McDonald's CEO on Going Viral, the Big Arch and the Fast-Food Value War

0:03It's a little weird to watch each other eat. Yeah, well, imagine how I felt. Seemed like a simple assignment. Yeah, seemed like it. This week on Bold Names, we're talking to Chris Kempczinski. He's the CEO of McDonald's. You probably recognize him because he just went viral trying to promote the company's new burger. You've heard about it. Here it is. The Big Arch. And half a pound of meat? It's a big one. All right, the moment of truth. Chris took what looked like a tiny nibble and his rivals pounced. Burger King made a video of its president taking a huge bite out of the Whopper. Only one thing missing, a napkin.

0:43And Wendy's got in on it too. That's a burger. So I went to McDonald's headquarters in Chicago to talk with Chris about being the company's face in the social media era and what McDonald's is cooking up next. From the Wall Street Journal, I'm Tim Higgins. This is Bold Names, where you'll hear from the leaders of the bold name companies featured in the Wall Street Journal. Today we ask, what's the value of a viral social media moment, and can McDonald's meet it?

1:16Chris, so great. Thanks for joining us. Yeah, welcome to McDonald's. It's great to be here. How did you realize that you went viral? It's a weird thing for sure. You know, so the video had been out for about, I don't know, three or four weeks, something like that. And I got a call from one of my kids and they said, Dad, you've gone viral and not in a good way. And so that's when I knew like, okay, something's going on. And then, yeah, I started getting texts and emails and calls from, you know, friends and people from all walks of life that, you know, knew me. And, you know, invariably they were all like, hey, have you seen this?

2:01And it's like by the thousandth time, yeah, I've seen it. So, yeah, that was kind of a weird moment. What do you think of the reaction? When you go on to social media, in general, you have to have a thick skin because there's going to be lovers and there's going to be haters. But ultimately, for me, you know, what I thought we did, you know, a really nice job on is once the Internet grabs hold of something like lean into it. And we did that. Our team did a nice job of that. And, you know, we are able to, you know, I think, engage with our fans. And ultimately, that's what we're trying to do here at McDonald's is sort of activate McDonald's as part of culture.

2:36And, you know, in this particular case, I was the lead on that. What do you think of some of the criticisms? You know, I think of some of the videos that kind of say you took a small bite. Maybe you don't even like your own burgers. You know, are you secretly a vegetarian? Yeah. Do you want to clear that up? Yeah, I'm definitely not a vegetarian. I think, you know, I blame it all on my mom because she told me, don't talk with your mouth full. And I think probably in that case, I should have just said, you know what, to hell with it. I'm going to go talk with my mouth full. Let it fly. Let it rip.

3:09Right. I mean, you know, there are some out there who would say CEOs maybe should stay off social media. There's a lot of risk. Clearly, you're leaning in to the medium. Why? CEOs, for better or for worse, in many cases, they're the face of the brand. They personify a company. And so I do think it's important to be out there, particularly in a consumer-facing brand, to do it. Now, there's ways that you need to be thinking about engaging, and there's places that I think it's appropriate for a CEO to be out there and doing it. But for me, McDonald's is a fun brand. McDonald's is a brand that everybody likes to talk about their McDonald's experience or whatever.

3:52And I think what I try to showcase are the fun aspects of our brand. And certainly, in some cases, it can go in unexpected directions. What do you think this tempest, if you will, says about the moment we are in communicating with your customers, the importance of social media influencers? Yeah. Well, it's just it's a different world for marketing. You know, when I started my career marketing, you do a 30 second spot and you'd put it out there and, you know, you had 30 seconds on TV. Yeah. Go big. Yeah, exactly. And, you know, you'd have the calendar planned out for the full year and, you know, it was all very organized and very controlled.

