McDonald's Corporation (MCD)

AGM 2017

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May 24, 2017

The information in this presentation contains certain forward looking statements that reflect management's expectations regarding future events and operating performance and speak only as of May 24, 2017. These forward looking statements are not guarantees of performance and involve a number of risks and uncertainties. Except as required by law, we do not undertake to update these forward looking statements. A list of the factors that could cause actual results to differ materially from those expressed in or underlying our forward looking statements is detailed in the company's filings with the SEC, such as its annual and quarterly reports. Access our SEC filings by going to corporate. Mcdonalds.com /mcd/investors. Our website also includes reconciliations of non GAAP financial measures we mentioned in our presentation, if any, to their corresponding GAAP measures. Those reconciliations may be found at investor. Mcdonalds.com. Well, good morning. It's a great day to be here with all of you, and I'm honored to serve as Chairman of your Board of Directors. And I welcome you to the McDonald's 2017 Annual Shareholders' Meeting, and I hereby call this meeting to order. In addition to everyone here, we're joined by those of you listening on our webcast. And for those of you here in the room, you have a copy of the agenda for our meeting today information about our procedures. But first, I'd like to introduce the people with me here on the stage. To my immediate left is Steve Easterbrook, Chief Executive Officer to his left also is Jerry Krulowicz, our General Counsel and finally to his left is Kevin Ozan, our Chief Financial Officer. I'm also pleased to introduce our Board of Directors, who are nominees for election at this meeting. In addition to Steve Easterbrook, they are Lloyd Dean, President and CEO of Dignity Health Bob Eckert, Operating Partner of 3, Glenn, Fleischer and Lo Margo Georgiadis, CEO of Mattel Gene Jackson, President and Strategic Senior Strategic Advisor of Nike Rick Lenny, Non Executive Chairman of Information Resources John Mulligan, Executive Vice President and COO at Target Sheila Penrose, Non Executive Chairman of Jones Lang LaSalle John Rogers, Jr, Founder, Chairman and CEO of Ariel Investments and Myles White, Chairman and CEO of Abbott Laboratories. Also with us today is our Chairman Emeritus, Andy McKenna. And I like all those directors and Andy to please stand be recognized. Thank you. And I think we're all fortunate to have this great board. So we'll begin our business this morning with the presentation of the proxy proposals and later you'll hear from Steve. I'll also offer a few comments later. But at this time, I'd like to turn to Jerry Krulwich, our Corporate Secretary, to describe our procedures for the business of this meeting. Jerry? Thank you, Rick. I can advise that a quorum of the company's shares outstanding is present to conduct the meeting. The polls are open and will close following the presentation of the proposals. For the benefit of all shareholders joining us today, we ask you to maintain a respectful and orderly environment throughout the meeting. For those of you that are invited to offer a comment or question, we would urge you to be courteous to your fellow shareholders and please limit your remarks to the time provided. You may review the rules of order, which are printed in your programs, and here is the order of events. 1st, the Chairman will introduce each proxy proposal and the presenter of each proposal. Each of the presenters will be allowed up to 2 minutes to present their proposal. A chime will indicate that the expiration of the time has happened. Following the presentation of all the proposals, the Chairman will ask for a motion and a second on all proposals at one time. There will not be a comment period during the presentation of the proposals, but there will be a question and answer period following the CEO's remarks. Our rules of order are intended to provide more opportunities for shareholders to ask their questions during that portion of today's meeting. If you have a question and have not yet submitted it, please hand that to the usher now. And if you have not already voted your shares and need a ballot, please raise your hand and an usher will provide one to you. If you have already submitted your proxy, you need not to vote by ballot. You've already voted. Broadridge Financial Solutions, the independent Inspector of Elections, receives and tallies all votes. Preliminary voting results will be announced after Steve's remarks. And with that, I will now turn the meeting back to our Chairman for the presentation of the proposals. Thank you very much, Sherry. So our first order of business is the election of Lloyd Dean, Steve Easterbrook, Robert Eckert, Margaret Georgiadis, Enrique Hernandez, me, Jean Jackson, Richard Lenny, John Mulligan, Sheila Penrose, John Rogers and Miles White as Directors. The second proposal is an advisory vote to approve executive compensation. The third proposal is an advisory vote on the frequency of future advisory votes to approve executive compensation. The 4th item is approval of the material terms of the performance goals for awards under the company's 2012 stock plan. The 5th item is an advisory vote to approve the appointment of Ernst and Young LLP as independent auditor for the year 2017. And the remaining items of business are shareholder proposals, excuse me. As a reminder, I will call on the presenter of each proposal when it is his or her turn to speak to the respective proposal in 2 minutes or less. The 6th item in the advisory vote on a shareholder proposal requesting a change to the vote counting standard for shareholder proposals. At this time, I call on Shriram Modusudinan for proposal number 6. Good morning. Thank you. Before commencing, if members of the press would like to ask questions or