Chris Kempczinski CEO of McDonald's

0:08First of all, Chris, a big thanks for taking the time. It's fantastic to have you on. You run an amazing company and you are the biggest employer in the world uh you know you kind of churn out four and a half thousand burgers every minute and and six and a half million burgers every day so uh before we kick off properly what is your favorite mcdonald's meal uh well you've got to go different parts of the day different meals so breakfast for me i love the egg mcmuffin uh it's a classic uh for lunch i'd say the quarter pounder here in the u.s is a great burger Love the quarter pounder, but also a fan of the McChicken.

0:47So those would be my probably go-to items. And of course, love our McDonald's French fries. Absolutely. And so I went to your, you know, I went to your store here in Oslo. Perfect. I've got some of your fries here. Now, I have to admit they are unfortunately cold by now. But what is it that characterizes a good fries? Yeah, well, it starts with it. They're best when they're hot. So no surprise. Best when they're hot. But, you know, with us, it's the size of the fry. So it's kind of a really good biteable size. And then what you like is you like a little bit of the crunch. So you like sort of the outside of the fry to be crispy.

1:33and you love the sort of inside of the fry to be sort of nice and moist, that's our gold standard McDonald's French fry. So we've kind of teared it apart. Can you kind of see whether it's your fry or not your fry? I can tell the difference, yes. Now, I must admit I'm an expert, let's just say, when it comes to McDonald's French fries. But, yeah, I can tell the difference. More importantly, I think what we hear from our consumers around the world is they can tell the difference too. Yeah, yeah. So perhaps you can spend some time on kicking off with your products, of course, because that's what's driving your growth.

2:16So how do you think about the local versus the not local choice? Sure. Well, we have kind of a little bit of both, as you know. So we have what we call global core menu, which are kind of iconic classics that every restaurant in the world is required to carry. So that would be something like the Big Mac as an example, the French fries as an example. Those would be global core menu items. So there's global core menu, but that's probably 15 items or so that every restaurant around the world is required to carry. And then beyond that, every market has flexibility to add whatever they want, you know, to their own local menu.

3:05And I think it's been sort of that combination of these global favorites, but also allowing markets to tailor their menu to what the consumer in that particular geography is looking for. The balance of that has been, I think, the formula for our success. You say that your menu is Darenian, so basically you sell what people want. Yeah. But do people know what's good for them? Well, we certainly try to educate them. And we, you know, everywhere that whether it's on the app or if you're in the restaurant, we disclose all our nutritional information. So we try to be very transparent about that so that people can make the right choices, because on our menu, there are a range of items, everything from indulgent products that you would really have as a treat to those that you can have more regularly.

3:58So, you know, we view our role as being fully transparent and making sure that people can make the right food choices for them. But ultimately, the education, which I think you're getting to, is something that, you know, the medical community, schools, all of those can play an important role in helping people make the right food choices. And are you actively trying to switch people's eating habits? or is it your responsibility? How do you look at this? Yeah, we don't really view it as our responsibility, in part because, think about this, the average sort of McDonald's user, so in markets where we operate, roughly 80 % of the consumers in that market visit McDonald's at least once a year.

4:52Our sort of average users, So someone who is coming to McDonald's, they're visiting our restaurant three, maybe four times a month. So when you think about the number of other meal occasions that that consumer is having, you know, we are we are getting a fraction of the total meal occasions there. And so, you know, for us to try to assume the mantle of we're going to change the way that somebody is eating when we're seeing, you know, a fraction of their consumption, I think is beyond what even a brand like McDonald's is capable of doing. Now, you are the biggest employer in the world. And I think one out of eight Americans have worked at McDonald's.

5:38That's right. Yeah. It's a huge responsibility, right? And so how do you think about your people? Well, way back to our founder, he said, you know, at the end of the day, we're a people business and nothing happens in our restaurant without our people. We have about two million people around the world working in our restaurants. And I think in this day and age, what we know our people are looking for is first, they're looking to work for a place that aligns with their values and that they feel good about being a part of that organization. Second, they expect to be compensated and treated fairly.

