:03:571 hour, 3 minutes, 57 secondsand productivity at an even greater pace starting in 2027.
1:04:031 hour, 4 minutes, 3 secondsThe additional capabilities, for example, Arch IQ, the menu, and many of the operations enablers will deploy in
1:04:111 hour, 4 minutes, 11 secondssequenced bundles that will prioritize the highest financial impact alongside the most efficient and effective
1:04:191 hour, 4 minutes, 19 secondsrestaurant level training to help manage the change in restaurants.
1:04:251 hour, 4 minutes, 25 secondsLet me review the principles that will guide when and where these capabilities are deployed.
1:04:321 hour, 4 minutes, 32 secondsWe deploy where the technology prerequisites are already in place. We verify restaurant readiness before anything scales.
1:04:421 hour, 4 minutes, 42 secondsEvery deployment is held to our global operating and investment standards. So we deliver the expected execution quality and returns.
1:04:541 hour, 4 minutes, 54 secondsAbove all, deployment is conditionsbased.
1:04:571 hour, 4 minutes, 57 secondsa market graduates to the next phase of deployment when it has built the capabilities to run it.
1:05:051 hour, 5 minutes, 5 secondsAs I hope you can tell from my enthusiasm, Restaurant Next is expected to support our ambitions, be the first choice for
1:05:131 hour, 5 minutes, 13 secondsmore customers and grow share by contributing directly to a better customer experience and facilitate
1:05:211 hour, 5 minutes, 21 secondsefficient restaurant operations of about 250 basis points over time.
1:05:281 hour, 5 minutes, 28 secondsThat sets us up to reinvest in the customer experience and grow.
1:05:341 hour, 5 minutes, 34 secondsIan will have more about the specifics of the economics and the implications for returns for both the company and franchises in his presentation.
1:05:451 hour, 5 minutes, 45 secondsBut of course, as we all know, restaurants don't create great experiences on their own. They need the crew to make that happen. When we make
1:05:541 hour, 5 minutes, 54 secondsrestaurants easier to run, we help restaurant teams focus on delivering the hospitality that brings customers back.
1:06:021 hour, 6 minutes, 2 secondsTo share more about how we'll redefine hospitality across the system, let me hand it over to McDonald's global chief people officer, Tiffany Boyd.
1:06:131 hour, 6 minutes, 13 seconds[music]
1:06:181 hour, 6 minutes, 18 secondsWell, thank [music] you, Jill, and good morning everyone. You know, in the lobby of our building, there is a Fred Turner
1:06:251 hour, 6 minutes, 25 secondsquote that's inscribed on the floor and it says, "We are a people business and we never forget it." Today, we have the
1:06:331 hour, 6 minutes, 33 secondsdata to show why that principle really matters for our growth. When we compare US restaurants in the top quartortile
1:06:411 hour, 6 minutes, 41 secondsversus those in the bottom quartile on employee engagement and retention, those in the top quartile deliver 10% more
1:06:481 hour, 6 minutes, 48 secondsguest counts, 15% higher sales, and 20% more cash flow than those in the bottom quartile. Why?
1:06:581 hour, 6 minutes, 58 secondsIt's the same brand. It's the same menu.
1:07:021 hour, 7 minutes, 2 secondsIt's even the same equipment. But the difference is the people and the environment that we create for them to perform at their best for our guests.
1:07:111 hour, 7 minutes, 11 secondsOur research shows that McDonald's outperforms key competitors on people and culture across most international
1:07:191 hour, 7 minutes, 19 secondsoperated markets and guests recognize the important role of our crew in creating great experiences.
1:07:271 hour, 7 minutes, 27 secondsThe connection is straightforward. Engaged crew members execute better.
1:07:321 hour, 7 minutes, 32 secondsBetter execution leads to better guest experiences. And those experiences drive
1:07:391 hour, 7 minutes, 39 secondsgreater guest counts, sales, and cash flow.
1:07:431 hour, 7 minutes, 43 secondsTogether, these insights reinforce that hospitality isn't just a feeling. It can be a real growth driver for McDonald's.
1:07:521 hour, 7 minutes, 52 secondsAnd that is the focus of People Next.
1:07:551 hour, 7 minutes, 55 secondsIt's about creating great experiences consistently and at scale.
1:08:001 hour, 8 minutesOn October 5th, Ray Croc's birthday, and our founders day, we're launching Make It Golden. It begins with the largest
1:08:101 hour, 8 minutes, 10 secondscapability building initiative in our 71-year history, and it'll equip 2 million people with the training, tools,
1:08:181 hour, 8 minutes, 18 secondsand support needed to deliver the great food, and great hospitality that are uniquely McDonald's.
1:08:251 hour, 8 minutes, 25 secondsMake it golden will continue as a multi-year roadmap to build capabilities that can be taught, measured, and scaled
1:08:331 hour, 8 minutes, 33 secondsto drive real business outcomes all while retaining the heart and soul of McDonald's.
1:08:401 hour, 8 minutes, 40 secondsMake it golden is built around three commitments. First, equipping our people with better tools and training. Second,
1:08:481 hour, 8 minutes, 48 secondsstrengthening our standards and how we measure performance. and third, delighting our guests with hospitality that's distinctly McDonald's.
1:08:581 hour, 8 minutes, 58 secondsEach commitment represents an evolution in how we engage and support our restaurant teams.
1:09:041 hour, 9 minutes, 4 secondsLet's start with how we'll upskill our people to perform at their best and do their best work. We'll do this by
1:09:111 hour, 9 minutes, 11 secondsleveraging training, technology, and simpler ways of working.
1:09:161 hour, 9 minutes, 16 secondsNot only does this create a better work experience for our people, but it also creates more capacity in the restaurant.
1:09:241 hour, 9 minutes, 24 secondsPrioritizing the crew experience delivers real economic value for our franchises because confident, well-trained
1:09:311 hour, 9 minutes, 31 secondsrestaurant teams not only perform more consistently, but they actually stay with the brand longer.
1:09:381 hour, 9 minutes, 38 secondsIn our US restaurants, the cost of replacing a crew member is about $1,600.
1:09:441 hour, 9 minutes, 44 secondsand replacing a shift manager costs roughly $5,800.
1:09:481 hour, 9 minutes, 48 secondsAnd that's before you consider broader impacts on service, sales, and guest satisfaction.
1:09:551 hour, 9 minutes, 55 secondsSo having a well-trained and engaged crew can help avoid these costs while delivering a great guest experience.
1:10:031 hour, 10 minutes, 3 secondsWe know this upskilling approach works.
1:10:061 hour, 10 minutes, 6 secondsIn Australia, our stepup initiative built training, coaching, and accountability around real observable hospitality behaviors. And in just one
1:10:151 hour, 10 minutes, 15 secondsyear, we saw double-digit improvements in guest satisfaction, and sales grew alongside it. We will now scale that
1:10:241 hour, 10 minutes, 24 secondskind of impact across the McDonald's system.
1:10:281 hour, 10 minutes, 28 secondsThrough Make It Golden, we will engage franchises across our owned markets by the end of 2026 with a common upskilling program.
1:10:381 hour, 10 minutes, 38 secondsIt will give operators a clear framework for building crew capabilities, improving execution, and delivering stronger restaurant performance.
1:10:471 hour, 10 minutes, 47 secondsToday, way too much of running a restaurant relies on paper, spreadsheets, and disconnected systems.
1:10:541 hour, 10 minutes, 54 secondsAs Brian mentioned earlier, ArchIch IQ provides AI enabled tools that simplify operations and help identify issues before they become downtime.
1:11:061 hour, 11 minutes, 6 secondsThe result is less administrative burden, more time spent leading crew and serving guests, and more consistent execution across our restaurants.
1:11:181 hour, 11 minutes, 18 secondsOur second commitment is to strengthen our standards.
1:11:221 hour, 11 minutes, 22 secondsGreat food and great hospitality have always mattered to McDonald's. What's changing is our ability to measure consistently and to scale what works.
1:11:331 hour, 11 minutes, 33 secondsGoing forward, we're elevating both within our restaurant performance review process, giving restaurant teams greater visibility into performance and more
1:11:421 hour, 11 minutes, 42 secondsconsistent coaching on how to make improvements.
1:11:461 hour, 11 minutes, 46 secondsTo do that, we're leveraging Qualrix, our experience management platform to bring together guest feedback, employee
1:11:541 hour, 11 minutes, 54 secondsfeedback, and operational performance data, all in one place. Earlier this year, we launched our first global
1:12:021 hour, 12 minutes, 2 secondsemployee listening platform, generating more than 300,000 employee responses across seven markets in just a few
1:12:091 hour, 12 minutes, 9 secondsweeks. Today, these insights sit in separate systems, but going forward, we can connect them, leveraging one common
1:12:181 hour, 12 minutes, 18 secondsdata lake that you heard Brian mention earlier. This will give us a clearer view of how employee and guest experience impact business performance.