4:31And we're in a world now where this creator economy and how consumers are engaging with brands, it's a lot more dynamic. And this notion of you can control everything, that's not the world that we're in. Consumers, I think there's a cynicism and a skepticism that goes around advertising. And that's been something that's been developed over many, many years. And I think what's been so refreshing around this creator economy and how people are using social media now is, you know, it's got a greater degree of authenticity where the consumers or our guests are actually just as much in control of our brand as we are.

5:08And that's a change if you're a marketer. That makes some people very nervous, right? I mean, the last few years, we've seen a lot of big brands go into the wood chipper on social media, oftentimes on social issues, culture wars. This time it was more about kind of the perception of you. Maybe you're too corporate. Are you being your authentic self? Yeah. Well, I think certainly there are places where it's not appropriate for a brand or for a CEO to be weighing in. What are those areas? We don't take political positions. Our view is if it's related to our business, we'll take a position on that.

5:46But we're a brand that serves everybody. And so when you're a brand that has that sort of broad remit, it's not our job to be getting in and to be fighting culture wars. There certainly we have a set of values that we believe in. But I think, again, our brand is a fun brand. People come to McDonald's to get a break. People come to McDonald's to enjoy and escape from maybe some of the things. And so I think for us, it's, you know, let's make sure we're keeping it light. And let's make sure we're focused on the great experience we have in the restaurant. Let's make sure we're focused on the food.

6:18You know, that's our sweet spot. I hear you don't want to be political, but your brand, basically everybody touches it. Yeah. On a given year, what, 90 % people, they go into a McDonald's here in the U.S.? I mean, it's, people have a relationship with it. Absolutely. And oftentimes the brand becomes a proxy for some other issue, whether it's wages or tariffs or whatnot. How do you navigate the politics? I mean, one of the guys working in the drive-thru line became president, right? I mean, how do you stay out of politics? Yeah, well, I think the last campaign actually showed the power of our brand where you had, as you mentioned, And, you know, President Trump was was in a drive through and working in a drive through.

7:03And then we had Vice President Harris, who was running on the Democratic ticket. You know, she had worked previously in a McDonald's. And so you actually had both presidential candidates talking about McDonald's, which there's very few brands that have that kind of reach and resonance. But I think for us, again, you know, there's places that are appropriate for us if it's directly related to the business, if it's related to sourcing or labor issues or things like that, certainly we're going to be out there talking about our position on those things as it relates to our business. But once it gets beyond our business and it's not something that is directly affecting our ability to serve guests every single day, those are places that I don't think are appropriate for us to be weighing into.

7:48Coming up, what's the strategy behind McDonald's introducing a premium burger like the Big Arch while expanding its meal deals. When you have roughly 90 % of the population that's coming into a McDonald's at least once a year, you've got to serve everybody. Stay with us.

8:16One of the risks of social media is you lose control of the message. Yeah. Right. People take it. They come up with their own messaging. And there's a risk that it kind of overshadows the image or the news you wanted to get out. And one of the things you've been trying to combat in the last few years is the perception that McDonald's is no longer affordable, the perception that maybe the food isn't as good as it once was. I know you've been working on those two things in particular. Yeah. What are you doing this year to hit those issues? Sure. Well, we've made a lot of progress, particularly on the value front.

8:52I think if you look at what's happened in the last, you know, call it 18 months or so with the McValue program in the U.S., we had a$5 meal. More recently, we've just announced that we're going to be coming out with a menu, 10 items under$3. So there's a lot of things that we're going to be able to be doing in that space that I think are going to continue to drive a value message. One of the things I've talked about is McDonald's in our DNA is value. It was founded on the idea of having great value for families. And so we're always going to be making sure that we're out there doing that. I think through COVID and some of the inflation, we in the industry maybe got a little bit off sides on that.

9:38But I think we've come back in a pretty resounding way. And certainly the reaction we're getting from our customers is they absolutely see and appreciate that value is back at McDonald's. I think on food, you know, if you think about what we serve in our restaurants, we've got a broad menu and we've got something for everybody. And so for us, you know, there's certainly going to be people out there that, you know, maybe want to disparage it. I think there's always an opportunity for us to educate people more about actually the care and attention that goes into how we're sourcing, the care and attention that goes into how we prepare the food.