6:19And third, I think increasingly what we're also hearing is people, our employees want us to work with them on flexibility and flexibility and providing flexibility and how and when people work is becoming increasingly important. And so as we try to bring that to life in our restaurants. And how long do they stay on average? It varies country to country. So if you take Italy, for example, I think our turnover rate in the restaurant level in Italy is 10%. It's pretty remarkable. If you go to the United States, it would be over 100 % turnover in a year. So it does very much vary year to year. And you tend to see that there's stratification as well.

7:09So you might have a group of people who have worked in a restaurant for a longer period of time. They might be on their way to becoming a shift manager or restaurant general manager. They could, in many cases, be in the restaurants for 10 years. And then you have someone who's coming in, tries it for a few weeks and says, this isn't for me or something in my life changed and I'm not going to be able to do it. So the averages are deceiving because there's quite a wide spectrum of tenure in a restaurant. And how do you move people up? I mean, I believe you have a hamburger academy, is that right?

7:44We have a hamburger university, right, which is sort of our capstone program. So when you become a restaurant general manager, which means that you're running, in essence, you know, a$3 million business or so, that would be in the U.S., the average approximate size of a restaurant, that you would come to Hamburger University and there's all sorts of training sessions that we have. And it really, it becomes an important part of someone's career at McDonald's when they hit that milestone. And then, of course, we do all sorts of training in the restaurant as well. Locally, we do training. And I think that's been one of the reasons why one out of eight people in the US have started their career at McDonald's, because beside providing the flexibility, you do learn the basics of business.

8:34You learn about how to work as a team. You learn about production flows. You learn about customer service. You learn about, you know, sort of how a P &L works, you learn a lot of the, what I would call basics of business that give you the ability to then either continue in McDonald's and continue working in the restaurants. Many people go on to become franchisees, or as you know, we have a number of people who have spent time at McDonald's and then go graduate on to do different things. But I think McDonald's provides some of those kind of foundational skills that can end up being part of a lifelong career.

9:16Yeah, some people for sure went on to do different things. I believe Jeff Bezos worked at McDonald's at some stage. He did, yeah. He still will describe working on the French fry station and is quite proud of his acumen at how he was able to very quickly fill a box of fries. So you have someone like Jeff Bezos, David Solomon at Goldman Sachs has worked at McDonald's way back in the beginning. That's one of the neat things about this job is I encounter so many people who are now doing amazing things who will tell me about kind of their earlier experience when they worked at McDonald's. And I think it just and part of it is they also go and talk about some of the skills that they learned at McDonald's.

10:05And that's why we're proud of our role as an employer. You have a franchise model. Does that mean that you don't decide the salaries? The way that a franchise model works, that's correct. We do not decide the salaries. That's up to the franchisee. Essentially, a franchisee is running their own business. And what they are licensing from us is they're licensing our trademark, which is the McDonald's logo. They're licensing our core equities. And then they're also getting with it a whole suite of support services that we provide to help them run great restaurants. But ultimately, part of the reason that we are in a franchise model is we want local entrepreneurs.

10:48We want people who have that pride of ownership, who feel like this is a business that they own and they're driving. And so, yes, the people are their people. They hire them. They determine the pay and salaries. Now, we share all sorts of information. So they, of course, understand where they are relative to the market. They understand where they are relative to each other. But the decision ultimately on how they attract the people they need for the restaurant is up to the franchisee.

11:22Talking a bit about sustainability, so you are the biggest buyer of beef in the world, potatoes, one of the biggest user of plastic products and so on. So what are the most important challenges you are seeing now on the sustainability side? I think on sustainability, because we have, one, such a global footprint, and two, we are pretty rigorous about our expectations. It's ensuring that all the way across the supply chain that we have visibility into that. So you're right, we sell more beef than anybody else. We sell more potatoes than anybody else. But the interesting thing is we don't own any of our supply chains.

12:08So we don't own the farms. We don't own the manufacturing facilities. All of that is done with us through a network of suppliers across the world, and we have a great group of suppliers. What we do is we make sure that we're clear about the expectations. So what McDonald's does is we set standards. We set standards around, for example, all palm oil has to be responsibly sourced. None of it can come from deforestation, and we have audit procedures out there to make sure that anybody who is providing us with palm oil is complying with our standards. When it comes to beef, we have very strict standards around deforestation and making sure that none of the cattle is coming from land that was deforested, and we have different ways that we oversee that.