1:12:281 hour, 12 minutes, 28 secondsIn Q1 of 2027, we will deploy this system across the US and OM markets.
1:12:371 hour, 12 minutes, 37 secondsWe're also rethinking what we measure.
1:12:401 hour, 12 minutes, 40 secondsToday, we evaluate whether a crew member uses the right words. Going forward, we'll also evaluate whether they create
1:12:481 hour, 12 minutes, 48 secondsa feel-good moment. When you pair this with guest friendliness scores, we'll be able to see and evaluate hospitality from both sides of the counter.
1:12:581 hour, 12 minutes, 58 secondsThis will come to life in real tangible points of reflection four times annually at each restaurant when we assess performance against our operating standards.
1:13:081 hour, 13 minutes, 8 secondsBut measurement only tells us where we stand. What guests actually feel gets decided somewhere else. At the front
1:13:171 hour, 13 minutes, 17 secondscounter, at the drive-through window, and oftentimes in a delivery bag. Which brings me to our third commitment, which
1:13:251 hour, 13 minutes, 25 secondsis to delight our guests with golden hospitality that's distinctly McDonald's.
1:13:311 hour, 13 minutes, 31 secondsOur goal is to make the McDonald's brand of hospitality recognizable, scalable, and repeatable and relevant across all
1:13:401 hour, 13 minutes, 40 secondschannels while still giving restaurant teams the freedom to create moments that build brand love and feel authentic to their customers and their communities.
1:13:511 hour, 13 minutes, 51 secondsLet me tell you what happened in China where 98% of transactions are digital and half of all orders leave in a
1:13:591 hour, 13 minutes, 59 secondsdelivery bag. You might expect hospitality to get lost in that environment, but it didn't. Let's take a look.
1:14:081 hour, 14 minutes, 8 secondsOne day, a guest included a note with their delivery order saying they could use a little sunshine. A simple request.
1:14:141 hour, 14 minutes, 14 secondsSo, the team slipped an extra nugget into the box and signed it. [music] Sunshine from the Nugget Man. That one act of kindness inspired more guest
1:14:221 hour, 14 minutes, 22 secondsrequests and soon grew into more than 10,000 wishes a day. That's McDonald's hospitality with digital convenience.
1:14:321 hour, 14 minutes, 32 secondsNow, the important part of this example isn't the extra nugget or even the nugget man. It's really the empowerment
1:14:391 hour, 14 minutes, 39 secondsof the crew. They paid attention, saw an opportunity, and took action to create something special. Now imagine teams in
1:14:471 hour, 14 minutes, 47 secondsover 46,000 restaurants creating those types of experiences and moments. That is the kind of experience that
1:14:551 hour, 14 minutes, 55 secondsstrengthens preference and give guests around the world another reason to choose McDonald's. A reason to make McDonald's their first choice.
1:15:051 hour, 15 minutes, 5 secondsOur ambition is simple. Establish a differentiated McDonald's guest experience by equipping our people,
1:15:131 hour, 15 minutes, 13 secondsstrengthening our standards, and delighting our guests. We have the people, we have the scale, we have the
1:15:201 hour, 15 minutes, 20 secondsroadmap to make hospitality a competitive advantage that only McDonald's can deliver. And that is how we'll make it golden.
1:15:301 hour, 15 minutes, 30 secondsNow, at this time, we will take a short break. Following that, our global chief financial officer, Ian Bordon, will take the stage to discuss McDonald's next financial impact. Thank you.
1:15:431 hour, 15 minutes, 43 seconds[applause]
1:15:451 hour, 15 minutes, 45 secondsPlease welcome Global Chief Financial Officer Ian Bordon.
1:15:561 hour, 15 minutes, 56 secondsMorning everybody. Welcome back from break. Um throughout the day you've heard about the opportunities that we're pursuing through McDonald's Next and I
1:16:051 hour, 16 minutes, 5 secondswant to translate those opportunities into the results that we expect.
1:16:091 hour, 16 minutes, 9 secondsMcDonald's Next isn't just a growth strategy. It's a value creation strategy designed to generate attractive returns
1:16:171 hour, 16 minutes, 17 secondsfor franchises and shareholders and designed to strengthen restaurant economics and create the capacity to reinvest for long-term growth.
1:16:271 hour, 16 minutes, 27 secondsUltimately, that's what powers the growth and productivity engine that Chris introduced earlier. The combination of our scale and the
1:16:351 hour, 16 minutes, 35 secondscapabilities that we've built through accelerating the arches is what makes Next possible.
1:16:401 hour, 16 minutes, 40 secondsTogether, they create significant opportunities for growth and a step change in productivity.
1:16:471 hour, 16 minutes, 47 secondsFrom my colleagues, you've heard how Next will position our business towards the highest growth categories and make the largest upgrade to taste and quality
1:16:561 hour, 16 minutes, 56 secondsin McDonald's history. This upgrade will help us deliver approximately one and a half points of share gains in both beverages and chicken by 2030.
1:17:061 hour, 17 minutes, 6 secondsHow next we'll activate the full power of our global fandom, refocus on our McDonald's IP, further personalize the
1:17:141 hour, 17 minutes, 14 secondsapp experience for our loyalty members, and reactivate our occasional customers to support baseline guest count growth.
1:17:221 hour, 17 minutes, 22 secondsHow next will leverage our foundational technology investments to bring about AI enabled capabilities to life at scale
1:17:301 hour, 17 minutes, 30 secondswhile making our restaurants easier to operate and unlocking about 250 basis points of gross restaurant level
1:17:381 hour, 17 minutes, 38 secondsefficiency at the company. AI will help enable a step change improvement in corporate GNA
1:17:461 hour, 17 minutes, 46 secondsand through make it golden deliver highquality execution on hospitality to make the McDonald's experience people
1:17:531 hour, 17 minutes, 53 secondslove even better and drive guest countled growth. These are not standalone investments.
1:18:011 hour, 18 minutes, 1 secondThey're connected capabilities. They reinforce one another, create stronger unit economics, and build greater capacity to reinvest over time.
1:18:121 hour, 18 minutes, 12 secondsSo, let me get into some more detail on what it's going to take to bring Next to life, the readiness of our system to do that,
1:18:201 hour, 18 minutes, 20 secondsand the returns that we expect next to generate. Let's start with our franchises.
1:18:261 hour, 18 minutes, 26 secondsTheir financial health is industryleading.
1:18:291 hour, 18 minutes, 29 secondsIn the US, average unit volumes are north of $4 million with operating cash flow of about $500,000.
1:18:371 hour, 18 minutes, 37 secondsAnd compared to 2019, total cash flow across the US franchisee organizations is up nearly 50%.
1:18:451 hour, 18 minutes, 45 secondsAcross our big five markets, average unit volumes are more than 4.5 million with cash flow of around $400,000.
1:18:541 hour, 18 minutes, 54 secondsThese strong economics support healthy franchisee balance sheets and substantial financial capacity to
1:19:011 hour, 19 minutes, 1 secondcontinue funding investment to support long-term growth.
1:19:061 hour, 19 minutes, 6 secondsAnd that's exactly what's planned as part of our strategy today. A standard required lobby remodel
1:19:141 hour, 19 minutes, 14 secondsof an average drive-through restaurant in the US costs about $400 to $450,000.
1:19:201 hour, 19 minutes, 20 secondsThis is funded by the franchisee as outlined in our franchise agreements.
1:19:251 hour, 19 minutes, 25 secondsRestaurant next will be incremental to that investment.
1:19:301 hour, 19 minutes, 30 secondsIt's the additional operational kitchen and technology capabilities that design elements as well that we believe unlock
1:19:381 hour, 19 minutes, 38 secondsincremental growth and greater productivity. The economics are compelling.
1:19:451 hour, 19 minutes, 45 secondsAs Jill discussed, across our wholly owned markets, we're targeting about 250 basis points in gross restaurant P&L efficiency as next is fully deployed.
1:19:561 hour, 19 minutes, 56 secondsFor an average restaurant in the US, that's about 100,000 of gross annual cash flow. We expect a portion of that
1:20:041 hour, 20 minutes, 4 secondswill be reinvested to support next growth initiatives, but that the majority will benefit the rest restaurant's bottom line over time.