10:13But, you know, that's on us. And ultimately, I think when someone goes into the restaurant, the moment of truth is when they bite into the burger. The moment of truth is when they, you know, take a bite out of our fries or have a McFlurry. And I would say with 70 million people a day coming into a McDonald's, the feedback that we get is people love our food. Let's talk about that 70 million a day visiting a McDonald's. That's providing you with great insight, all that data. Yeah. And what is that data telling you about the changes that need to specifically happen on the menu? It's interesting.

10:48I think, you know, certainly there's always with our customers a desire to try new things. And so people love our classic core menu, the Big Mac, the Quarter Pounder, Chicken McNuggets, all of those things. But it's always interesting to see reaction to new products. Our K-pop Demon Hunters program right now, you know, we've got some Korean-inspired products in there that I expect are going to do quite well. Gimme, gimme, gimme. Grab me on McShaker fries and Tempeze McNuggets. With two sauces. And photo cards for the fans. Nice. So that's, I think, one thing, which is we're learning about consumers' interest in sort of using McDonald's as a place to explore new tastes and new territories.

11:32What was the goal at the Big Arch? Yeah. What were you trying to address in your menu with this new product? Well, I think the big thing we saw there is, you know, there's a group of consumers out there who want a really big burger. That's a half a pound of beef in the Big Arch. And you could do something like a double quarter pounder. Certainly that was, you know, another way to go do it. But I think there's something out there as you look at, you know, what consumers were buying and perhaps other places, fast casual restaurants or even fine dining or full dining. There's a desire to have sort of an elevated burger experience.

12:08And I think what we've done with the big arch, the bun, the sauces that we have with it, the crispy onions, all those things, that was for us a way to offer that more elevated burger experience. And it's been great to see the reaction. I think we've gotten a lot of good reaction that said, you know, we hit on the insight that people were looking for there. So on one hand, you've got this premium burger. And on the other hand, you're pushing into even more on the deal. Value meal 2.0. What's going on there? Why do you need both? Well, it goes back to what I was saying earlier. when you have roughly 90 % of the population that's coming into a McDonald's at least once a year, you've got to serve everybody, young, old, rich, poor.

12:56I mean, no matter what walk of life people are coming from or what occasions. Because in a lot of ways, you're serving two Americas, right? You've got folks who are doing well financially who are coming in, maybe struggled in the last year or so with lower income folks struggling to pay. But these deals have been bringing people in, my assumption. Yeah, we had a really strong Q4. One of the things I talked about in our most recent earnings call is we're gaining share with that low-income consumer. And for us, that to me is sort of a bellwether of how are you doing around value. But at the same point, we're also gaining share with upper income.

13:35And so as we think about our business, we want to be gaining share with all cohorts. and having a breadth of products that can go across all of that has been what I think has made us successful over the last year or so. One of the things I think a lot of people don't realize is you do not set the prices, right? Your stores, franchisees, those operators, they're running their businesses. They have been pinched themselves. It's kind of between a rock and a hard place. You've got increasing costs, especially when it comes to beef. Yep. You got customers who maybe don't feel as flush. How do you navigate that kind of dynamic?

14:15It's tricky for sure. And like you said, there's been quite a bit of cost inflation, both on the input side. So food and packaging, those costs are up pretty significantly. Burgers and beef, you mentioned, has probably been one of the most hard hit areas. And then you also had quite a bit of labor inflation that's happened. And so you take the two of those in combination and there's been, you know, I think quite a bit of inflation that we've had to navigate. How do you price that through? Ultimately, I think what we keep talking about with our franchisees is you have to do what the customer is willing to accept.

