Mcdonald's 2008 Annual Report
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Jim Skinner, Chief Executive Officer (left) Ralph Alvarez, President and Chief Operating Officer (right) To Our Valued Shareholders: I’ve been thinking a lot lately about a quote from Thomas Alva Edison, one of America’s greatest inventors. “Opportunity is missed by most people,” he observed, “because it is dressed in overalls and looks like work.” I believe Mr. Edison was reminding us that lightning It was hard work and determination that built really doesn’t come in a bottle — and that overnight McDonald’s — and today, those same qualities successes are very much the exception to the rule, drive our success. not the norm. As this Annual Report indicates, 2008 was a banner At McDonald’s, success has always involved a year for McDonald’s. Revenues increased to a record not-so-profound formula involving one-part inspiration $23.5 billion … global comparable sales increased and four-parts perspiration. 6.9 percent and we marked our 68th consecutive monthly increase … operating income and earnings Our founder, Ray Kroc, coined the phrase “grinding per share rose 17 and 15 percent, respectively it out” to characterize the determination and attention (excluding the 2007 Latin America transaction) … to detail that is required to be successful in our and we returned $5.8 billion to shareholders through industry. “Grinding it out” was his way of saying share repurchases and dividends paid. the restaurant business is, and always will be, a labor-intensive operation. REVENUES 06 $20.9 07 $22.8 08 $23.5 In billions. These financial results are among the best in our This process began nearly six years ago, when Company’s history. Significantly, in a year when McDonald’s embraced a strategy focused nearly every investment suffered, when the Dow fell on restaurant operations and our cornerstones 34 percent and the S&P lost nearly 39 percent of quality, service, cleanliness and value. of its total shareholder value, your investment in McDonald’s increased by nearly 6 percent. In fact, “Better, not just bigger” became our mantra, and the McDonald’s was one of only two companies in the customer-centric Plan to Win became our playbook. Dow Jones Industrial Average to post a gain. This same strategy continues today … in 32,000 McDonald’s restaurants around the world. Every OUR HARD WORK PAID OFF IN 2008. decision we make, whether it affects thousands We are confident we can sustain this success going of restaurants or just one, has customer relevance forward because our entire McDonald’s System — as its primary driver. comprised of the industry’s best franchisees, suppliers Whether it involves adding more choices and and employees — continues to focus on delivering variety … improving our operational excellence … long-term profitable growth. making our restaurants more convenient and more inviting … or enhancing our value proposition across the menu, we take our cue from customers. 68 58Million Consecutive months Customers served of positive global on average each day comparable sales through December 2008 THEY SPEAK. WE LISTEN. In 2003, McDonald’s served an average of 47 million customers a day. In 2008, our average increased to 58 million customers a day — an increase of about 25 percent in just five years. Our 5,000 franchisees worldwide, who own and operate 80 percent of our restaurants, display outstanding leadership in their restaurants and 2 McDonald’s Corporation Annual Report 2008 communities. Our managers and crew are serving We believe the strategies we have in place continue customers better than ever, as measured through to be exactly right for our business … and, in our Customer Satisfaction Opportunity scores. the future, will enable us to seize opportunities when others can’t. Our unparalleled global supply chain enables us to obtain the quality and quantity of ingredients we I am immensely proud to be a part of this McDonald’s need at competitive and predictable prices. The team. Six years ago, to recall Mr. Edison, we did not collaborative relationship we have with our suppliers let opportunity pass us by. We rolled up our sleeves is a true competitive advantage, especially in today’s and worked together to restore pride and prosperity environment, and a key reason why we continue to to the McDonald’s brand. Looking ahead to 2009 achieve industry-leading restaurant-level profitability. and beyond, I am confident we will maintain our momentum by continuing to focus on our customers, CASH GENERATED BY OPERATIONS our restaurants and our strategy of being “better, 06 $4.3 not just bigger.” 