1:20:131 hour, 20 minutes, 13 secondsThat's real value creation at the restaurant level.
1:20:171 hour, 20 minutes, 17 secondsTo deploy all restaurant next elements for a traditional drive-through restaurant, we estimate an incremental investment of approximately 800,000 per
1:20:261 hour, 20 minutes, 26 secondsUS restaurant and generally 650 to 700,000 across our top markets.
1:20:341 hour, 20 minutes, 34 secondsImportantly, those investments will be phased over time. The technology, kitchen, and operational capabilities
1:20:421 hour, 20 minutes, 42 secondswill be adopted as they become available. Design elements will largely align with the normal remodel cycle. So,
1:20:501 hour, 20 minutes, 50 secondsfranchises can invest progressively as capabilities are deployed and benefits are realized.
1:20:571 hour, 20 minutes, 57 secondsAnd they won't be making those investments alone.
1:21:011 hour, 21 minutes, 1 secondMcDonald's will partner alongside franchises for a portion of the incremental next investments through a mix of rent relief and capital support.
1:21:111 hour, 21 minutes, 11 secondsThe mix and level of support will vary by market and be flexible and targeted to the realities that franchises face
1:21:181 hour, 21 minutes, 18 secondslocally. The principle is simple and consistent with past practice. The full restaurant next program should generate
1:21:261 hour, 21 minutes, 26 secondsattractive returns for both our franchises and McDonald's.
1:21:311 hour, 21 minutes, 31 secondsWhen franchises have stronger economics, our system is stronger.
1:21:361 hour, 21 minutes, 36 secondsThis is not new. We've successfully partnered with franchises on large-scale reinvestment programs over time.
1:21:431 hour, 21 minutes, 43 secondsMost recently, Experience of the Future demonstrated how aligning investment with value creation can accelerate
1:21:511 hour, 21 minutes, 51 secondsmodernization, build capacity, and generate attractive returns across the system.
1:21:581 hour, 21 minutes, 58 secondsThrough 2036, we expect to provide $8.5 billion in total next partner, which contains both rent relief and capital support.
1:22:081 hour, 22 minutes, 8 secondsThis includes about $5 billion by the end of 2030 to accelerate deployment of ArchIQ technology bundles as well as kitchen and operations enablers.
1:22:191 hour, 22 minutes, 19 secondsHolistic restaurant next investments will have about a 4-year payback for franchises after partnering and about a
1:22:261 hour, 22 minutes, 26 seconds5 to sixyear payback for McDonald's consistent with previous significant growth initiatives.
1:22:331 hour, 22 minutes, 33 secondsThe power of next combined with our strong balance sheet will structurally strengthen restaurant economics and the financial capacity of our franchises.
1:22:441 hour, 22 minutes, 44 secondsIn turn, this will increase the long-term growth potential of our system by purposefully positioning our business towards the greatest opportunity areas.
1:22:551 hour, 22 minutes, 55 secondsThe targets we're introducing today reflect the financial impact of the choices we've discussed. They're
1:23:021 hour, 23 minutes, 2 secondsgrounded in demonstrated performance, the expected economics of Restaurant Next, and the opportunities that we see ahead.
1:23:111 hour, 23 minutes, 11 secondsBeginning with the top line, each pillar of Next is designed for McDonald's to be the first choice for more customers more
1:23:181 hour, 23 minutes, 18 secondsoften to ultimately deliver sustained baseline guest count growth.
1:23:241 hour, 23 minutes, 24 secondsAt the same time, capabilities such as AI enabled revenue management and Archie suggestive cell will help increase
1:23:321 hour, 23 minutes, 32 secondsaverage check over time. Taken together, we believe next positions McDonald's to deliver more durable comparable sales growth.
1:23:441 hour, 23 minutes, 44 secondsSince our last investor update nearly three years ago, we've delivered against our commitment to increase the sales
1:23:511 hour, 23 minutes, 51 secondscontribution from new restaurants. In 2026, new restaurants will contribute about two and a half percent driven by
1:23:581 hour, 23 minutes, 58 secondsthe fastest pace of restaurant unit expansion in McDonald's history. In 2027, we expect new restaurants to
1:24:071 hour, 24 minutes, 7 secondscontribute nearly 2 and a.5% to systemwide sales growth and moderate to about 2% by 2030.
1:24:151 hour, 24 minutes, 15 secondsUnderlying this sales growth is a net restaurant unit growth target of nearly 4 and a.5% in 2027 and between 3 and
1:24:221 hour, 24 minutes, 22 secondsa.5% and 3% annually between 2028 and 2030.
1:24:281 hour, 24 minutes, 28 secondsThis includes more than 550 combined US and M openings annually through to 2030.
1:24:371 hour, 24 minutes, 37 secondsThe targeted pace of new restaurant openings reflects our disciplined commitment to adding restaurants only when and where we expect to see strong
1:24:461 hour, 24 minutes, 46 secondslong-term returns for both the franchises and the company.
1:24:511 hour, 24 minutes, 51 secondsWe continue to see attractive near-term returns for new restaurants. And over a typical 20-year period, the company
1:24:591 hour, 24 minutes, 59 secondsreturns are in the high teens percent range, which is well above our long-term cost of capital.
1:25:061 hour, 25 minutes, 6 secondsIn short, these returns provide confidence in our ability to continue to grow while maintaining our disciplined approach to capital allocation.
1:25:171 hour, 25 minutes, 17 secondsAll new restaurant openings will incorporate the restaurant next design beginning in the first quarter of 2028.
1:25:241 hour, 25 minutes, 24 secondsAnd we expect the cost of the new design standard will be comparable to existing costs.
1:25:311 hour, 25 minutes, 31 secondsBetween 2027 and 2030, based on today's rates, we expect to spend about $3 billion in baseline annual capital
1:25:391 hour, 25 minutes, 39 secondsexpenditures with the majority supporting new restaurant development.
1:25:451 hour, 25 minutes, 45 secondsAdditionally, over the same period, we plan to spend around one and a half to$2 billion on a cumulative basis to support
1:25:531 hour, 25 minutes, 53 secondsthe accelerated deployment of Restaurant Next through Capital Partner.
1:26:011 hour, 26 minutes, 1 secondJust as we're disciplined about when, where, and how we invest capital, we're also taking a disciplined view to ensure that every restaurant is owned and
1:26:091 hour, 26 minutes, 9 secondsoperated by the right organization within our system.
1:26:141 hour, 26 minutes, 14 secondsAs we shared earlier this year, we've already begun taking steps towards a higher franchise mix and are targeting an increase from about 95% franchise
1:26:231 hour, 26 minutes, 23 secondstoday to about 98% globally by the end of 2028.
1:26:291 hour, 26 minutes, 29 secondsWe believe our highly franchiseed model supports a more efficient and scalable corporate structure, enabling us to focus resources on the capabilities that
1:26:381 hour, 26 minutes, 38 secondsmatter most to our system. Which brings me to GNA.
1:26:431 hour, 26 minutes, 43 secondsAs Chris discussed earlier, we've been improving our operating efficiency over the last several years. We've reduced
1:26:511 hour, 26 minutes, 51 secondsour GNA expense as a percentage of systemwide sales from above 2.4% in 2021 to about 2.2% in 2026.
1:27:011 hour, 27 minutes, 1 secondAll while continuing to invest in areas of growth such as improved digital capabilities and our transformation efforts across the business.
1:27:101 hour, 27 minutes, 10 secondsWhen I spoke to you in 2023, global business services was an emerging capability.
1:27:161 hour, 27 minutes, 16 secondsToday, it's an established operating engine across McDonald's.
1:27:211 hour, 27 minutes, 21 secondsOver the past 3 years, we've redesigned processes and modernized systems. We've made significant progress to build a
1:27:281 hour, 27 minutes, 28 secondstrusted enterprise data lake and consolidate work into global capability centers. These changes allow us to
1:27:361 hour, 27 minutes, 36 secondsleverage our scale and serve markets with greater speed and consistency.
1:27:411 hour, 27 minutes, 41 secondsNew enterprise data, analytics, and AI capabilities are becoming a powerful driver of productivity.
1:27:481 hour, 27 minutes, 48 secondsThey're helping us further simplify and automate processes and accelerate decision making and innovation across the business.
1:27:581 hour, 27 minutes, 58 secondsAs adoption scales, these capabilities will help us operate with greater efficiency and support the meaningful step change in our cost structure.
1:28:071 hour, 28 minutes, 7 secondsWe expect GNA as a percent of systemwide sales will begin to decline in 2027 as we generate efficiencies and manage our overall spend.
