McDonald's New CEO, Chris Kempczinski, Faces Franchisee Disenchantment

• by Thom Forbes , Featured Columnist @tforbes, November 6, 2019

Chris Kempczinski, who took over as CEO of MacDonald’s following the resignation of Steve Easterbrook last week for having a consensual relationship with an employee, is a detail-oriented outsider with broad experience as a strategist at top-line marketers. But he has never earned a paycheck assembling a Big Mac, which apparently impairs his credibility with franchisees.

A marathon runner known around the office as Chris K., Kempczinski “began his business career as a Procter & Gamble brand manager in the early 1990s, working for its soap dish division that included Comet, Mr. Clean and Spic and Span. A Duke University graduate, he left P&G to earn an MBA from Harvard University. After Harvard, Kempczinski worked for PepsiCo and later Kraft,” Sarah Brookbank and Alexander Coolidge report  for the Cincinnati Enquirer.

“Within one year and one month of joining McDonald’s, Kempczinski was promoted to president of McDonald’s USA in October 2016. During his tenure as president of McDonald’s U.S. footprint, Kempczinski oversaw the business operations of around 14,000 stores,” Matthew Grothaus reports for Fast Company.

“What Chris Kempczinski isn’t is a guy who once flipped burgers -- and that doesn’t exactly endear him to owners of McDonald’s franchises. Already upset over bearing the burden of the costs from that makeover, they may be one of his biggest challenges as he takes over from Steve Easterbrook,” write  Bloomberg’s Leslie Patton and Thomas Buckley.

Kempczinski was at at Easterbrook’s side as he turned around the chain with “an ambitious modernization plan that spanned menu revamps, store remodels and acquiring artificial intelligence startups,” they write. “But the costs of implementing Easterbrook’s plan were heaped upon the restaurant owners, who run about 93% of McDonald’s 38,000 restaurants worldwide. They banded together in open rebellion as they chafed at what they saw as a command-and-control mentality coming from corporate headquarters.

“Last November, they succeeded in forcing Easterbrook to slow by two years the rollout of upgrades tied to home delivery and touchscreen kiosks in the U.S. Given Kempczinski’s key role, that strife isn’t likely to recede easily, said a person familiar with the situation,” Patton and Buckley add.

“The history of McDonald’s is you earn your credibility by being an operations person,” Richard Adams, a consultant who works with McDonald’s operators, tells  The Wall Street Journal’s Micah Maidenberg. “Chris K. is the first person to run the U.S. who has zero experience doing that.

“Mr. Kempczinski said in an interview Sunday that operators are enjoying a record year for cash flow. Average cash flow for franchisees has grown for 11 consecutive months through September, executives said last month,” Maidenberg continues. “We have about 2,000 owner-operators in the U.S. It’s a place where there is always lively debate,” Kempczinski tells him.

Kempczinski will hold a global town-hall meeting with employees today.

“I’ll share a bit more about my background and perspective, but most importantly, I’d like to hear from colleagues around the world,” he wrote in an email, Maidenberg reports.

Former CEO Easterbrook, meanwhile, “stands to pocket $70 million worth of stocks and options as part of being ousted from the company over a consensual relationship with an employee, CBS News reported Tuesday,” writes Tamar Lapin for the New York Post. “On top of that, the former burger bigwig will be getting a cash severance of $700,000, or six months pay.” 

That’s because “McDonald’s board of directors decided to label Easterbrook’s forced exit as ‘without cause.’”

“No way this is what you would do if the board wanted to send the message that this type of behavior at McDonald’s is not acceptable,” pay consultant Brian Foley told the outlet, Lapin continues. 

Meanwhile, “Labor activists Fight for 15 and a union said in May that 25 McDonald's employees came forward alleging that they were sexually harassed on the job. The accusations included groping, indecent exposure, propositions for sex and lewd comments by supervisors against workers as young as 16 years old, according to the labor groups,” CBS News’ Caroline Linton writes.

“The American Civil Liberties Union and the Time's Up Legal Defense Fund also backed the complaints, which included 20 claims with the Equal Employment Opportunity Commission and three filed lawsuits alleging civil rights violations. Easterbrook responded in a letter saying the company had started working with RAINN, a group devoted to curbing sexual violence, to improve conditions for employees and upgrade McDonald's harassment policies,” Linton continues.

In new that may -- or may not -- be related, McDonald’s global chief people officer David Fairhurst, has also left the company, McDonald’s confirmed Monday without further comment. 

“He’s the third top executive to leave the company since mid-summer,” Nancy Luna reports for Nation’s Restaurant News. Silvia Lagnado, global chief marketing officer, announced in July that she would step down in October.