follow-up on anything presented on this proposal, an e mail address is teaminvestorvoice.net. Ladies and gentlemen, I'm Shriram Madhusuthanen, and I stand on behalf of Investor Voice of Seattle to move proposal number 6, which requests a simple majority vote on shareholder sponsored items. A simple majority voting standard only counts votes cast for or against an item. In doing so, it provides the most democratic, clear and accurate picture of the intent of those stockholders who are both informed and decided. This standard only counts votes that are affirmatively cast for or against an item and excludes the abstain votes of those who have formally declined to express an opinion. A simple majority standard does not arbitrarily ascribe negative intent to those who purposefully abstain, nor does it allow McDonald's to pick winners and losers by calculating shareholder items differently from how it tallies its own director election. In summary, counting abstentions artificially depress the appearance of support for shareholder concerns relative to the director election. Counting abstentions is unnecessary since shareholder items are typically non binding. And counting of sanctions is confusing and inconsistent because it treats management's director vote more favorably than all shareholder items. In closing, the simple majority standard proposed by Item 6 provide shareholders with better information about vote outcomes, allows more accurate communication between stockholders and the Board and eliminates the 2nd class treatment of shareholder items relative to management's director election. Therefore, ask McDonald's to adopt simple majority voting for shareholder proposals. Please vote for item number 6. That e mail again for anyone wishing to follow-up is teaminvestorvoice.net. Thank you. Mr. Mehul, this is Susan. I'm sorry I'm having difficulty with your name, but thank you very much. Appreciate that. The 7th item is an advisory vote on a shareholder proposal regarding the threshold to call shareholder meetings. This time, I call upon Alexa Kaczmarski, who is here to present Proposal 7. Thank you. My name is Alexa Kaczmarski, representing John Shoveden, who sponsored Proposal 7. Resolved, shareowners ask our Board to take the steps necessary unilaterally, if possible, to amend our bylaws and each appropriate governing document to give shareholders in the aggregate of 15% of our outstanding common stock the power to call a special share owners meeting. This proposal does not impact our Board's current power to call a special meeting. Dozens of Fortune 500 companies allow 10% of shares to call a special meeting and this proposal is only asking that 15% of our shares be enabled to call a special meeting. Special meetings allow share owners to vote on important matters such as electing new directors that can arise between annual meetings. Shareowner input on the timing of shareowner meetings is especially important when events unfold quickly and issues may become moved by the next annual meeting. This is important because there could be 15 months or more between annual meetings. Please vote to enhance shareholder value for Proposal 7. Thank you very much, Ms. Kazimierzsky. So the 8th item is also an advisory vote on the shareholder proposal to issue a class of preferred stock with the right to elect its own director. At this time, I call upon Patrick MacVowell, who is here to present Proposal 8. Good morning. Good morning, members of the Board and fellow shareholders. I'm Patrick Mittal, and I'm here on behalf of the Marco Consulting Group Trust to move item number 8 on the proxy statement. As many of you know, our company has set a goal that 95% of its restaurants be franchisee owned, up from the current 85%. And our view of this continuing strategy requires a well diversified Board Board representation and that includes a director who has a thorough appreciation of both the opportunities and challenges faced by today's franchise operators. Over time, our franchisees have increasingly served as a critical source of capital to McDonald's through their investments in both the company brand and real estate. Despite these investments, franchisees do not currently have a voice on the Board. Our corporate strategy is vetted and decided. Proposal number 8 would provide direct and down board representation for 1 individual who would be nominated and voted on by other franchisees through the creation of a new class of stock, it should exclusively lead to franchisees. It's important to note that the stock would offer no economic rights such as dividends or liquidation preferences, but it would allow for franchisees to have a legitimate voice of representation at the Board level. In closing, over recent years McDonald's has increasingly relied upon franchise operators, while the company itself has largely stepped away from being an operator. And that raises significant concerns for long term shareholders, because these steps are to only further distance McDonald's from its customer base, which is why there needs to be greater communication between the Board and its frontline operators such as franchisees. We therefore urge you to vote for proposal number 8. Thank you all very much for your time this morning. And thank you, Mr. Patel. So now we'll turn to the 9th item, which is also an advisory vote on a shareholder proposal requesting that the Board make all lawful efforts to implement and or increase activity on the wholly owned principles. This time, I call upon James Kilkenny, who is here to present Proposal 9. Good morning. Good morning. Mr. Chairman is all here. I rise to move the resolution on the Holy Land Principles. My name is James Kilkenny. The Holy Land Principles are pro Jewish, pro Palestinian and pro company. The principles do not call for quotas, reverse discrimination, divestment, disinvestment or boycotts. The principles do not take any position on solutions to the Israeli Palestine issue. The principles