1:28:171 hour, 28 minutes, 17 secondsAnd we'll continue to leverage GNA in subsequent years as we target about 1.9% of systemwide sales by 2030.
1:28:261 hour, 28 minutes, 26 secondsImportantly, we expect these GNA efficiencies will help fuel investments for long-term growth and drive profitability.
1:28:341 hour, 28 minutes, 34 secondsThat balanced repro approach is is in our outlook for our operating margin.
1:28:411 hour, 28 minutes, 41 secondsBy 2030, we expect to expand adjusted operating margin to the low to mid50% range through a combination of topline
1:28:491 hour, 28 minutes, 49 secondsoperating leverage and the cumulative impact of our refranchising efforts and GNA savings.
1:28:561 hour, 28 minutes, 56 secondsStrong margins are important. Converting those earnings into cash is equally important.
1:29:031 hour, 29 minutes, 3 secondsWe expect the levers that I've discussed today to increase free cash flow conversion from today's low to mid 80%
1:29:091 hour, 29 minutes, 9 secondsrange to the mid to high 80% range by 2030. Our strong cash flow generation provides flexibility to maintain a
1:29:181 hour, 29 minutes, 18 secondsconsistent and disciplined capital allocation framework as we remain steadfast in our commitment to be good stewards of capital.
1:29:281 hour, 29 minutes, 28 secondsOur first priority is to reinvest in the business to generate attractive returns and drive sustainable, profitable long-term growth. We believe our
1:29:361 hour, 29 minutes, 36 secondsadjusted new restaurant opening pace and McDonald's next are both strong examples of this. Our second priority is to
1:29:451 hour, 29 minutes, 45 secondsreturn excess free cash flow to shareholders over time through dividends and share repurchases. We continue to
1:29:521 hour, 29 minutes, 52 secondstarget a dividend payout ratio of between 50 to 60% of EPS and will proudly join the short list of dividend
1:29:591 hour, 29 minutes, 59 secondskings with our 50th consecutive annual dividend increase.
1:30:051 hour, 30 minutes, 5 secondsAnd finally, we remain committed to a strong balance sheet. We continue to believe that maintaining our current investment grade credit rating enables
1:30:141 hour, 30 minutes, 14 secondsthe company and the broader system to invest consistently in growth initiatives.
1:30:201 hour, 30 minutes, 20 secondsIt also provides us additional flexibility when returning cash to shareholders while efficiently accessing capital at attractive cost and terms.
1:30:321 hour, 30 minutes, 32 secondsI'll close with what I mentioned earlier.
1:30:351 hour, 30 minutes, 35 secondsMcDonald's next positions us to deliver more durable comparable sales growth, supports strong EPS growth, and
1:30:441 hour, 30 minutes, 44 secondsreinforce our position as a highquality long-term compounder.
1:30:481 hour, 30 minutes, 48 secondsThe scale of our investment reflects the scale of the opportunity. An opportunity that only McDonald's can capture through
1:30:561 hour, 30 minutes, 56 secondsour scale. The reach of our brand, the strength of our balance sheet, our worldclass franchises and suppliers, and
1:31:051 hour, 31 minutes, 5 secondsour successful track record of turning investment into long-term returns.
1:31:111 hour, 31 minutes, 11 secondsVery few companies can say that. Fewer still can act on it. And we are.
1:31:191 hour, 31 minutes, 19 secondsAnd with that, we'll get ready to take your questions.
1:31:441 hour, 31 minutes, 44 seconds[music]
1:31:491 hour, 31 minutes, 49 secondsThanks, Ian. Hello again, everybody.
1:31:501 hour, 31 minutes, 50 secondsWe're now going to take the next 30 minutes for Q&A. Uh Chris and Ian will be up here on stage obviously. We have other members of our senior leadership
1:31:581 hour, 31 minutes, 58 secondsteam here as well. Uh we have a couple mic runners on each side up in the audience. I'll be help facilitate this
1:32:051 hour, 32 minutes, 5 secondssession. At the end of the Q&A, we'll conclude the live stream and then I'll discuss next steps with those here in Chicago. Uh when you're called on,
1:32:131 hour, 32 minutes, 13 secondsplease state both your name and your firm. And with that, let's take the first question. Dave.
1:32:211 hour, 32 minutes, 21 secondsThanks U David Palmer Evercore ISI. Um just want to acknowledge and thanks for all the detail today. I want to acknowledge a question we we often get
1:32:301 hour, 32 minutes, 30 secondsand that is about uh product development idea generation to all the elements of the funnel and and basically the
1:32:371 hour, 32 minutes, 37 secondseffectiveness of that. You talked about a lot of new things coming. You've done a lot of things in the last 18 months as well.
1:32:451 hour, 32 minutes, 45 secondsWhat have you learned from from what you've done and how you do it that that funnel or stage gating that you do from chicken to beverage to marketing and
1:32:541 hour, 32 minutes, 54 secondsvalue and then why do you feel like maybe you're making adjustments that your hit rate might be better in the future and thank you.
1:33:021 hour, 33 minutes, 2 secondsYeah, thanks for the question. Yeah, I I think ultimately this this strategy that we've unveiled as a growth strategy certainly enabled by productivity. And I
1:33:111 hour, 33 minutes, 11 secondsI think as we think about the business, you know, we there's two elements to how you drive growth in the business. Uh there's baseline growth and there's
1:33:181 hour, 33 minutes, 18 secondsincremental growth. And uh the foundation of what we're talking about here is really about driving that baseline growth. That's the sort of
1:33:261 hour, 33 minutes, 26 secondssustaining growth that ultimately is what creates that long-term value creation. Now, you need to punctuate that periodically with incremental
1:33:331 hour, 33 minutes, 33 secondsactivity. Um, things like a FIFA promotion or a Minecraft or whatever. I think one of the things that we've learned, certainly I talked about this
1:33:411 hour, 33 minutes, 41 secondson Q2, is you've got to make sure that the balance is really weighted to the to the baseline. And yes, you need to do the incremental, but if you get over,
1:33:501 hour, 33 minutes, 50 secondsyou know, you put too much on the calendar around incremental, it can add complexity to the restaurant. And ultimately, then you start to have the
1:33:581 hour, 33 minutes, 58 secondsissue with lapping that activity. And then you start to having to add more onto the calendar to do do that. So, I think what we're really focused on here
1:34:051 hour, 34 minutes, 5 secondsis the foundational elements, improving taste and quality of the food that we serve. Uh, making sure we're in the
1:34:131 hour, 34 minutes, 13 secondsright categories. Uh, making sure that we're providing sustained support on that. It's not just sort of an in-n-out, but that we're doing that consistently
1:34:211 hour, 34 minutes, 21 secondsover time. Uh, all of those things are going to drive the baseline. I think those are pro probably the biggest learnings that we've taken away um from,
1:34:281 hour, 34 minutes, 28 secondsyou know, what you described as the last couple years. Maybe just one ad to to the to to the question, David. I think
1:34:361 hour, 34 minutes, 36 secondsbeverages to me is a great example of of something I think that we've executed very well and driven baseline but also
1:34:431 hour, 34 minutes, 43 secondsdriven innovation and uh put ourselves in a new category. Obviously, we did a lot of research as you know through cosmix and then I think the tests that
1:34:511 hour, 34 minutes, 51 secondswe did in both uh the US business and in other markets as it's come to life and we've executed I think incredibly well
1:34:581 hour, 34 minutes, 58 secondsuh both from a customer and from a restaurant uh execution standpoint and ease of execution and so I think that's to Chris's point a great example of
1:35:071 hour, 35 minutes, 7 secondsbaseline building test and learn quickly and get to scale quickly. Um, and as we talked about a bit in our script, you're
1:35:151 hour, 35 minutes, 15 secondsgoing to see beverages in all of our M markets in in Europe in the first half of 27 because the business can see the
1:35:221 hour, 35 minutes, 22 secondsopportunity and and we've obviously done a lot of work to make sure that we can execute that opportunity very effectively at the restaurant level.
1:35:301 hour, 35 minutes, 30 secondsAndrew, great. Thank you for the presentation today. It's Andrew Charles from TD Cow and um in the spirit of driving durable
1:35:391 hour, 35 minutes, 39 secondssales growth in the past you've talked about normalized US and M same store sales of 3 to 4% you know gaining share in a category that grows around 2 to 3%
1:35:481 hour, 35 minutes, 48 secondsand you know I know you talked about an expectation for flat industry traffic over the medium term but does the next plan give you confidence that you can return to kind of the normalized rate of
1:35:561 hour, 35 minutes, 56 secondssame store sales you've seen of that 3 to 4% level particularly in the US yeah absolutely I I think what we're rolling out here is is really based on
1:36:041 hour, 36 minutes, 4 secondsour confidence that we can go deliver that share growth that we talked about in chicken and beverages and also that we can hold our our leadership share in
1:36:131 hour, 36 minutes, 13 secondsbeef. And so, you know, as we think about our algorithm, uh despite sort of what we're expecting is flat industry traffic, our expectation is we're
1:36:211 hour, 36 minutes, 21 secondsgrowing traffic. And then on top of growing traffic, you're getting check uh with that that drives comparable sales.
