NEW YORK ( TheStreet) -- The future of mighty burger chain McDonald's (MCD) is poised to be shared soon with franchisees starving for better sales to pay for the higher wages, as well as investors clamoring for improved profits after two brutal years of underperformance.
On Monday, May 4, the struggling Golden Arches, which has cooked up six straight quarters of sales declines in the U.S. and poor results in Japan, will unveil its latest turnaround plan at its Oakbrook, Ill., headquarters. With Wall Street watching and a legion of franchisees from around the world scheduled to attend, the stage will be set for new McDonald's CEO Steve Easterbrook to put his mark on the chain after successfully engineering a turnaround at the company's U.K. operations.
The fact that McDonald's waited for another occasion to reveal its plan rather than its earnings call suggests that big changes are in the offing. "We have selected that date because we believe these initial plans will be well enough baked out that it will be meaningful news to all the audiences that have an interest in what we're doing at McDonald's," Easterbrook said during the company's April 22 first-quarter earnings call.
One element is already in focus: reducing the bloated McDonald's menu, which has slowed traffic in double-lane drive-thrus to a crawl and is failing to connect with customers drawn to "healthy" Chipotle (CMG) burritos and organically sourced ingredients at Shake Shack (SHAK). Various news agencies recently reported that McDonald's has quietly cut seven sandwiches from its vast menu, including the Deluxe Quarter Pounder and six chicken sandwiches. Honey mustard and chipotle barbecue snack wraps also got axed.
TheStreet takes a brief look at three things Easterbrook and other McDonald's executives might share at the event:
1. Trim the menu further.
The idea of making additional cuts to the menu -- on menu boards inside the restaurant and the drive-thru -- has been hinted at by McDonald's execs. "We have to make the experience easier for customers and our teams," said a McDonald's executive on the earnings call.
Calling the menu cuts in January "initial," the executive acknowledged that further measures will simplify McDonald's menu.
Observers have long considered McDonald's McCafe line of coffee drinks as ripe for trimming, owing to their complex preparation needs and the expensive equipment franchisees must purchaase. A slimmed-down McCafe product line could see McDonald's selling just old-fashioned java, instead of three versions of fruit smoothies and assorted frappes reminiscent of Starbucks (SBUX).
If McDonald's execs are looking to speed up service to please customers, then it should start with the drive-thru. According to QSR Magazine, McDonald's generates about 65% of its sales from its drive-thrus. And the drive-thru experience has been hurt in recent years as execs have loaded up the menu with snack wraps and McCafe drinks and limited-time sandwiches. A typical McDonald's drive-thru is loaded with signs for sandwiches and special promotions, and the menu itself stuffed with choices. The experience tends to add to wait times and result in upset customers.
McDonald's could dramatically reduce the number of menu items a customer could view from the car at the drive-thru and designate some complex burgers as "order in the restaurant only." Indeed, coffee giant Starbucks is experimenting with smaller-format "express stores" with a more limited number of choices so that on-the-go customers can be quickly served.
McDonald's did not respond to requests for comment on this story.
On Friday at 2:15 p.m. EDT, McDonald's stock was trading at $97.83, a rise of more than 4% for the year thus far.
2. Curtail new restaurant openings -- again.
The company could also slow the pace of new restaurant openings around the world this year while working to improve its menu and overall operations. After all, why continue to open new venues if the heart of the operation, the menu, is not as effective and profitable as possible?
McDonald's opened the door to takng this step earlier this year. In January, while former CEO Don Thompson still had the helm, McDonald's said in 2015 it would open globally a mere 1,000 new restaurants, a decline from the 1,300 it opened in 2014.
3. Make a strong commitment to "healthy" fast food.
McDonald's was long seen as a pioneer on food issues, with efforts such as seeking out increasingly safe supplies for its global restaurant operations. That has fallen by the wayside in recent years just when U.S. consumers are increasingly demanding to know what they're ingesting and pushing for changes should food ingredients contain preservatives or artificial elements.
For its part, McDonald's has taken minor strides toward improving its food quality as well as run a series of TV ads on the matter last fall and earlier this year.
On March 4, McDonald's announced plans to begin sourcing chicken that's raised without antibiotics that are important to human medicine as well as milk from cows that have not treated with the artificial growth hormone RBST. McDonald's said it will phase in the new chicken over the next two years and will start to introduce the new milk later this year. "Our customers want food that they feel great about eating -- all the way from the farm to the restaurant -- and these moves take a step toward better delivering on those expectations," McDonald's U.S president, Mike Andres, declared in a statement then.
Any ingredient news from McDonald's, which could include a commitment to use more organic veggies and dairy items, would follow on the heels of a recent big announcement from burrito king Chipotle that may prompt changes at competitors.
On Monday, Chipotle's more than 1,700 U.S. restaurants and 10 ShopHouse Asian-fare concept eateries began serving food free of controversial genetically modified organisms after a two-year effort by the company to rid them from the menu.