12:59So we're setting the standards with that. And of course, part of how we set the standards is we get to select who our suppliers are. I would say in 99 % of the cases, our suppliers are wanting to do the same things that we're wanting to do. They live on the same planet that we do. They see the challenges that we see. And so what we work together on is how do we make sure that we're working together responsibly, but at the same time, there's 7, 8 billion people in the world that need to be fed. and how do you do that in a responsible, sustainable manner. So there is competition out there. You have other people, you know, flipping burgers.

13:41I know another big company, for instance. What is it that you do better than them? I'd say, you know, our focus has always been in the beginning, quality, service, and convenience. QSC, we call it. actually QSC and V, which is the last part is value. So that has been our playbook from the very beginning. It was something Ray Kroc, when he founded the company, he talked about QSC and V as being the foundation. And what we try to do is just do the very best job we can on each of those dimensions. And it might sound a little bit odd, but we don't actually spend a ton of time benchmarking ourselves to our competitors.

14:31We spend a lot more time benchmarking ourselves to our own internal standards and how we're doing. And the thing I love about this business is the amount of data that you can get in this business is unbelievable. We get data by restaurant, by hour, by customer. And we get a lot of feedback, as you would imagine then, from our customers telling us either we're doing a great job or, hey, I didn't have a great experience. And so when we're thinking about our performance, we're typically relying a lot on that own internal data to identify areas that we can get better. And our belief is that we have structural advantages in this business.

15:14And so long as we are executing against our QSC and V, that the structural advantages for us are going to be what protect us. And it's just about delighting the consumer. Chris, tell me about some of the coolest data you have and how you use some of these analytics. Just looking back, I think, for instance, Ray Kwok, he counted the amount of sesame seeds on each bun and that kind of thing. What are you doing? Well, I'll give you an example. If you went back a few years ago, imagine if you're running a restaurant. So imagine you're that restaurant general manager. and the way that our kitchens work, let's say it's 11.30 in the morning and you're getting ready for the lunchtime rush.

15:59The question you have to answer for yourself is, okay, I know lunchtime rush is about to come. How do I get prepared for that lunchtime rush? So how many hamburgers do I think I'm gonna sell? Am I gonna be selling the Quarter Pounder? Am I gonna be selling the Big Mac? How many chicken nuggets am I gonna be selling? It's the whole range of items, and you're trying to figure out, how much am I going to be selling? And you're trying to get it all prepared in advance. So you're trying to stage it so that you're ready to go. Well, all of that work in the past was really done sort of through the intuition and experience of the restaurant general manager.

16:37And now, because of something we have called e-production, essentially, we know, based on the history of that restaurant, exactly what they need to stage by every 15-minute increment throughout the day. So you'll see a screen that will pop up in the restaurant, which will say, OK, it's 1130. Time for you to now make eight hamburgers, do a basket of chicken nuggets, and have a fresh batch of fries. And oh, by the way, you're going to get these three other orders as well. All of that is informed by what we have as just the historical data. So we take some of the guesswork out of it. And it's what you would, in a manufacturing parlance, you would describe as a standard SNOP process and sales and operations planning process where we're much, through data, we're much better able to predict what we need to be making.

17:34And ultimately, the benefit to the consumer means that they have a faster experience so they don't have to wait. And if we don't have something ready, we typically then have to make it on demand, which requires the consumer to wait. but also because we're making it in advance and it's syncing up with what the consumer is looking for, it means the product is going to be hot and fresh when they get it and it's not going to be something that's been sitting around for 15 minutes or something like that. Yeah, your colleagues in Oslo clearly had it today ready in no time, so you should be really proud of them.

18:07Oh, good. Yeah, they do a great job up there. And how do you think artificial intelligence will take this further? So it's a great question, and there's so many different use cases that we can think of with artificial intelligence. Start with where you started our conversation, which is with our people. And think about the training that goes on to train 2 million people on our procedures. Every time you launch a limited-time-only offer product, so something that maybe is only going to be in the restaurant for four weeks or so, You have to do training on that. So there's a vast amount of training that happens.