1:36:281 hour, 36 minutes, 28 secondsWe're also, as you heard, we're continuing to invest where it makes sense in new restaurants. So you put all those things together uh and we have a
1:36:351 hour, 36 minutes, 35 secondslot of confidence in the algorithm that uh you just highlighted there and maybe just a a build to that a little bit I think because obviously we've we've given a fair bit of texture
1:36:441 hour, 36 minutes, 44 secondstoday on the scale of the investment [clears throat] behind that which is significant but I'd say the level of the investment is linked to the level of opportunity and I think we think there's
1:36:531 hour, 36 minutes, 53 secondsa really clear and compelling opportunity. We think that opportunity, as you heard me talk about, provides compelling returns for our franchises
1:37:011 hour, 37 minutes, 1 secondand for McDonald's, which is why we're going to support bringing that opportunity to life. And we're going to obviously go after that as aggressively
1:37:081 hour, 37 minutes, 8 secondsas we can. Obviously, uh, managing some of the things we talked about earlier with executing well.
1:37:151 hour, 37 minutes, 15 secondsDenilo, thank you. Good morning. Danil Gour with Bernstein. Um, Ian, I was wondering if
1:37:231 hour, 37 minutes, 23 secondsyou can expand a little bit on how you're planning to get to the mid50s uh margin for for McDonald over time. Maybe
1:37:301 hour, 37 minutes, 30 secondsif you can walk us through the puts and takes since, you know, you're talking about industry traffic remaining under pressure. Chris, you were talking about
1:37:381 hour, 37 minutes, 38 secondsthe inflation uh uh in the United States and even beyond in the rest of the world still remaining quite elevated. And so what is the role of different components
1:37:461 hour, 37 minutes, 46 secondsof your P&L that will get you to that level of margin? And what role is the refranchising playing to get to the mid-50s? Yeah, thank you.
1:37:531 hour, 37 minutes, 53 secondsYeah, thanks Danilo. A good question. So I'd say I'd think of it as three key components. First and always the one that's most important is you've got to
1:38:011 hour, 38 minutes, 1 secondget to that durable comparable sales growth. And I think we've talked a fair bit about our confidence and the underpinnings through the category share
1:38:101 hour, 38 minutes, 10 secondsgrowth targets that we've outlined. I think through what you heard from Morgan in terms of we've done a lot of work through accelerating arches to build
1:38:171 hour, 38 minutes, 17 secondsthis loyalty base of 220 million plus consumers, how do we activate those consumers and create even more
1:38:241 hour, 38 minutes, 24 secondsconnection, more value in the experience that we get and obviously drive incremental visits over time. So I think
1:38:311 hour, 38 minutes, 31 secondsthere's lots of confidence in the ability to kind of get to that more durable comparable sales growth. And as we drive strong topline growth, obviously that always allows us to
1:38:401 hour, 38 minutes, 40 secondsdeliver leverage from an operating margin standpoint over time. I think the other two key components to that are the GNA target that I outlined, which is how
1:38:491 hour, 38 minutes, 49 secondswe get from about 2.2% of systemwide sales today to about 1.9% um by the end of 2030, which is a
1:38:571 hour, 38 minutes, 57 secondsmeaningful step change at the enterprise level from an efficiency. And then the last component is the franchised mix
1:39:041 hour, 39 minutes, 4 secondsglobally. We're at about 95% at the start of 26 and we're going to get to about 98% by the end of 2028. So it's
1:39:121 hour, 39 minutes, 12 secondsthose three components that come together that kind of uh enable that move to the low to mid 50% range
1:39:211 hour, 39 minutes, 21 secondsDennis Dennis Ger UBS. Thank uh thanks for the presentation. Thanks to the team for
1:39:281 hour, 39 minutes, 28 secondsputting the day together. Um Chris, you you've talked a lot about the importance of value for for a while now, but I think a little bit less so in the
1:39:351 hour, 39 minutes, 35 secondspresentation thus far today. So wondering if you could speak a little more to, you know, where the brand is as far as value positioning goes, how you
1:39:421 hour, 39 minutes, 42 secondsthink about the value strategy over the coming years and if any update on how you think about winning with that lower income consumer in the US. Sure. Yeah, thanks for the question.
1:39:511 hour, 39 minutes, 51 secondsYeah, certainly I mean value is foundational. It goes back to when Ry founded this company. He talked about QSC and V uh and V V being value. So,
1:40:001 hour, 40 minutesthis goes all the way back to the beginning. And it's part of our DNA. You've heard me say that uh many times.
1:40:061 hour, 40 minutes, 6 secondsUh there's been a lot of work, as you know, over the last couple years uh to make sure that we've got our value positioning in the right places. And uh
1:40:141 hour, 40 minutes, 14 secondsbroadly across the world, I feel like we're in a really good spot there. Um, we've also talked about that there's a few different components to value.
1:40:231 hour, 40 minutes, 23 secondsThere's base menu. So, when you walk in the restaurant, what do you see on the menu boards? There's meal bundles, which would be, you know, okay, I'm buying a
1:40:311 hour, 40 minutes, 31 secondsbunch of stuff. Um, what do I get from a meal bundle standpoint? And then there's that entry level value, which is the the critically important value that you need
1:40:391 hour, 40 minutes, 39 secondswith that low-income consumer. If I focus just on the US um because I think that's probably uh the crux of your question. We've made tremendous progress
1:40:481 hour, 40 minutes, 48 secondson the first two elements of that. Our base menu pricing is below our competitive competitors on beef, chicken, and beverages and breakfast.
1:40:571 hour, 40 minutes, 57 secondsSo, we're in a really good spot from a menu standpoint. When you walk in the restaurants, we're lower than our competitive set. We also feel really
1:41:051 hour, 41 minutes, 5 secondsgood about where we are on the meal bundles. Uh our $5 meal bundle uh is the best in the industry. Nobody's better than us on that. We have $4 at
1:41:131 hour, 41 minutes, 13 secondsbreakfast. Uh and we've done the work to get our EVMS back in line. Uh we're holding to a 15 16% discount on that. So
1:41:221 hour, 41 minutes, 22 secondsI feel good about that. The opportunity that we have is still around that entry level pricing and we have that in almost
1:41:291 hour, 41 minutes, 29 secondsall of our our M markets. We haven't had that in the US. And so certainly that was what we tried to address with the 10 items for
1:41:381 hour, 41 minutes, 38 secondsunder $3 that we did in in uh Q2 of this year. Um we still have some opportunities on that and I talked about
1:41:441 hour, 41 minutes, 44 secondsthat on the Q2 call. Uh Sky certainly has been having a lot of really I think very productive conversations with the franchises. Uh there were some
1:41:521 hour, 41 minutes, 52 secondsconversations this week. uh there's complete alignment around the need for us to make sure we have a strong offering there and there's going to be
1:42:001 hour, 42 minutessome work that happens over the next couple months um to test some different ways for us to go after that and do that. So I have 100% confidence that the
1:42:091 hour, 42 minutes, 9 secondsUS will get that entry level value and that is really the key to going after that low-income consumer is having that entry entry- level value offering.
1:42:181 hour, 42 minutes, 18 secondsOkay. Um go Brian Yeah, thanks guys. Brian Harour from
1:42:251 hour, 42 minutes, 25 secondsMorgan Stanley. The so so the rent relief and then the capital partnering.
1:42:311 hour, 42 minutes, 31 secondsUm could you give us some sense for um kind of when the the plurality of that will show up? Right. I think you've
1:42:381 hour, 42 minutes, 38 secondstalked about something like 70% of restaurants that are going to be remodeled in the next three or four years. Maybe that was a US comment, but you know when will we see most of that
1:42:461 hour, 42 minutes, 46 secondscoming through? And I guess what are some of the other milestones? you know, for example, like the the beverage sale.
1:42:511 hour, 42 minutes, 51 secondsWhen will you see that in in most of the US and M stores that might be tied to, you know, to that capital deployment?