do not try to tell the Palestinians or the Israelis what to do. The Holy Land principles only call for fair employment by American companies in Palestine Israel. Let me repeat that. The Holy Land principles only call for fair employment by McDonald's and the other American companies doing business in the Holy Land. Irrespective of what Americans think about the Palestinian Israeli issue, one thing is certain. Americans expect American companies in the Holy Land to practice fair employment. Yet incredibly, before the Holy Land Principles were launched in 2012, this issue has never been brought before any of the 542 American companies doing business in Israel Palestine. Our resolution calls on McDonald's to set the standard by signing and implementing the Holy Land Principles, which are based on the very effective McGryde principles for Northern Ireland. Initially, American companies resisted the McGryde principles, but now 116 companies including McDonald's to its credit have signed the McBride principles. So why would McDonald's or any other American companies refuse to sign the Holy Land Principle? In 2015, GE, Corning and Intel tried to get the SEC to exclude the Holy Land Principles resolutions from their 2015 proxy materials. I'm going to go over. Fair employment by the company is not only morally right, but makes a good economic sense, good for the company, enhancing its reputation and making it more profitable for its investors. Signing the Holy Land principles will send out a very strong message that McDonald's is in principle and practice committed to American fairness its operation in the Holy Land. Who could be opposed to that? Please vote for the Holy Land principles. It's the American way. Thank you and start to go on with that. Okay. Thank you, Mr. Culkemi. We'll now move to the 10th item, which is also an advisory vote and a shareholder proposal requesting the Board update the company's policy regarding the use of antibiotics by its meat suppliers. At this time, I call upon Sister Mariana Ryan, who is here to present proposal number 10. Good morning, Sister. Good morning. My name is Sister Mariana Ryan, a Benedictine Sister of Chicago. Resolution number 10 asks McDonald's to set global sourcing targets with timelines for pork and beef raised without the non therapeutic use of medically important antibiotics. McDonald's showed leadership by phasing out medically important antibiotics in poultry supply chains in the U. S. In 2016. Now setting sourcing targets for pork and beef presents another opportunity to show leadership on this issue. The non therapeutic use of antibiotics in livestock is under increasing regulatory scrutiny in the United States, in the European Union and in other markets. This threat of increased regulation creates material risk that can and should be proactively addressed. Investors are increasingly concerned about the risk of inaction on antibiotics in farm animal production. In April 2016, investors worth $1,400,000,000,000 called on several companies, including McDonald's to prohibit use of medically important antibiotics. The company has substantial supply chain influence. A recent Chicago Tribune article determined McDonald's to be the largest beef buyer in the U. S. And the company's existing commitments to sustainable beef indicates that it does in fact have influence on meat suppliers. McDonald's may lose market share because of not keeping up with consumer preferences. In a 2015 survey from Crane Chicago Business, 34% of fast food restaurant customers said they would visit McDonald's more often if it served meat raised without hormones or antibiotics. Antibiotic resistance could kill more people than cancer by 2,050 and 80% of these drugs are currently used in livestock. Shareholders are seeking detailed comprehensive disclosure about how McDonald's plans to expand its policy on chicken to pork and beef in the U. S. And worldwide, particularly given growing health concerns and industry trends. Thank you, and we ask you to vote for Resolution 10. Thank you, Mr. Berrien. Now we'll move to our 11th item, also an advisory vote and a shareholder proposal requesting a report assessing the environmental impacts of polystyrene foam beverage cups. And I'd like to call Amanda Hanley, who I guess is already ready to present proposal number 11. Good morning. Good morning. I'm Amanda Hanley, a Board member of As You Sow, which filed Proposal 11 on the proxy to assess the environmental impact of polystyrene foam cups. We appreciate that McDonald's has phased out harmful polystyrene foam packaging for food applications such as hot beverage cups in the U. S. And many other countries. However, we are concerned that it continues to use foam cups in some overseas markets where plastic pollution migration into waterways is highest, such as Hong Kong and parts of the Philippines. Polystyrene foam or styrofoam is creating huge environmental problems, especially in our oceans. Plastic packaging is a prime component of ocean dire pollution, which threatens marine animals and potentially human health. An estimated 8,000,000 tons of plastic are swept into the oceans annually and one study projected that oceans will contain more plastic than fish by 2,050. Foam cuts break down into small indigestible pellets, which marine animals mistake for food, resulting in intestinal blockage, buildup of toxins, the death in birds, fish and whales and other animals. While recyclable in theory, very little foam gets recycled. In its latest report, the U. S. EPA was unable to find any significant recycling of polystyrene in the United States. 