07 $4.9 08 $5.9 As always, thank you for your investment in McDonald’s. In billions. We appreciate the trust you have in our Company, and we are working hard to keep it. And our talented, experienced employees, led by Sincerely, President and Chief Operating Officer Ralph Alvarez and his global management team, have kept McDonald’s strategically focused on the Plan to Win. In addition, strong financial management contributes to our profitability and returns. Whether it involves Jim Skinner controlling our costs or investing to grow our Vice Chairman and CEO business, McDonald’s disciplined approach provides flexibility and strength in these unprecedented financial markets. This is reflected in our healthy balance sheet and the highest credit rating in the restaurant industry, which allows us to have ready access to capital when we need it. Our financial strength is also a positive for our owner/operators and suppliers, who continue to have access to the credit needed to reinvest in their businesses. CASH RETURNED TO SHAREHOLDERS 06 $4.9 07 $5.7 08 $5.8 Through dividends and share repurchases. In billions. McDonald’s Corporation Annual Report 2008 3 Our people are the spirit SENIOR CORPORATE & BUSINESS UNIT OFFICERS Ralph Alvarez* President, Chief Operating Officer of McDonald’s; they Jose Armario* Group President — Canada & Latin America Peter Bensen* Chief Financial Officer transform our Plan to Win Peter Bush President — APMEA Pacific & South Africa Division Mary Dillon* Global Chief Marketing Officer into reality with their Steven Easterbrook President — Europe Northern Division Timothy Fenton* President — Asia/Pacific, Middle East & Africa commitment, dedication Janice Fields U.S. Chief Operations Officer Richard Floersch* Chief Human Resources Officer and vision. Denis Hennequin* President — Europe James Johannesen President — U.S. Central Division Khamzat Khasbulatov President — Europe Eastern Division Karen King President — U.S. East Division MANAGEMENT TEAM Bane Knezevic President — Europe Western Division (From left to right) Kevin Ozan* Corporate Controller Jose Armario Richard Floersch Jean-Pierre Petit President — Europe Southern Division Janice Fields Mary Dillon Steven Plotkin President — U.S. West Division Peter Rodwell President — APMEA Greater Asia & Middle East Division James Skinner Timothy Fenton Gloria Santona* General Counsel, Corporate Secretary Ralph Alvarez Peter Bensen James Skinner* Vice Chairman, Chief Executive Officer Jeffrey Stratton* Chief Restaurant Officer Donald Thompson Gloria Santona Donald Thompson* President — U.S.A. Jeffrey Stratton Denis Hennequin *Executive Officer 4 McDonald’s Corporation Annual Report 2008 From young adults to moms, from breakfast to late night, from Beijing to Brussels to Boston, McDonald’s is firing on all cylinders. We drive our business momentum by focusing on what matters most to customers. Our owner/operators, suppliers and employees work together to meet customer needs in uniquely McDonald’s ways. The powerful combination of entrepreneurial spirit and Systemwide alignment around our Plan to Win enables us to execute the best ideas with both large - scale efficiency and local flair. As a result, we’re delivering simple, easy and enjoyable restaurant experiences for customers and creating superior value for shareholders. Read on to learn how McDonald’s is … On the Menu On the Move On the Mark On the Map On the Money For Great Taste For Today’s For a Great As a Place All Day and Variety Busy Lifestyles Experience to Gather Every Day On the Menu For Great Taste and Variety Food options to feel good about Whether you prefer beef or chicken, salads or sandwiches, breakfast or desserts, there’s something for every appetite and occasion at McDonald’s. In every country, our menus balance classic favorites with new tastes and local flavors. We’re also a beverage destination with offerings such as sweet tea, juices and McCafé coffees. Customers — especially parents — are taking notice of the great-tasting, feel-good choices we’ve introduced in recent years, from flavorful Premium Salads and Snack Wraps to fresh Apple Dippers in the U.S. and Corn Cups in China. Research tells us that customer perceptions of our food’s nutritional content have improved in many markets. In the U.S., one of every three Happy Meals sold now includes either milk, water or Apple Dippers. We also engage kids’ minds, bodies and spirits with Happy Meal promotions like “One Minute to Move It” from DreamWorks Animation’s Madagascar: Escape 2 Africa,™ which challenged them to take a moment to have fun and be active. New products can broaden our appeal, but the great taste of our core menu is still the primary driver of our business. Promoting classic favorites like the Big Mac, Quarter Pounder, Chicken McNuggets and our World Famous Fries continues to generate significant sales growth, as we saw with the 40th Anniversary celebration of the Big Mac in 2008. Madagascar: Escape 2 Africa™ ©2008 DreamWorks Animation LLC Say Mmmmm In Europe, the unique beef taste and real ciabatta bread of The M from McDonald’s has boosted our image for innovation and quality. This new burger has driven sales in several European countries, including France, Germany and the U.K. Beverage Destination Cappuccinos, lattes and mochas are part of our delicious lineup of new McCafé specialty coffees.