1:42:581 hour, 42 minutes, 58 secondsYeah. Well, why don't I take the first bit and and Chris may want to weigh in on the on the second part there. Um, I'd say just maybe for grounding,
1:43:071 hour, 43 minutes, 7 secondspartnering is something that's been part of our um business model for a long time. And I think if you remember EOTF
1:43:151 hour, 43 minutes, 15 secondsor in the US BBV 2020 we did significant partnering in pair with those initiatives. I think if you think about
1:43:231 hour, 43 minutes, 23 secondshow we always think about partnering at the enterprise level it's about we want to ensure that our franchises are going to get a strong return on what they're
1:43:301 hour, 43 minutes, 30 secondsinvesting behind any growth initiative and we want to make sure McDonald's is getting a strong return on any investment that we put behind to
1:43:381 hour, 43 minutes, 38 secondssupport. I think it's one of the strategic advantages of our business model is we have the financial strength as a system together with our franchises to get after these initiatives at scale.
1:43:491 hour, 43 minutes, 49 secondsI think the rent partnering that I laid out or the 8.5 billion that we talked about from 2027 to 2036
1:43:561 hour, 43 minutes, 56 secondsis commensurate with the opportunity we think to drive growth because obviously they're connected and that's obviously the way that we get our return over
1:44:041 hour, 44 minutes, 4 secondstime. I think one important thing to just note is that 8 and a half billion is a cash number. Obviously when we
1:44:111 hour, 44 minutes, 11 secondspartner we am advertise that partnering over the remaining term of the franchise agreement. So on average I would say that's probably about 10 years. So
1:44:201 hour, 44 minutes, 20 secondsthere's a different P&L timing than there is to the cash timing. I think we will not have a standard partnering approach. The partnering will depend on
1:44:281 hour, 44 minutes, 28 secondsthe context in each market because contexts are different, starting points are different, organizational dynamics
1:44:361 hour, 44 minutes, 36 secondsare often different. I think we want to make sure that that the partnering is designed to enable each of our uh
1:44:431 hour, 44 minutes, 43 secondsmarkets to get after the opportunity and do that in the right way and then headlined by that principle that whatever we invest, we've got to make
1:44:501 hour, 44 minutes, 50 secondssure we're getting an appropriate return on that investment. And again, it's very typical with what we've done with all of our significant growth initiatives over history.
1:44:591 hour, 44 minutes, 59 secondsYeah. And then maybe just the second part of your question, certainly the the elements of next that are tied to the remodels to the reinvestment there. I
1:45:081 hour, 45 minutes, 8 secondsmean, those are going to happen as as those activities take place. And we're doing this within the normal remodel cycle. So, this is going to be something
1:45:151 hour, 45 minutes, 15 secondswhere it'll depend on the market, but when is that 10-year remodel timing uh due for at franchisee? uh things like
1:45:221 hour, 45 minutes, 22 secondsthe beverage cell, those are really more about enabling and and making the restaurant run more efficiently. That doesn't mean though that we're not able
1:45:301 hour, 45 minutes, 30 secondsto get after the beverage opportunity until we have the beverage cell because you've already seen, you know, what we've done with beverages in the US.
1:45:371 hour, 45 minutes, 37 secondsWe've done that without the benefit uh of a beverage cell in most of our restaurants here. Um there are other markets in M. We're a little bit further
1:45:451 hour, 45 minutes, 45 secondsalong on on beverage cells. So, I I think part of what we've really been thoughtful about here is how do we make sure that we're going after the
1:45:531 hour, 45 minutes, 53 secondsopportunities when the system is has the readiness to go do that. Many of the ideas uh I think are are ones that we're going to be able to get in front of or
1:46:011 hour, 46 minutes, 1 secondget after uh in advance, but there are certainly things uh that are going to be tied to the remodel cycle.
1:46:081 hour, 46 minutes, 8 secondsSay Lauren, thank you. Appreciate Bank. So, appreciate all the color today. There's obviously a lot of focus from investors on reacelerating US comp.
1:46:191 hour, 46 minutes, 19 secondsI know Sky recently just took over. Can you just help bridge how we should think about US comps into the back half of the year and then some of the initiatives
1:46:261 hour, 46 minutes, 26 secondsthat you outlined today translating into 2027 and beyond? Thank you.
1:46:301 hour, 46 minutes, 30 secondsSure. Well, I'll I'll start and then uh we've got we've got Sky here who can give more commentary. But you know as we talked about uh the goal here in the US
1:46:391 hour, 46 minutes, 39 secondsis to make sure that we're exiting 2026 with the business in a stronger position heading into 2027. And that still is
1:46:471 hour, 46 minutes, 47 secondsvery much uh the focus and the orientation. Uh a big part of that is as as we've talked about making sure that
1:46:541 hour, 46 minutes, 54 secondswe've got uh that entry level value program in place. There's some work uh and a lot of conversations uh on that
1:47:011 hour, 47 minutes, 1 secondand maybe Sky I'll pass it over to you now to give a little more perspective on Yeah, thank you. Good morning, everyone.
1:47:071 hour, 47 minutes, 7 secondsUm, yeah, so we've had a lot of really productive conversations with franchises, particularly over the last few weeks, and it's it's obviously
1:47:141 hour, 47 minutes, 14 secondsexactly as Chris described, is how do we just make sure that the business is in a stronger position as we as we come out
1:47:211 hour, 47 minutes, 21 secondsof 26 going into into 27. Um, we've made a lot of quick moves already, um, particularly as as we address some of
1:47:281 hour, 47 minutes, 28 secondsthe the value opportunities that we have. Um, so you'll certainly find us doing two things. um trying to just simplify operations and get our
1:47:371 hour, 47 minutes, 37 secondsrestaurant teams a lot more focused on doing fewer things well. Um and then also knowing that we have some elements
1:47:441 hour, 47 minutes, 44 secondsof our value strategy that are actually working, making sure that we redirecting our marketing efforts into the things that are working. So for the back part
1:47:521 hour, 47 minutes, 52 secondsof the year, you'll see us really just help the restaurants get quite focused on on execution, particularly around taste and quality. Um but then also
1:48:001 hour, 48 minutesyou'll see us leaning a lot more into things like EVMS and meal bundles and and digital offers um which are really the things that that are working right
1:48:081 hour, 48 minutes, 8 secondsnow. In concert we're obviously doing a lot of testing around what the evolution of our of our new entry level um value
1:48:171 hour, 48 minutes, 17 secondsprogram will be which more to come in in the new year.
1:48:201 hour, 48 minutes, 20 secondsI might just uh do a little build on that uh from a tactical perspective but just building on what we talked about in the Q2 call. You remember we said we had some execution opportunities to address.
1:48:311 hour, 48 minutes, 31 secondsYou've kind of heard from Sky how how the US business is working very handinand with our operator leaders to get that sorted uh with the right sense of of urgency. We talked in the Q2 call.
1:48:421 hour, 48 minutes, 42 secondsYou remember that we started the quarter in July slightly negative. A lot of the actions that Sky has just talked about went into place in August. So August was
1:48:511 hour, 48 minutes, 51 secondsalso slightly negative. We expect September will be positive but I think because of that slower start to the beginning of the quarter. I think we
1:48:591 hour, 48 minutes, 59 secondsexpect the US business will be slightly negative for Q3. Okay, John.
1:49:091 hour, 49 minutes, 9 secondsThank you. It's John Ivan coach AP Morgan. The question is on the implementation of the various modules of NEX. So, you know, it it sounds like a
1:49:171 hour, 49 minutes, 17 secondsnumber of things are going to go in over a course of a few years and some of the design elements of Nex will actually happen with a 10-year remodel. I think I heard you correct.
1:49:251 hour, 49 minutes, 25 secondsSo, when I go back and I think about EOTF in M and specifically in the US, it was kind of like everything was done
1:49:331 hour, 49 minutes, 33 secondsat once within a store and I think a lot of projects were actually done ahead of the 10-year remodel. So you maybe give
1:49:411 hour, 49 minutes, 41 secondsus if you Chris because you were sitting in the seat then um you know a history lesson in terms of what you learned from EOTF in terms of kind of accelerating
1:49:491 hour, 49 minutes, 49 secondsthe project and doing everything at once in those stores in terms of what we learned from EOTF relative to why the current plan on next a little bit of a
1:49:581 hour, 49 minutes, 58 secondsyou know longer stepby-step implementation is the right thing for 2027 and beyond.
