What’s happening at McDonald’s?

McDonald’s is temporarily closing its US offices in order to prepare for mass lay-offs in the latest round of corporate job cuts.

In an email seen by The Wall Street Journal (WSJ), McDonald’s told office staff to work from home from Monday to Wednesday and to cancel all in-person meetings, in order to virtually inform staff of their fates.

“During the week of April 3, we will communicate key decisions related to roles and staffing levels across the organization,” the Chicago-based company said. “We want to ensure the comfort and confidentiality of our people during the notification period.”

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McDonald’s reportedly also considered the fact that the week of Easter would be busy for personal travel. According to CNN, the company told staff who weren’t able to access their computers to give managers their personal contact details.

The corporate vice president of insurance was told that his position – which he had been in for 20 years – “was being eliminated”, said the WSJ.

“The McDonald’s layoffs – which are expected to focus on corporate employees – appear to be driven heavily by the company’s own business decisions and interest in expansion,” said Vox. The company hasn’t expanded significantly domestically in the past decade, and the company intends to reach more customers through innovations like pre-order drive-thrus. However, “the company has also expressed worries about ongoing inflation and higher costs”, added the website.

In an interview in January with the WSJ, chief executive Chris Kempczinski said that he “expected to save money as part of the workforce assessment”. However, “he did not provide a specific dollar amount or job reduction target”, Forbes noted.

What is the significance?

“McDonald’s has been a star of the pandemic,” said CNN. The chain has managed to keep sales up, reporting a net income of $1.9bn in the fourth quarter of 2022 – up 16% from the year before – despite customers buying fewer items. Its sales were apparently boosted by consumption of adult Happy Meals, said The Wall Street Journal in January.

McDonald’s is a big player in the industry, with more than 150,000 global employees – 75% outside the US. But “the company has undergone several rounds of layoffs in recent years”, said Forbes. In 2018, it said it would be cutting management to be “more dynamic, nimble, and competitive” as part of a plan to shrink administration costs. Staff numbers are down significantly from the 235,000 the company boasted in 2017.

The lay-offs are part of a wider labour trend to reduce staff amid fears of an economic slowdown. The tech sector, in particular, has seen swathes of drastic cuts with some of America’s biggest companies including Amazon, Google and Microsoft having implemented mass lay-offs.

If a retail company that has bucked the pandemic trend and kept its profits up is planning to grow its business with fewer staff, questions have been raised as to what this means for the industry more widely.

What happens next?

The reports of McDonald’s lay-offs have “spurred fears the labour market could be softening in the restaurant industry”, said Barron’s, “but analysts say they don’t see reason for alarm.” The labour market remains strong with employment shortages across various sectors like retail and hospitality.

McDonald’s “has been implementing a growth plan since the start of the pandemic”, said CNN, and reported 10.9% growth in global sales at new locations. “The company is planning to open 1,900 new restaurants throughout the world in 2023.”

“It sounds like they want to reorganise the company into different structures to grow faster,” the BTIG restaurants analyst Peter Saleh told Bloomberg in January. “Maybe they feel like they don’t have the right people in place.”

“As the fast-food industry continues to evolve in response to changing consumer preferences, economic pressures and technological advancements, McDonald’s ongoing restructuring efforts demonstrate the company’s commitment to staying ahead of the curve,” said Forbes. While the exact number of lay-offs is not yet known, “this move demonstrates McDonald’s dedication to becoming more dynamic and competitive”.

But laying off staff virtually is also “a practice that has sparked criticism from other companies’ employees and management experts”, said Bloomberg. “Asking staff to work from home during job cuts protects their privacy but can also lead to backlash.”