Chris Kempczinski has morphed into a top restaurant industry executive since joining McDonald’s to focus on strategy in 2015. Now he must prove that has learned more than enough about the fast-food business — after years of not being in it — to lead the Golden Arches forward at a critical time in its history.
On Sunday evening, McDonald’s announced that Kempczinski has been appointed permanent CEO and has gained a seat on McDonald’s board of directors — both a vote of confidence in his leadership potential. He was previously president of McDonald’s U.S.
This follows news that CEO Steve Easterbrook was removed due to “poor judgment involving a recent consensual relationship with an employee.” A source familiar with the situation tells Yahoo Finance the process on this matter with Easterbrook was thorough and seen through by McDonald’s board of directors.
McDonald’s declined to make Kempczinski available to Yahoo Finance for an interview. A McDonald’s spokeswoman declined to share any details on Easterbrook’s ouster beyond the press release.
In a statement to Yahoo Finance, Easterbrook’s lawyer said, “Mr. Easterbrook is deeply grateful for his time at McDonald’s and continues to believe in the Company’s future. He acknowledges his error in judgment and supports the Company’s decision. He will not be commenting further at this time.”
McDonald’s stock fell 3% in pre-market trade on Monday.
Kempczinski joined McDonald’s in Sept. 2015, hired by the well-regarded restaurant industry veteran and now former CEO Steve Easterbrook. One McDonald’s insider told Yahoo Finance Kempczinkski is known internally as a very detailed oriented executive. What is unclear is if Kempczinski could pull back from the details and assume more of the leadership role needed to lead and inspire a restaurant giant such as McDonald’s, the insider said.
Another potential source of concern is that Kempczinski tends to be an analytics driven executive, which has in the past ruffled some feathers of franchisees that pride themselves on relationships with corporate.
“This is McDonald’s in crisis,” long-time restaurant analyst Howard Penney of Hedgeye Risk told Yahoo Finance. Penney says McDonald’s has long been known for its succession planning, but the appointment of Kempczinski doesn’t fit the bill of a well thought out decision.
Penney echoed the concerns of the McDonald’s insider regarding Kempczinski’s poor relationship with franchisees — which are the lifeblood of the Golden Arches. Franchisees have been unhappy with Kempczinski’s initiatives to raise the average ticket at McDonald’s, which goes against the chain’s value-focused DNA.
“You need a strong relationship with the franchisees. Now you have the guy that is causing all the anxiety running the company,” Penney added.
Explained UBS restaurant analyst Dennis Geiger, “Our franchisee discussions highlight concern around the changes/uncertainty, while the leadership transitions come at a pivotal point in US franchisee-franchisor relations. Today’s news likely adds uncertainty to investors’ list of concerns, which already include: decelerating US comps, negative EPS revisions, & US breakfast competition, against the backdrop of valuation re-ratings across QSR.” Geiger maintained his neutral rating on McDonald’s stock.
Here’s what we know about Kempczinski, who will have to quickly get up to speed on McDonald’s sizable international business.
He was brought into the fast food industry
Kempczinski was one of Easterbrook’s earliest leadership hires. He was an outsider by design, part of Easterbrook’s efforts to get fresh thinking in the then stale McDonald’s top ranks.
Kempczinski was then executive vice president of growth initiatives and president of international at the legacy Kraft Foods business. Prior to that, Kempczinski worked at PepsiCo, Boston Consulting Group and Procter & Gamble before joining Kraft in 2008.
He gets digital
At the opening of McDonald’s New York City flagship over the summer, Yahoo Finance came away impressed by Kempczinski’s knowledge of the business. Most importantly, Kempczinski appears to understand the need to move quickly with digital enhancements across ordering and the drive-thru.
He helped spearhead a major delivery push in the U.S. via Uber Eats, the roll-out of digital ordering kiosks, and the beginning of re-imagining the drive-thru experience by infusing more technology.
“We are still learning where that business could go,” Kempczinski told Yahoo Finance in May. “Certainly we expect delivery to keep growing.”
He deserves some credit for the food and sales trends
A good bit of the credit on the vastly improved food quality at McDonald’s has mostly gone to restaurant veteran Easterbrook. But Kempczinski deserve a healthy dose of credit as part of his efforts to improve traffic counts at McDonald’s U.S. —weak traffic counts at McDonald’s U.S. is something Kempczinski identified early as a key problem for the chain. This is likely where Kempczinski’s background in consumer products and consulting have paid dividends for McDonald’s.
McDonald’s U.S. has seen an impressive uptick in same-store sales under Kempczinski’s watch.