1:50:031 hour, 50 minutes, 3 secondsSure. Uh I mean a couple things I think first I would probably disagree slightly with your characterization of where we
1:50:101 hour, 50 minutes, 10 secondswere with EOTF uh in that we were you know perhaps moving more quickly. In fact we were trying to catch up uh and
1:50:181 hour, 50 minutes, 18 secondsin the US we had gotten behind the restaurant estate had gotten outdated uh and so we were in a situation where we actually needed to catch up in really
1:50:261 hour, 50 minutes, 26 secondsshort order. Uh which is the focus of what we did uh during that three or four year period there. I think certainly one of the the big learnings and takeaways
1:50:351 hour, 50 minutes, 35 secondsfrom that is we can't let that happen again. Uh and I think we've seen around the world we've generally been on a very good remodel cadence but we had gotten
1:50:441 hour, 50 minutes, 44 secondsout of whack on that uh in the US and so we're now you know heading into again a 10-year remodel cycle and and we're
1:50:511 hour, 50 minutes, 51 secondscommitted to making sure that our restaurants don't fall behind like they did previously. So I think that was certainly one big learning. I think the
1:50:591 hour, 50 minutes, 59 secondssecond thing that, you know, we've learned through that is, you know, how you sequence this um and when you're
1:51:061 hour, 51 minutes, 6 secondskind of taking restaurants down is really important. Um because, you know, no matter if you're doing a light touch or if you're doing something more
1:51:131 hour, 51 minutes, 13 secondssignificant in a restaurant, uh it does impact operations. It does impact downtime. Uh and so a lot of how we've thought about the different elements of
1:51:221 hour, 51 minutes, 22 secondswhat we're doing here with Next is also with an eye toward understanding the impact it might have on restaurants. uh in downtime. The fact that this is being
1:51:311 hour, 51 minutes, 31 secondsspread globally across really a 10-year remodel cycle allows us on a global level to certainly have uh more latitude
1:51:391 hour, 51 minutes, 39 secondson that. In the US, you know, roughly if you just take okay, you did 70% of the system in EOTF, you would have roughly
1:51:471 hour, 51 minutes, 47 seconds70% of the system in the US going through that over the next call it four years. That's broadly right, but I think we're also going to be pragmatic about
1:51:551 hour, 51 minutes, 55 secondsit and we're going to be working with franchises to do it in the way that makes the most sense. So, I think let's not get caught behind. Let's make sure
1:52:031 hour, 52 minutes, 3 secondswe're really thoughtful about what we're putting into the restaurant when we're taking it down to touch it to do a remodel. Those are probably the biggest takeaways we had.
1:52:121 hour, 52 minutes, 12 secondsLet me go on this side over here. Uh Jake, hey Jacob Aken Phillips, Melius
1:52:211 hour, 52 minutes, 21 secondsResearch. Thanks for the question and um thanks for the presentation. So can you go a little bit more in detail about the phasing of the different modules? What's
1:52:291 hour, 52 minutes, 29 secondsassumed in that $100,000 franchisee cash flow improvement? How much of it is productivity versus the
1:52:381 hour, 52 minutes, 38 secondsexpected sales from better hospitality, better some of these other platforms, etc. Sure. Well, most of it in fact is
1:52:471 hour, 52 minutes, 47 secondsis really driven by productivity. We haven't counted on a lot of operating leverage going into that 250 basis point
1:52:551 hour, 52 minutes, 55 secondsuh productivity. Uh so most of it is is real uh productivity benefits. Uh and there are elements to it. There's Arch
1:53:021 hour, 53 minutes, 2 secondsIQ uh and you heard different elements of ArchIQ. Archie's part of it.
1:53:071 hour, 53 minutes, 7 secondsInventory management uh things that we can do around connected restaurants.
1:53:111 hour, 53 minutes, 11 secondsThat's one part of it. There's another part which around supply chain savings.
1:53:151 hour, 53 minutes, 15 secondsWe still have a significant amount of spend as you know on our supply chain.
1:53:201 hour, 53 minutes, 20 secondsWe think there's big opportunities there for us to unlock savings. And then we're also looking at marketing as an opportunity and and particularly as as
1:53:271 hour, 53 minutes, 27 secondsmarketing evolves. Uh Morgan talked about this as well uh about how the marketing model is is changing. Uh we
1:53:351 hour, 53 minutes, 35 secondsthink there's also opportunities for us to get productivity savings on the marketing side. So all of those things together, it will depend a little bit on
1:53:441 hour, 53 minutes, 44 secondswhere a market is in that period uh at that time period. So take Archie as an example. Right now it's uh English and
1:53:511 hour, 53 minutes, 51 secondsSpanish language. So if you were Germany uh your ability to pull that right now is not the same as if it's English or Spanish. Um but the plan would be
1:54:001 hour, 54 minutescertainly over time uh that Germany would have that. So it really is going to depend very much markettomarket uh around that. The other thing, a lot of
1:54:081 hour, 54 minutes, 8 secondswhat we're doing with Arch IQ is also ena enabled by our edge deployment when that technology goes in. But we've tried
1:54:151 hour, 54 minutes, 15 secondsto, as you would imagine, frontload as much as we can some of the productivity benefits to enable the capacity and the confidence to then go invest behind the other areas of next.
1:54:271 hour, 54 minutes, 27 secondsChris, thanks. It's Chris O call with Bayard.
1:54:331 hour, 54 minutes, 33 secondsUm, you know, fewer larger marketing campaigns can result in more focus and impact, but it also carries risk that
1:54:401 hour, 54 minutes, 40 secondsthe campaign may underperform expectations. What gives you confidence that you can predict the success and reliability of a longer marketing
1:54:491 hour, 54 minutes, 49 secondscampaign and maybe what are some of the key factors to ensure it it is successful?
1:54:531 hour, 54 minutes, 53 secondsSure. Well, it it starts with uh what we're focusing on and what we're focusing on is baseline driving growth.
1:55:001 hour, 55 minutesAnd we're focused on baseline driving growth. It's all about the taste and quality of our food. And we know because taste and quality are two of the top
1:55:091 hour, 55 minutes, 9 secondsthree consumer needs. That as you improve taste and quality perception, it has sustained benefit on share. And you heard about, you know, improving five
1:55:181 hour, 55 minutes, 18 secondspoints taste and quality perceptions in chicken is related to uh getting a half a share point of growth in chicken. And
1:55:251 hour, 55 minutes, 25 secondsso for us, the opportunity is as we continue to make the upgrade around the taste and quality of our food and drive consumer awareness of it, that's
1:55:341 hour, 55 minutes, 34 secondssomething that's going to be the gift that keeps on giving. Um, and so you actually become a little bit less dependent on sort of do you have the
1:55:421 hour, 55 minutes, 42 secondsright movie property this month or do you have the right other partnership which creates a little bit of that boom bust dynamic that you're talking about.
1:55:511 hour, 55 minutes, 51 secondsthe foundation of driving taste and quality and driving consumer perception in those areas drives that growth and then you can put things on top of it. So
1:55:591 hour, 55 minutes, 59 secondsactually I think what we've described uh as a as our plan with next actually derisk the marketing calendar more so than maybe what we've had over the last couple years.
1:56:101 hour, 56 minutes, 10 secondsPeter, thank you. Uh Peter Stlay BTI uh thanks
1:56:171 hour, 56 minutes, 17 secondsfor everything today. I I wanted to ask um on the handbredded chicken if you can give us a little bit more detail on
1:56:241 hour, 56 minutes, 24 secondsterms of the timing of that, what you need to do to get there and is that somewhat of an offset to the 250 basis
1:56:311 hour, 56 minutes, 31 secondspoints of gross benefit to the franchisees? I would assume that adds some more labor to the restaurant. So any more detail around that would be helpful. Thanks.
1:56:391 hour, 56 minutes, 39 secondsSure. Well, as we said, we've got a lot of experience with handbredding. We're doing it in in some of our big markets
1:56:451 hour, 56 minutes, 45 secondsin Asia. Uh I think for us as we think about hand breading, we've we've piloted here in Chicago uh and gotten some
1:56:531 hour, 56 minutes, 53 secondsexperience there. Um and now we're going to take it to more restaurants in the US to really make sure that we fine-tune the operational elements. You can't just
1:57:011 hour, 57 minutes, 1 secondsort of take the experience and the learning from an operation standpoint in Asia. You've got a different menu. You've got different unit volumes.