18:50And one of the things that happens with artificial intelligence is you now have an ability to get to much more customized training in someone's local language. And they're able, through interaction, to be able to progress through the training at the pace that makes sense for them. So as opposed to a one-size-fits-all training experience, you'd be able to offer something that's much more customized. That would just be one example. Certainly, as you're also getting vast amounts of consumer data, we get about 65 million people a day visiting our restaurants. We're collecting data on roughly, you know, a third of those people are volunteering to be self-identified.

19:35You can then start to customize. Imagine driving up through the drive-thru and And imagine that maybe the drive-through menu board changes because we know that when you typically come to McDonald's, these are the items that you like to buy. And so now you have a menu board that maybe is customized to you as opposed to just being a menu board that everybody sees. So you can go on and on and on with all the different potential use cases. I think our challenge, like every company, is going to be prioritizing and deciding which ones do we want to be sort of on the leading edge of. Which ones do we want to be a fast follower?

20:13And then where do we want to be insourcing some of those capabilities versus what we would typically do is where are we outsourcing those capabilities? But I think there's no doubt that in our industry over the next, call it five years, you're going to see a pretty significant impact from AI, as I think probably is going to happen across industries around the world. I think you opened your first fully automated restaurant in Texas recently. How does that work? Yeah, it's not quite fully automated because we still do have people working in the kitchen. But the automation is there's no lobby. It's all drive-through or it's a curbside pickup.

20:57And this is all about just, again, providing convenience to the customer. We're seeing, especially post-COVID, that one of the things that is enduring is this on-the-go component. So whether it's delivery, whether it's drive-through, whether it's using digital and having someone bring the food out, people are looking to eat on the go. And this restaurant that we have in Texas without a dining room is meant to see how far we can push the envelope on providing that sort of experience. But I think I get asked all the time, you know, do I see a day where there aren't going to be any people working in our restaurant?

21:37And the answer to that is no. I don't see that certainly in my career horizon being something that's going to happen at McDonald's. We're always going to need people to provide that great service, that great hospitality. But I do think that there are important things that we can do where you have technology, where you have AI as a co-pilot to make the job easier to take stress out of the restaurant. I think that's going to be where you see it over the next few years.

22:10If you were to try to distill down the corporate culture and the essence of the McDonald's ways of doing things, what would it be? Well, we talk about a few things as being sort of what we would describe as cultural norms. One is this notion of ruthlessly prioritizing. And there are so many opportunities for us, so many different things that we can do, but we can't do everything and we can't do everything well. And so we have to be able to prioritize. And that's something that I would say is an ongoing struggle, but we're very mindful of it. And we spent a lot of time here at a company about prioritization.

22:55So that's one thing that we do. I think another thing that we try to focus on is discuss and not present. So we don't want to be a PowerPoint-heavy presentation organization. We want it to be about discussion. We want it to be about debating ideas. And so that's another thing that we try to make sure the way we run ourselves, the way we conduct ourselves, is it's a place where we encourage debate, where we allow for debate, but it's done in, I think, a very constructive manner. And that goes to, I think another one is about inclusion for us. And if you think about the fact that we serve roughly 80 % of the population, if you go into a McDonald's, you see everybody.

23:46You see young, old, different ethnicities, different races, rich, poor, et cetera. We wouldn't be able to do a great job of serving all of those different customers if we didn't have within our own organization diversity as well that reflected all those different experiences and different wants and needs. So the final thing that I'd say is defining about our culture is just a focus on inclusion that we've been on for 40 some odd years. Frankly, we were on it way before the whole notion of DEI came about because it's so core to what we do. What are your most important leadership principles? I think one of the things that I certainly expect is tone at the top.

24:36And so a recognition that as a leader of an organization, you will set the culture. And I do think that over time, the culture of an organization does come to reflect the tone that's coming out of the CEO's office. So the most important thing for me is that I set the right tone at the top, and that goes to our values that I talked about previously. It goes to our cultural norms. There's a bunch of ways that you bring that to life, but it starts with setting the right tone at the top in the company. I think the other thing is to be able to speak with clarity. The organization needs to understand the vision.

