Just before 2013’s end-of-year holiday season kicked off, McDonald’s CFO Peter Bensen and his financial team cut approximately $100 million in capital expenditures from the company’s budget. In addition, the team instituted a plan to invest $3 billion in opening new restaurants and completing needed renovations in the wake of the company’s already disappointing sales.Now, after the New Year is in full swing, McDonald’s is still reporting lower-than-average sales while struggling to compete with seasonal promotions offered by Wendy’s and Burger King. Since McDonald’s hasn’t had the most promising start to the year, Peter Bensen seems justified in making the changes he did at the end of 2013. Let’s take a look at Bensen’s planning in action.
Bensen Plans for the Future
With top brands around the globe taking proactive steps to plan for the future, McDonald’s isn’t alone in their attempt to take a conservative approach to finance. Peter Bensen, with five years serving a dual role as CFO and Executive Vice President, has provided solid leadership and insight to the corporation’s executive team. Factors affecting Bensen’s decision to trim capital expenditures include lower consumer spending, fiscal impact of the Affordable Care Act and slow overall growth.
Changes Forecasted for 2014
Prior to the end of 2013, Bensen and his team were busy making predictions for the company’s financial health in 2014. The following factors were identified as changes McDonald’s would need to make or plan for as the New Year approached.
- Coordinate new location openings with the development of residential areas.
- Affordable Care Act will possibly increase expenses by $400 million annually.
- Keep menu prices higher to mitigate loss.
McDonald’s Sales Still Fail to Impress
In spite of insightful changes made in 2013, McDonald’s has experienced unimpressive sales in 2014, leading to a total of five consecutive quarters of minimal growth. Recently, Hedgeye Risk Management analyst Howard Penney stated, “If McDonald’s doesn’t fix itself by the end of 2014, the drumbeat of activism will grow.”
Thus far, McDonald’s continues to face low demand, high competition and operational issues. Though Bensen’s end-of-year changes were seen as conservative, lack of progress in early 2014 may lead the CFO to rethink growth strategies.
What changes would you make to improve McDonald’s bottom line? Do you think McDonald’s will bounce back from this slump in 2014?