1:57:091 hour, 57 minutes, 9 secondsYou've got breakfast versus lunch, different peak volumes. So you actually have to make sure that you've optimized how you do handb breading uh in a market
1:57:181 hour, 57 minutes, 18 secondsuh and which is why we're doing this testing uh or this piloting that we're doing in the US uh and we're also doing it in Ireland. I I would expect we're
1:57:261 hour, 57 minutes, 26 secondsgoing to continue to learn on that over the next call it six months or so uh to really get how we would roll that out perfected and then once we've aligned
1:57:341 hour, 57 minutes, 34 secondswith that on the franchises uh you know we would be rolling out. So we're not announcing a date on it. Um but it's it's going to be driven by making sure
1:57:421 hour, 57 minutes, 42 secondsthat we've really grooved the operational elements of that with our franchises uh in both like I said the US
1:57:481 hour, 57 minutes, 48 secondsand and then learning in M as well. Uh as it relates to the investment certainly there is labor investment. Uh
1:57:561 hour, 57 minutes, 56 secondsit really becomes sort of different ways you can think about it. the in the broader next conversation there's areas that we're requiring franchises to
1:58:041 hour, 58 minutes, 4 secondsinvest whether that's capital whether that's through the P&L and then there are other areas for the franchises that we're going to be driving savings for
1:58:111 hour, 58 minutes, 11 secondsthem both in the P&L but also through some of the capital partnering that Ian talked about so I hate to sort of you know say one is directly with the other
1:58:201 hour, 58 minutes, 20 secondsit's it's sort of a ledger there's things that are on the plus side of the ledger there are things that are on the negative side of the ledger and when you put those two together you get the
1:58:281 hour, 58 minutes, 28 secondsstrong returns that we talked talked about and just maybe the only texture I would add um is I think a big part of how next comes to life is how you think about
1:58:361 hour, 58 minutes, 36 secondsthese as interconnected capabilities and how you phase them. So if you're in the US do I put uh Archie in place first
1:58:441 hour, 58 minutes, 44 secondsbecause I know that creates capacity and efficiency improves the ability of the restaurant to execute and frontload that
1:58:521 hour, 58 minutes, 52 secondsinvert in front of something like chicken where there's more investment some added complexity that needs to be managed. So I think how each market kind
1:59:001 hour, 59 minutesof thinks about these and sequence them I think is going to be a really important part of how we bring to life the strategy and make sure we can
1:59:071 hour, 59 minutes, 7 secondsexecute it and set the restaurants obviously up for success.
1:59:121 hour, 59 minutes, 12 secondsSarah, thank you. Sarah Senator from Bank of America. Um I guess maybe a
1:59:201 hour, 59 minutes, 20 secondsclarification then a question. Um the I guess the rough math I did on the remodels and the payback period suggests maybe a mid to high singledigit lift. Is
1:59:291 hour, 59 minutes, 29 secondsthat the right way to think about um those um you know what you're expecting as you do that? And then the question is I think Chris at one point you mentioned
1:59:371 hour, 59 minutes, 37 secondslast year that maybe a quarter of the US business was on the loyalty platform.
1:59:421 hour, 59 minutes, 42 secondsHave you seen that grow? It seems like loyalty is a important part of your um you know kind of customization and personalization. So, how do you get that
1:59:511 hour, 59 minutes, 51 secondsadoption curve, you know, how do you get people continue up that adoption curve? Thank you.
1:59:561 hour, 59 minutes, 56 secondsI'll let you do the first one, Ian, and I'll for the loyalty.
2:00:002 hoursUm, well, I don't have your math in front of me, Sarah, but I would say I think um the if you look at remodels,
2:00:082 hours, 8 secondscertainly in in places like Europe or M, we continue to see good lifts when we do remodels and keep that image fresh. It
2:00:152 hours, 15 secondsalways depends on do you do that remodel as a standalone basis? Do you combine the remodel with capacity driving or
2:00:232 hours, 23 secondsvisible kind of external elements to the consumer? So I would say I just would go back to when we think about the total
2:00:302 hours, 30 secondsalgorithm, you get to that more durable comparable sales lift that we talked about earlier and we're and we're very confident in kind of getting to those
2:00:382 hours, 38 secondspayback terms that I talked about up front.
2:00:412 hours, 41 secondsYeah. Yeah. And then on loyalty, right now loyalty uh is about 30% of sales. Uh the opportunity for us is to continue to drive that. And and you heard from
2:00:502 hours, 50 secondsMorgan uh the potential that we have with loyalty, particularly around frequency. We can get someone to be a loyal customer, we're seeing about two and a half times increase on frequency.
2:01:002 hours, 1 minuteAnd so the more we can get those occasional customers moved into the loyalty program, the more compelling uh the economics and the math on that.
2:01:082 hours, 1 minute, 8 secondsLook, I think one of the things that we've discovered, and Morgan talked about this, is the the more that we can broaden the loyalty platform and include
2:01:172 hours, 1 minute, 17 secondsthings like partnerships so that it's not just about, you know, redeeming points uh for food, but also broadening out uh the different value and the
2:01:262 hours, 1 minute, 26 secondsbenefits that you get from loyalty. All of those things serve to increase and drive even more adoption of the loyalty program. So you'll see over time, you
2:01:342 hours, 1 minute, 34 secondsknow, we're going to continue to add features to our loyalty program that's going to continue to add members to that and then we'll get the frequency benefit that I talked about.
2:01:432 hours, 1 minute, 43 secondsDo one more. Okay.
2:01:482 hours, 1 minute, 48 secondsMy my question is just on GNA and I mean from 2023 to 2030 you basically kept at 2.2% for four years. Now it's rolling
2:01:562 hours, 1 minute, 56 secondsoff pretty hard. What were the capabilities you were investing in that kept it high? Why does it roll off? And I think it's some of the technology gets
2:02:052 hours, 2 minutes, 5 secondsin place, but um does that mean you see a big step down in 28 and just just kind of where you get the efficiencies? Thanks.
2:02:112 hours, 2 minutes, 11 secondsYeah. Uh good question. Well, I think it's it's a couple of things. Firstly, it's all of the work we've been doing on technology to I think modernize,
2:02:202 hours, 2 minutes, 20 secondsgenerate global scalable tools and capabilities by in their nature are more efficient because we're not building
2:02:272 hours, 2 minutes, 27 secondsstandalone technology in every market which we've talked a lot about in the past which is very efficient obviously to build and very efficient to op
2:02:362 hours, 2 minutes, 36 secondsinefficient to operate. I think the second thing which I talked about in my opening remarks is is the global business service capability. Right? We
2:02:432 hours, 2 minutes, 43 secondswe talked about the fact that we had 600 finance systems and several hundred HR systems. Obviously again very complex
2:02:502 hours, 2 minutes, 50 secondsand inefficient to operate. We think that capability now is at scale and we are going to start leveraging that
2:02:572 hours, 2 minutes, 57 secondscapability to kind of drive efficiency across the organization. I think the third bit is AI and what we believe AI can do to help further enable some of
2:03:062 hours, 3 minutes, 6 secondsthose processes endtoend processes to continue to drive efficiency. So, I think it's the combination of those things that help us get there. Um, I
2:03:142 hours, 3 minutes, 14 secondswon't get into texture of timing. More to come later on that.
2:03:182 hours, 3 minutes, 18 secondsYeah. And I would just add I I think if you look at over the last few years, I mean, we haven't broken it out, but the scale of what we've had to invest from a
2:03:262 hours, 3 minutes, 26 secondstechnology standpoint to get to a global a common global tech platform to get those data puddles into data lakes that
2:03:342 hours, 3 minutes, 34 secondshas been a massive amount of spend. And then we've created this global business services which again required a big upfront investment to get that set up.
2:03:432 hours, 3 minutes, 43 secondsAnd so now we've got those two in place and that's going to give us uh this the efficiency savings uh that you know we've shown here in the guidance. Um but
2:03:512 hours, 3 minutes, 51 secondsthere was a lot of heavy lifting and a lot of investment that needed to happen over the last few years to enable the benefits we're now going to see.
2:03:592 hours, 3 minutes, 59 secondsOkay. Uh that wraps up our Q&A session. Thanks Chris and Ian.
2:04:032 hours, 4 minutes, 3 secondsAll right. We'll see you at the warehouse. [applause] All right, thanks everyone for your
2:04:122 hours, 4 minutes, 12 secondsquestions. For those here in Chicago, please remain seated and in a moment we'll outline what we have planned for the remainder of the day. For those of
2:04:202 hours, 4 minutes, 20 secondsus on the live stream, thank you for joining us today. We hope our presentation provided insight into how McDonald's Next will drive our ambition
2:04:272 hours, 4 minutes, 27 secondsto be the first choice for more customers more often. Please feel free to contact investor relations if you have any follow-up questions. And with that, we'll now wrap up the live stream.
2:04:372 hours, 4 minutes, 37 secondsAgain, thank you and have a great rest of your day.