A Shake-Up Deluxe on McDonald’s Home Turf

McDonald’s on Tuesday named its chief financial officer to head restaurant operations in the United States, an executive suite shake-up analysts said was prompted by steadily declining domestic sales.

Jack Greenberg, currently CFO and vice chairman, will become chairman of McDonald’s U.S. restaurants, a new position. The previous head of domestic operations, Edward H. Rensi, will report to Greenberg.

McDonald’s said the move will strengthen its business and does not signal a lack of confidence in Rensi.

Greenberg will spend “a significant amount of time” working with Rensi and franchisees “providing domestic strategic direction,” said McDonald’s Chairman and Chief Executive Michael Quinlan. “He’ll help us maximize the growth of the U.S. business by adding the broad scope of his skills to our U.S. management team.”

There was no hint as to what changes Greenberg might make, if any, but analysts viewed the executive shift as a sign that new thinking is needed at the lackluster U.S. operations, which are expected to post lower third-quarter sales next week.

“Greenberg is an extremely bright guy,” said Mitchell Pinheiro, a restaurant industry analyst with Janney Montgomery Scott in Philadelphia. “They think he can spearhead the effort to get domestic operations back on course.”

In a conference call with analysts, Greenberg said he will work closely with franchisees, some of which have been alienated by a rapid expansion of McDonald’s restaurants that has cut into sales of some existing locations.

“Rensi has a top-down management style. It is his way or the highway,” said Dick Adams, a San Diego consultant who says he represents several hundred McDonald’s franchisees. “Jack has not been as involved in the hamburger side of the business. Maybe he will be more willing to listen to business issues.”

McDonald’s faces challenges on many fronts, including what Rensi last year called “a lousy track record with quality, service and cleanliness relative to the competition.”

In addition, its much-ballyhooed Arch Deluxe hamburger has not reversed the company’s sales declines. Since introducing it in May, the company has tried three different advertising approaches and given away thousands of coupons for the lettuce-and-tomato hamburger with a mustard and mayonnaise dressing.

As previously reported, Rensi recently told the company’s 2,700 U.S. franchisees via memo that the Arch Deluxe has done well but was “never intended to be a silver bullet.”

“This doesn’t mean the Deluxe line has been the dismal failure that others believe,” said analyst Janice Meyer at Prudential Securities Research. “I think it is basically meeting expectations, but other parts of the business have weakened more than expectations.

“The kids’ business has been weakened by Burger King, and their core hamburger customers have been chipped away by some of Wendy’s new sandwiches,” she said.

Analysts said it will be some time before the effect of any changes Greenberg might make becomes evident.

“McDonald’s is like an aircraft carrier. It takes a long time to stop and turn it around,” said Pinheiro. “We are not going to see the fruits of these actions for quite a while.”

Observers said Greenberg’s appointment could boost McDonald’s standing on Wall Street, where he is respected by analysts. Even so, the move got a lukewarm reception among investors. McDonald’s shares closed down 50 cents at $46.125 in trading on the New York Stock Exchange.

Greenberg’s appointment was the most dramatic in a series of executive shuffles announced by McDonald’s. Paul Schrage, chief of McDonald’s marketing and a member of its board, said he will retire within a year. He is 61.

Brad A. Ball, senior vice president of marketing for McDonald’s USA, becomes head of domestic marketing, reporting to Rensi. Ball joined McDonald’s last year from the Los Angeles advertising agency of Davis, Ball & Colombatto, which handles regional advertising for McDonald’s and created the “Mac at Night” promotion.

David B. Green, senior vice president of marketing, was named senior marketing officer of McDonald’s International, a new position. More than half the company’s revenue now comes from its international operations.

Michael Conley, currently senior vice president and controller, will take over from Greenberg as chief financial officer.