9 countries in more than 100 U. S. Cities or counties have banned foam packaging. The International Agency For Research on Cancer has determined that styrene used in the production of polystyrene is a possible human carcinogen linked to increased occupational risk of leukemia and lymphoma. We appreciate McDonald's leadership in phasing out foam based takeout containers 25 years ago and hot cups 3 years ago, but the job isn't finished. The company needs to fully phase out use of foam based food service packaging materials. Please support proposal 11 on our proxy statement to protect our valuable brand and our oceans from harm caused by plastic pollution. Thank you. Thank you, Ms. Hanley. And now the 12th and final item is an advisory vote on the shareholder proposal requesting a report on charitable contributions. At this time, I call upon Gregory Achille, who is here to present number 12. Good morning. Good morning. My name is Akhila, and I'm a long time civil rights and social justice advocate. I'm a father of 6 and from Los Angeles and project coordinator for Corporate Accountability International. And I speak on behalf of John Harrington, a long time shareholder on behalf of a growing movement of parents, educators and health professionals concerned about this corporation's role in driving the epidemic of diet related diseases. Now we are joined by the 2nd largest food district in the country. To that end, I urge McDonald's to solely report its charitable contribution and to make sure that they are in line with stated values. Charity is about giving back to the community, not about promoting a brand. Far too often McDonald's Charities serve its brand while attacking and disadvantaging the people they say they want to support. For example, McTeacher's Night. It's the corporation gets teachers from behind to work behind the counter serving burgers, fries and sodas to their students. While this is identified as a fundraiser, in reality what it is, is predatory marketing. They exploit the trust that children have in the teachers and the schools. McTeacher's Night faces an escalating opposition. More than 50 teacher organizations, including the National Association of Teachers have denounced the practice. Last month, the Los Angeles United School District overwhelmingly passed their resolution demanding an immediate end of the program. McDonald's needs to act and make sure that its values are in line with its position. We are urging people to support Resolution 12. Thank you. Thank you, Mr. Keeley. Is there a motion to move on all these proposals? Second. Okay. Moved and seconded. The Board of Directors recommends a vote in favor of the election of all director nominees and in favor of the other 4 management proposals. The Board also recommends a vote against all of the shareholder proposals. The reasons for the Board's recommendations are outlined in the proxy statement which you have available to you. If you're voting at the meeting, please complete and sign your ballot and motion for an usher to collect it. If you've already submitted your proxy, you do not need to vote by ballot. Is there anybody who needs a ballot or would like one? Okay. I don't see anybody. So the polls are now closed. I can share with you now that the preliminary voting results will be announced at the end of today's program. And this concludes the formal business of the meeting, and the Annual Shareholders Meeting is now adjourned. So now that we finished our business and before I turn over the podium to Steve, I thought I'd offer a few comments, observations about our company. This company has made remarkable progress since 2015. In the coming years, I believe we'll maintain our momentum and even accelerate our efforts to build a better McDonald's. The company is well positioned for the future. We restructured our organization and strengthened our leadership team. An example, over the past 2 years since Steve began as CEO, new leaders have been placed in 12 of the 14 top roles in this company. Steve, the presidents of each of our 4 operating segments and new leaders in key areas such as strategy, people, marketing and communications, all bring exceptional skills and dynamic abilities. On behalf of the Board, I can state with confidence that Steve is the right leader for McDonald's. In fact, we believe he is the best leader in the entire sector today. We benefit from an effective working relationship between the Board and CEO, and I mean all of us benefit. We share a strongly held commitment to delivering results. Your Board is holding itself accountable. Like to make a few additional comments about the board. I can assure you that each member of the board is fully engaged. The Board operates with an appropriate balance of institutional knowledge and fresh perspective. Our directors bring experience to many different industries. As our business evolves, so will our Board. For example, 4 new directors have been added to our Board since 2015. And as of this meeting, 5 directors will have retired since 2015. Our governance committee continues its comprehensive process of identifying candidates best suited to join our Board as the need arises and the company takes on new challenges. We also have a robust evaluation process that includes regular self assessment and director peer review. We remain committed to ensuring that we have the right directors in place to oversee the company's business and serve the interest of McDonald's shareholders well into the future. This past March, just a few months ago, I joined Steve and other members of the management team and leaders from throughout the company at an Investor Day. This was an extraordinary event. The company offered a frank assessment of the challenges we face and our greatest opportunities to drive growth. We presented an in-depth review of the path we will take to leadership in our industry. We look forward to seeing those initiatives gain momentum and advance McDonald's in the months and years ahead. We are confident about our future because of our strategic plans and our management team's ability to execute, which has been demonstrated by our recent performance. Our financial results. They were strong in 2016. Comparable sales continued improving. We increased operating income and earnings per share. Restaurant cash flows grew in many