25:20They need to understand where we're going. They need to understand how they can contribute to that, what their role is going to be. So you have to be a very good communicator and do it a number of different ways, but make sure that everybody understands the direction, why we're going that way, and what the potential benefits of all this is. And then ultimately, you have to be a great listener because the nature and scope of these jobs, I touch one fraction of a fraction of a fraction of the things that happen in McDonald's every single day. Everybody in the company is more of an expert in their area than I am in mine.

25:59My job is to synthesize sort of all their thinking and ideas and be able to stitch it together in a way that makes sense. And so creating an environment where people are willing to tell you sometimes the uncomfortable truths, where they're willing to challenge your ideas, all of that goes to ultimately, I think, creating a great organization and one that can be successful in the long term. Is it possible to give us some examples of the tone from the top? And for instance, what are the parts of the corporate culture you were trying to tweak just now and how do you do it? Yeah. One thing I'm trying to change is what I have described as vertical thinking versus horizontal thinking.

26:43And vertical thinking is when people tend to look at their job or they look at their project through the lens of either their function. So if I'm supply chain, I'm only thinking about it as a supply chain leader, or they're thinking about it through their geographic lens. So if I'm in Canada running the Canadian business, I'm only thinking about it from a Canadian perspective, as opposed to thinking about things horizontally, where you're thinking about how might what I'm doing here, how does that connect to other people in the organization and how am I bringing them along? Because the reality is there isn't a single project that happens at McDonald's that can happen with only one function.

27:28Everything that we do inherently is multifunctional. Just it's the nature of everything. And if you think about our business as well, there's so much commonality in our business. There's so much opportunity to learn that if you're only thinking about your geography and you're not opening up your horizon, and your aperture to think about what are other markets doing? What can I learn? Back to the cultural norms, another one I talk about is steal shamelessly. And so before you embark on something, the first question you should be asking is, okay, who else has done this before? And what can I learn from them?

28:06Because 90 % of the time, I guarantee you the issue that you're facing, we have faced somewhere else in McDonald's already. And so start with that horizontal mindset before you drop into a vertical mindset. That's one thing that I've been preaching quite a bit over the last six months in our organization.

28:31What's the best thing you've stolen from other organizations? I mean, stolen. Yeah. Copied. I'd say I've been fortunate. I started my career at Procter & Gamble as a brand manager there. And I think P &G does a spectacular job around talent development and succession planning. That's been something that I've tried to bring to McDonald's and PepsiCo as well. I think PepsiCo is another one that's a standout from a talent development succession planning standpoint. I've tried to bring those ideas, those processes, those tools, and bring them to McDonald's. Because I do think, back to this point of we're a people business, it means that we're going to be only as good as the pipeline of talent that we have two, three layers down in the organization.

29:26And that's been something that I have unapologetically stolen from other organizations that I've been a part of and that we're getting embedded here at McDonald's. And specifically, what's the key to good succession planning? I think it starts with a few different things. It starts with having clarity about what are the critical experiences that someone needs for different jobs. If you're not clear about to be successful in this role, here's the experiences that this person would need to have to be successful in that role. you're kind of in the dark then when you're doing succession planning. So it starts with having clarity about the experiences that are needed to be successful in that role.

30:11That's part one. I think the second thing is having a very realistic but also aligned point of view with the employee about their strengths and opportunities. What are they good at? Where do they have their development opportunities? And then it's the marrying of the two. It's the marrying of when an opportunity comes up, of all the people that I've got to choose from, how might this fit with someone's development opportunity? Do they bring to it also the critical experiences that they need? And ideally, you're doing it multi-years out. So you're not doing it just when the job comes open. And you're actually for every single job, especially at the more senior levels, every single job, you're building a slate that says in the next one to three years, here's what this looks like.

31:02In the next four to six years, here are people that we might consider for this role so that you've got sort of a longer term view and a strategy that you're executing against versus what I see sometimes that happens if you don't have that kind of robust process is it tends to be a part of the job. be much more reactive, much more reflexive. Hey, somebody quit, somebody moved to a different job. Okay, who do we have? And it's not a strategic decision. It's more of an availability decision. And when you're thinking about it that way, you're ultimately not going to be building the bench of your organization in the future.