14:51And so you have to be mindful of around what the customer's ability to pay for some of those things are. And ultimately, you know, we are seeing in some places margins compressed, but the opportunity then is can we serve more gas? So that ultimately you end up maybe making more from, we call it penny profit, but more in absolute dollars, but maybe the percent margin had to shrink. Let's unpack that a little bit, right? If you're trying to improve your margins, you have a few levers that you can pull. You could offer smaller portions, which I don't think you want to do. We have not done that. You could raise prices.

15:24You don't want to do that, right? Right. So the other thing you can try to do is drive more value into these restaurants. Yeah. And the classic levers are menu innovation and marketing. Yeah. And so you've got the double whammy going on here this year. We talk about going three for three as kind of our formula, which is we've got to have strong value at the foundation. And we talk about both value and affordability. So you can have great value, and we think, frankly, the big arch is a great value, but it may not be affordable. If you only have$4 in your pocket, paying$8 to$10 for a burger may not fit your definition of value, even though you're getting half a pound of beef.

16:09You may need something that's on a lower price point as well. So we've had to make sure we've got a strong value and affordability platform. But then you also need great marketing. You also need great menu news. And it's the three of those things working in combination that ultimately can drive guest counts and then driving guest counts or traffic in the restaurant is how you can get productivity and efficiencies to ultimately make the economics work for our franchisees. McDonald's is a great barometer of the economy. What are you seeing in the past year that's different with your customers when it comes to spending?

16:42I think it's probably been largely consistent with what we've seen over the last couple of years, which is certainly that lower income consumers under a lot of pressure. Are they under more pressure now? I think they are. I wouldn't say under more pressure in this particular moment. But if you think about the things that, you know, that lower income consumers navigating, housing costs are up. Health care costs are up. Child care costs are up. transportation costs are up. You know, those are all non-discretionary spending categories. And there's been quite a bit of inflation that, you know, those consumers are having to navigate there.

17:21I think in this particular moment, there's probably, we know, a fair bit of unease around, you know, what's going to happen in 2026 as maybe some of these energy costs and the inflation that's coming with energy, how does that work its way through the economy? Does that actually add another layer of inflation. So I'd say right now in this particular moment, the lower income consumers continuing to feel stressed and continuing to be very careful about how they're spending their dollar. And on the upper end side, you know, there's been a benefit certainly around a rising stock market, which kind of creates this sort of wealth effect.

17:56The stock market has sold off in more recent times. But all of that goes to consumer psychology and our business being more of a discretionary business, you know, we pay a lot of attention to consumer psychology. And I think probably right now, people are a little bit more nervous. Just ahead, McDonald's rivals are introducing their own deals to try and win the fast food war. But Chris is confident in McDonald's own special sauce. We're going to undercut everybody else on price because we are bigger and we have more scale than anybody else. And then when the customer comes into the restaurant, we're going to deliver to them a better experience than anybody else.

18:36That's next.

18:51I don't have to tell you this, but you're in a brutally competitive business, right? I think that was underscored by the moment your video had going viral and your competitors trying to take an opportunity to take pokes at you, right? It's also a moment that you and they are trying to define or redefine what value is. How do you rise to that moment? Well, let me start with, I always love when my competitors are talking about me, especially publicly. So they were... What does it mean to you when you hear them talking about you? Well, it means that people are hearing about Big Arch and then they're going out and buying Big Arch.

19:28So have at it. But I think you're right. I mean, we're in a competitive industry. I think one of the things that we look at is we really are, I think, the leader in our industry. And so, you know, we don't spend as much time, to be honest, thinking about what our competitors are doing and, you know, what's going to be our response. We're much more focused on kind of playing our own game and making sure that ultimately we're doing what we need to to provide the best possible experience to our guests that come into the restaurant. And our formula of success over the last 70 years is when we do our job the right way and we take care of our guests, everything else seems to work fine.