markets around the world, and this momentum is building. For example, in the U. K, McDonald's has posted a year over year comparable sales increase for 44 straight quarters, through the Q1 of this year. To put it another way, that's an 11 year uninterrupted run of like for like growth in that market. We successfully completed our 3 year plan to return $30,000,000,000 to shareholders by the end of 2016. The $14,000,000,000 return to shareholders in 2016 16 alone was accomplished with $11,000,000,000 of share repurchases and $3,000,000,000 in dividends, including a 6% dividend increase in the 4th quarter. And we intend to return another $22,000,000,000 to $24,000,000,000 to shareholders over the next 3 years between 2017 2019. I hope it's clear clearly apparent to all of you now that at McDonald's, we're advancing our business while also continuing to uphold our commitment to you, our shareholders. We have many reasons to be encouraged and confident about our future. And thank you for taking your time to be with us here today. And I thank you for your support at McDonald's. And now with those comments, I'd like to welcome to the podium Steve Easterbrook, our CEO. Chris? Thank you, Rick, and good morning, everybody. Now we've made significant progress in building a better McDonald's because of the strong partnership we have, Rick, with you and the entire Board of Directors. And your leadership, your full counsel, your challenge and your support has been much appreciated. So on behalf of management, I'd like to recognize the contribution the Board has made. Thank you. I'd also like to recognize our senior management team, many of whom are with us here today. These leaders have been instrumental in shaping the vision for where we're going and are passionate about working with our employees, our franchisees and our supplier partners to bring that vision to life. In addition to Gerry and Kevin, they are Ian Borden, President of the Foundational Markets Lucy Brady, Senior Vice President of Corporate Strategy Francesca Debiado, Chief Supply Chain and Sustainability Officer Joe Ehrlich, President of the High Growth Markets David Fairhurst, Chief People Officer Robert Gibbs, Chief Communications Officer Doug Gore, President of International Lead Markets and Chief Restaurant Officer Chris Kemshinsky, President of McDonald's USA Silvia Lagnado, Chief Marketing Officer and Jim Sappington, Executive Vice President of Operations, Digital and Technology. Please do stand, guys, and be recognized. And I want to express my appreciation to all of you, our shareholders. Thank you for your investment and for joining us today, both in person and on the webcast. But before we continue, I'd like to recognize a longtime friend of McDonald's who's not with us today. This past weekend, many of us gathered to celebrate the rich life and legacy of Al Golin. Al passed away in April. This is the 1st McDonald's shareholder meeting that he's not attended since we're incorporated. Al was a trusted adviser to Ray Kroc, Fred Turner and to every CEO of McDonald's over the years, including myself, as well as being a visionary in his field, he was just a really kind gentleman. We'll miss him. When I became CEO 2 years ago, I had just one mandate, which is turn around the McDonald's business. We took swift actions to revitalize our company and begin changing McDonald's trajectory. Putting the customer back at the center started with running better restaurants. A focus on the fundamentals of quality, service, cleanliness and value made a noticeable difference for customers. Today, we are customer focused, forward looking and right sized. Our business results in 2016 are a testament to our progress. They bolster the confidence we have in our ability to drive profitable long term growth. We grew comparable sales during all 4 quarters in 2016, making for 6 consecutive quarters of comparable sales growth. That momentum has continued into 2017. Strong first quarter has now made for 7 consecutive quarters of comparable sales growth. In 2016, operating income increased 8%, diluted earnings per share was up 13% and our franchisees continue to generate cash flow growth at or near record all time high in many markets around the world. Whilst this marks a significant improvement from 2 years ago, we're only getting started. Our company culture is evolving, and we have a restless energy. That is why we developed our Velocity Growth Plan. It's how we're building a better McDonald's. And as Rick mentioned, we unveiled the Velocity Growth Plan in March at our Investor Day. Since then, thousands of McDonald's stakeholders, owner operators, suppliers, our board members, employees, agency partners and bankers have walked through a space we created in downtown Chicago. We shared the bold steps we're taking to deliver an improved experience, and our team is highly energized. The reaction from owner operators in particular has been very, very strong, with over 90% approval for our plans in the U. S. Market in their post visit survey. At its core, Velocity is about growing guest counts. We will retain customers who visit us regularly today. We will regain customers who are not visiting as often as they once did. And we'll also convert casual visitors into committed McDonald's customers. We are focused on actions that tap into the competitive advantages unique to McDonald's: our unmatched global scale and our iconic brand our tremendous local market presence and our connection to the everyday lives of our customers around the world. So let me tell you a little more about our approach to retaining customers. We serve 60,000,000 customers every day, and nearly onethree of those visits are my families. 