31:39Did you learn anything important at Harvard Business School? I learned a lot of things there. It was a great experience for me. One of the things that I learned about it is just you meet people from so many different industries and from so many different countries. It opened up my worldview of everything that's out there. So I think the one thing is just a much more expansive horizon of all the different career paths that are out there, but also there's a lot of talented people. One thing that you learn when you go to Harvard business school is, no matter how good you think you are, you're not that good.

32:21Because you can meet a lot of other people that are pretty impressive. And it's a humbling experience, for sure. Jensen Huang of NVIDIA said, Nikolai, you have hard work, and then you have insanely hard work. How would you define your work ethics? I think you go through through peaks and valleys on that. So I wouldn't say that it is at a steady state. There are going to be periods where you are extremely hardworking and where it can become sort of all consuming. And then there will be other times where you don't have that. I think from my vantage point, the way I think about myself, you know, I've, my success has been largely through hard work.

33:12I would say I'm not the smartest person in the world. I'm not the most charismatic person in the world. When you go to Harvard business school, uh, and when you work at the companies that I work at, I've worked at, uh, I've seen plenty of people who are better on some of those dimensions, than I am. I think for me, what I've been able to do, I think in my career, is I've got a good balance of skills. So I've got a good ability to take kind of risks, but also think through things. I've got good communication skills. So I think a balance of those abilities paired with a willingness to do the hard work.

33:52Because to get to be a CEO of a company like McDonald's, it doesn't happen in your first five years out of business school. It doesn't happen in your first 15 years out of business school. In my case, it's 25 years after business school that you get into that sort of role. And so along the way, there's got to be a lot of learning. There's got to be a lot of experiences and hard work. And ultimately, as you well know, Nikolai, you develop a reputation in your industry. You become a brand unto yourself where Chris is known for being this type of person. And I think over my years, sort of developed a brand, someone who's strategic, but also who's a good listener and is able to do the hard work and do it in the right way.

34:50So relentlessly slaving away. Well, probably no different than you or anybody else, but yes. How do you relax? I gather you run marathons and all that kind of stuff. Well, yes, I've run a bunch of those. As I get older, I'm going to run less of those. You know, the body can only take so much of the pounding on that. But I love sports. I'd say I start with I love sports. I love being outdoors. Those are all great things for me. And I've got a great family that I just I love being around. And I've got a great group of friends that also I enjoy being around. And you find, you know, you need to get the balance from that.

35:31Because at the end of the day, there will be a day that I'm no longer CEO of McDonald's. And with that go all the sort of, you know, trappings of the role. And what you're back to is your friends, your family, you know, the things that you care about. And so I always try to keep that in mind as well and make sure that I don't over-index because in the long run, I think I have a pretty good idea of what really matters. Now, we have tens of thousands of young people listening into the program here. What would be your advice to them? I think the first is just to not settle. And what I see sometimes people happen in their career is they start to settle for, you know, either this is, you know, as high as I'm going to go, or yeah, I don't love my job, but I'm, I'm, it pays well, and I don't really want to move.

36:31And, and so you end up seeing that, that people will maybe make some settle for things. And I don't think you should settle. I think, you know, people should set high expectations for what they want to get out of life, what they want to get out of their career. So it starts with one, don't settle. I think the second thing is surround yourself, be around good people. So much of the opportunities that I've gotten, the coaching that I've gotten over the years has been because of the relationships and just the people that I've been around. And when you're around good people, people that you like, people that you trust, that's going to be helpful for you in your career.

37:16If you're working in a place and you don't love the people, that should be a red light for you that maybe this isn't the right place for you. So you got to make sure that you're around people that you like. And then the last thing I would say is make sure you're constantly learning, especially these days where the world I think is changing so quickly. If you're not, if you don't have a learner's mindset, if you are not inherently curious every single day trying to learn about something new, I think you can find yourself becoming quickly outdated in certain areas. And so having that learner's mindset, being relentlessly curious about stuff, and being willing to take action on it.

38:02You know, when you find something that maybe you discover through your investigation that seems really interesting. It's one thing to say, hey, that seems really interesting. It's another to say, and you know what, I'm going to go do X, Y, Z about it. And that goes back to the don't settle. I think it's a fantastic place to end. I certainly have learned a lot from you today. Big thanks for sharing and all the best going forward. Well, thanks so much for having me, Nikolai. It's my pleasure.