20:11I mean, price is a huge issue for everybody. Your competitors are trying to do their own value meals. You're trying to encourage your operators to lower their prices as well. It costs money to do that. Is it a race to the bottom? Can you be profitable in such a world where everybody's trying to nickel and dime? We're going to do whatever we need to do to make sure that we are leading on value in our industry. And I think the moves that we've made most recently, but even over the last year or so, are consistent with that. Ultimately, we have better unit economics than almost anybody else in our industry.

20:47So we have the ability and I think the resources to do what it needs to do to win with the customer. And we're going to certainly leverage that ability that we have. So winning the fast food value war can be sustainable for you. Absolutely. I think if you are ultimately driving more guests into the restaurant and then you're providing them with a great experience, you're getting them to be buying a variety of items on the menu. Ultimately, that that model works. And frankly, that's the model that went way back to Ray Kroc. I mean, Ray Kroc's whole business proposition was we're going to undercut everybody else on price because we are bigger and we have more scale than anybody else.

21:33And then when the customer comes into the restaurant, we're going to deliver to them a better experience than anybody else. And you create this kind of virtuous flywheel. That's the whole idea that Ray Kroc built this great company on. And it's worked for us for 70 years. So I don't think there's any reason for us to change at this point. And now you're working on improving or redefining what the value of that experience is like in the restaurants and on the menu this year. Yeah. Well, we've stood up this team that we call it a restaurant experience team. And one of the things that we wanted to take a look at is if you think about all the things that go on with the restaurant experience, one of the things that's interesting is when you think about people's taste perceptions, actually 60 % of people's taste perceptions are formed before they even take a bite of our product.

22:18That comes from where's the product source from or when they walk into the restaurant, what's the aroma that they get? Seeing how the product's prepared. All of those things go into shaping how a customer thinks about a product. It primes them in a way for what that great moment of truth bite is going to be. And the other thing that we've done there is we created three category teams. So we have a category team solely focused around chicken. We have a category team solely focused around beef. Another one focused around beverages. and they are obsessed every single day with making sure what is it that we need to do to make sure we are serving the best tasting chicken.

22:57That may be sourcing, that may be how we prepare, that may be the equipment, it may be the recipe, all of those things, but that's what we're trying to do with this Restaurant Experience team. One of the things about chicken is it's a huge market, right? Yep, massive. Much bigger than... 2x beef. And chicken's also cheaper than beef, right? So if you can get people on the chicken at McDonald's, it could help your bottom line. Sure, absolutely. It's typically at a lower price point, so it does work well with a value menu. But I think also, again, for us, it's following what the customer wants. Chicken is growing faster globally than beef.

23:32And so for us, we're always following what the consumer is wanting. And right now, we're getting a really strong demand signal from the consumer, which is they want more chicken products. And we're rising on the occasion. We brought snack wraps back. We've got McCrispie. So there's a lot of things going on in chicken. Knowing what you know now about your viral moment, is there anything you would have done differently? Well, again, I probably wouldn't have worried about talking with my mouth full. But I think, you know, to me, these are just kind of fun moments. And yes, there were moments it was a little humbling, but the Internet is undefeated.

24:11and I think for us, what I'm proud of is how we responded to it. We leaned into it. I think going forward, probably when I'm doing tastings, I'm probably going to be a little bit more aware of how the internet may be interpreting my bites and my tastes and things like that. But no, to me, I'm going to continue to be on social media. We're a fun brand. This is something that I think as a consumer-facing brand, people want to see the CEO out there. So yeah, I'm not going anywhere. You're going to continue to eat burgers on video. Absolutely. And that's bold names for this week. Our producer is Danny Lewis.

24:50Our video producer is Alexis Moore. And our fact checker is Aparna Nathan. Michael LaValle is our sound designer and Jessica Fenton wrote our theme music. Our supervising producer is Katie Ferguson. Additional thanks to Jenna Heron and Alexander Hotz. Our development producer is Aisha Al-Muslim and Chris Dinsley is the deputy editor of audio for The Wall Street Journal. For even more, check out my column on WSJ.com. We've linked it in the show notes. I'm Tim Higgins. Thanks for listening.