1st and foremost, McDonald's was a family restaurant when we launched more than 60 years ago, and it remains so today. We will celebrate the emotional Bond families have in McDonald's by continuing to transform the experience in our restaurants. In markets like France, for example, our restaurants have modernized their play areas, made their kiosk screens reachable by kids and trained the hospitality staff to assist parents. We offer great value too because we know how important that is to families. More important is the restaurant. We live up to our commitment to families by serving food that kids like and parents feel good about them eating. We provided billions of servings of fruit and made fruit appealing to kids with fruit on a stick, unpackaging and organic fruit drinks. Take a look at this commercial we're using in Canada. Our breakfast menu brings many of our regular customers to McDonald's. In line with what customers want, we're continuing to use high quality ingredients such as fresh cracked eggs and our Oaken McMuffin sandwich. To build on our strengths, we'll continue putting significant energy towards growing the entire core of our business. The second pillar of our strategy focuses on bringing customers back to McDonald's as we seek to regain visits we've lost in recent years. Some of our customers simply aren't visiting us as much as they used to, and we know why. We didn't keep pace with our rising expectations for quality, convenience and value. And clearly, as a restaurant business, food is at the heart of everything we do. Our food must be delicious. In fact, we just introduced our signature Crafted line here in the U. S. A few weeks ago. We're offering new flavors such as pico guacamole, maple bacon Dijon and sweet barbecue bacon for your burger or your chicken sandwich. And I hope those of you in the room today will taste 1 soon using the BR guest card you received on the way in. We're also working to bring our customers juicy and more flavorful burgers. And by the middle of next year, in the majority of our restaurants in the U. S, we'll serve quarter pound patties made with fresh beef, cooked to order. I visited our restaurants in Dallas where we've been serving fresh beef and I've tasted the burgers, And I know our customers will appreciate it as we bring this to more restaurants. Taste is not the only way we're making our food better. We've been improving how we serve and source our food. In the U. S, we're serving only chicken not treated with antibiotics important to human medicine, and we've committed to sourcing only K3 eggs by 2025. We've removed artificial preservatives from several menu items, including chicken McNuggets, and we've eliminated high fructose corn syrup from the buns used on most of our sandwiches. We will continue to work closely with our suppliers who are true partners in the McDonald's system and that absolutely share our commitment to our customers. It's great to see a good number of them with us here today. Thank you for joining us. We're taking significant steps forward on what matters most to customers, and I'm confident it'll make a difference for our business and for our brand. We continue to create a more convenient and satisfying customer experience. In Canada, for example, customers have come to rely on the hospitality offered by our guest experience leaders, who welcome in the restaurants and offer to guide them through the ordering process of the kiosk. And customers really appreciate ordering at their own pace and customizing their selections, having their food just the way they like it. And since we introduced kiosks in Canada in 2015, usage has more than doubled year over year. We also remain committed to value. If you only have a buck or 2 in your pocket, there is something good for you at McDonald's. In the U. S, we made our McPig program even more appealing with dollar Any Size soft drinks, which began last month. In Germany, our Taste of McDonald's campaign provides an everyday affordable mid tier sandwich that is appealing to price conscious consumers. We also see powerful opportunities to convert casual customers into more frequent, committed McDonald's visitors. And coffee and snacking are 2 underdeveloped opportunities to do just that. Our McCafe coffee has tremendous growth potential. In Australia, for example, McCafe sales are now 14% of the business. The market has taken a unique approach by serving our high quality coffee prepared by dedicated McCafe baristas. Our customers enjoy cafe ambiance and a great cup of coffee with the convenience, speed and the value they expect from McDonald's. We've also made McDonald's a destination for coffee in Canada, where consumers are passionate about a consistently great cup of brewed coffee. In fact, McDonald's earned recognition there for the best coffee in the country. And the success in both these markets demonstrate the promise of what coffee can do for our business. And just like coffee, we see potential around the world with ice cream and baked goods. We aim to make McDonald's the first choice when someone craves an afternoon or evening snack. Our 3 pillars of retain, regain and convert form a SAU strategy focused on the biggest opportunities to grow guest counts. We're also prioritizing 3 major accelerators that extend across everything we do. They are digital, delivery and experience of the future. Digital offers an opportunity to reshape the interactions our customers have with whether they dine in our restaurants, take out or go through the drive through. We will launch Mobile Order and Pay in 20,000 restaurants around the world by the end of 2017. In the U. S, we're committed to launching mobile order and pay along with curbside check-in in all of our traditional restaurants by the end of this year. And whilst we're still in the early days of our pilot markets, we're moving aggressively and moving to rapid deployment with mobile order and pay beyond the 400 restaurants across the U. S. Where it's been offered initially. We must get digital rights to be relevant to mobile consumers. Delivery offers remarkable growth potential. Nearly 75% of the population in our 6 largest markets lives within 3 miles of the McDonald's. With more than 2 decades of delivery experience in Asia and the Middle East, we're in a strong position to claim our share in the rapidly growing $100,000,000,000 restaurant delivery market. Delivery is now available in over 1,000 U. S. Restaurants. We have expanded from offering delivery initially in Miami, Orlando and Tampa to now include Los Angeles, here in Chicago, Columbus and Phoenix. We will continue expanding to additional cities in the U. S. And in markets around the world. So let's watch one of the new commercials we'll be using to let our customers know they can have their McDonald's delivered to their home, their office, their door or wherever they are. Take a look. So we're moving aggressively to bring experience of the future, which we call EOTF, to more restaurants. EOTF involves many changes in our restaurants, including contemporary decor, technology such as self order kiosks and overall enhanced hospitality that increasingly includes table service. We're tailoring the experience for our customers, making it less stressful and more convenient. Taken together, these actions enable us to bring the biggest benefit to the most people in the shortest possible time. And as we execute our Velocity Growth Plan, our stakeholders and our shareholders will measure our progress against new average annual financial targets effective the beginning of 2019. We expect system wide sales growth of 3% to 5% operating margin in the mid-forty percent range earnings per share growth in the high single digits and return on incremental invested capital target in the mid-twenty percent range. When I stepped into the CEO role, I said that we would succeed with revitalizing the business, accelerating our growth and reasserting our leadership in the industry. They're on our way, and we've never been more confident we'll achieve our ambitions. Thank you again for your investment and for your support of McDonald's. And now I'll ask Rick to share the preliminary voting results. Thank you. Well done, Steve. And I think you all can understand why I say the Board of Directors is so excited and confident with the future of McDonald's. So we received the preliminary voting results from the independent inspector of elections, and final results will be posted on the McDonald's website after all the votes have finally been tallied and certified. But I'll share with you now the preliminary results, and they're as follows. Shareholders have elected each of the director nominees with the average support of at least 96.8% of the shares voted. Shareholders have approved the management proposal relating to an advisory vote on executive compensation with the support of 94.7 percent of the shares voted. Shareholders have approved the 1 year option for the management proposal on the frequency of future advisory votes to approve executive compensation. Shareholders also have approved the material terms of the performance goals for awards under the company's 2012 stock ownership plan with support of 96.4% of the shares loaded. Shareholders have approved Ernst and Young as the company's independent auditor for 2017 with support of 98.1% of the share voted. The advisory shareholder proposals were not approved. The advisory shareholder proposal requesting a change to the vote counting standard for shareholder proposals received the support of 9.3% of the shares voted. The advisory shareholder proposal regarding the thresholds shareholder meetings received the support of 47.5% as shares voted. The advisory shareholder proposal to issue a class of preferred stock with the right to elect its own director received the support of 1.3% of the shares voted. The advisory shareholder proposal requesting that the Board make all lawful efforts to implement and or increase the activity on the Holy Land Principles received the support of 2.6 percent of the shares voted. The advisory shareholder proposal requesting the Board to update the company's policy regarding use of antibiotics by its meat suppliers received the support of 29.7% from the shares loaded. The advisory shareholder proposal requesting a report assessing the environmental impacts of polystyrene foam beverage cups received the support of 30.9% of the shares voted. And the advisory shareholder proposal requesting a report on charitable contributions received the support of 3.5% of the shares voted. And now with that behind us, we'll begin the question and answer period. Earlier in this meeting, Jerry Krewelich reviewed the rules of order for today's meeting. As a reminder, they're printed in your program, and we really urge everyone to follow those rules. This will extend courtesy and respect to each shareholder asking a question today, and we hope to be able to answer all of the questions. Now I'll turn to Steve, who will lead this part of our meeting. Thank you, Rick. We set aside up to 20 minutes for questions. And I have many of the questions in the question cards that many of you filled in earlier. We've also tried to batch the subject together so we can address as many of the most popular topics that are on your minds today. So when I call your name, please go to 1 of the 2 microphones on either side of the room, and we will try to intend to address as many of the questions as we can. Please do, though, limit your questions to one topic and your discussion to 1 minute or less. So we can start with Ronald Friedman, who has a question on stock buybacks and franchising policy. And perhaps Tom Liking, who's interested in delivery, can move to the other side and be ready, that would be great. Hi. Last my name is Ron Friedman. Last year, you bought about 10% of the stock back. And if you could just tell us why you bought that much back and how you paid for it in your future intentions? Yes. Thank you very much. It's a great question. It's I mean, this is a clearly a significant strategic decision and discussions we have at a board level. So but if I just share with you our overall policy on what we do with our financials because we're a very strong cash generative business. And the priorities of the business is the first use is to invest in the business for growth. After that, we then ensure we maintain a competitive and compelling dividend. And then the remaining cash, we use for cash stock buybacks. And we tend to look at this over a 2 to 3 year period. And I think Rick mentioned the targets from 2014 to 2016, which we hit, which was a combined $30,000,000,000 return to shareholders. And we've outlined a target from 'seventeen to 'twenty 19 for $22,000,000,000 to $24,000,000,000 And the reality is it's all about allocation resource. But fundamentally, because of our confidence in the business, we've the 1st and foremost discussion we had, both from the management side and then we presented for discussions with the approval, is we want to invest 1st and foremost in the business because we believe that's the greatest growth potential. But when the numbers of the stock buybacks of the size that you referenced, really just demonstrates quite how strong cash generative business we are. Thank you for your question. Tom, question on delivery, I believe. So I'm a crew member at McDonald's in Geneva, and I was talking to our managers because I figured it'd be a pretty profitable thing to have Uber deliver food because I know a lot of my friends like ordering it, but can't always make it McDonald's. So I was wondering, you're telling me that there was going to be like a drive thru section for them. So I was thinking like with the double drive thrus, are we just making like one for people and like one of them for the Uber? Then also, he was saying that they're not just going to be paying us for just one order. They're going to be paying us at the end of the week each week. And I was wondering how the collection of that money is going to go down. Okay. Well, first of all, thanks for the work you did in the restaurant. Really appreciate it, seriously. So well done. So I appreciate that, Tom. But it's a good question. So we're learning really quickly on delivery. I mentioned earlier, in Asia and the Middle East, we've actually been we've offered a delivery system for the last 20 years. And it's going to be a pretty significant business But we've used a very different model. We actually hire our own drivers, have our own moped sore cycles and we deliver the food ourselves. We don't think that's necessarily the best model in other certain other markets, and so be here in the U. S. And in Western Europe as well. So with the advance of technology and companies such as Uber Eats and there's many others, these are called 3rd party operators. And what they do is they take, I guess, the complications of the drivers, the car, the insurance and understanding the navigation, the rest of it. And we can do what we do best, which is to prepare the food, offer great value and have them come and collect it. To your question around operationally, how is it going to work? We started off with a test down in Florida, and we initially were asking the drivers come in and pick up at the front counter because we didn't necessarily want to add any more traffic to the drive through. But as we learned through the test and expanded to more cities, we found that we could cope with both. So frankly, the Uber drivers can come and collect it in whichever way they want. And frankly, you and I wouldn't know they're necessarily an Uber driver or whether they came to the drive through, we say. They're just regular customers. In terms of the financials of it, it it's a really strong incremental business for our owner operators, for our company restaurants And it's great for Uber as well because it keeps their drivers busy. The more active we can keep our drivers, the better as well. So we're seeing incremental business is coming toward a strong level. And as the awareness raises, I think people like you and your friends will start getting more and more used to when you call up the app on your phone that you'll know your local McDonald's. The other thing that we find exciting about it, and I mentioned it, it's not to be underestimated. We at McDonald's have more restaurants closer to more of the population than any other restaurant business. So that makes delivery such a great opportunity for us. And because we are so efficient and effective, most of the time in our restaurants, our delivery times are lower than most other restaurant businesses as well. So that makes us particularly strong because when you do work with partners like Uber Eats, they don't allow for promotional activity. You can't promote and get yourself higher up the list. It's really down to your performance. So if you can perform better than anyone else, we'll come higher up the selection list. And hopefully, we'll keep you even busy in the restaurant. But thank you for your questions, Tom. Appreciate it. Now maybe we could have Duane Bradley come up because I think there's a question around the office move and perhaps the campus. And then we could line up Al Polestrini, who wants to talk about customer experience in the front counter. So do we have Dwayne? Hi, I'm Duane Bradley. I have a question regarding the purpose of the move to Chicago from the campus out here in Oak Brook. And when will that be effective? When it will be completed? And will you be continuing to have your meetings out here, the annual meetings at Oak Brook Campus now? Okay. So the move downtown, let me address the timing piece first because we're under construction for the new head office, the new headquarters down in the West Loop area, downtown Chicago. So we're in the West Loop area, around about 1,000 west to Randolph, and it's where the old Oprah Winfrey Studios used to be. So we've taken that site, and we're developing a new, like a very modern facility where we can take Hamburger University as well, so we can take our students down there. And so we just think as a customer facing business and with society moving so quickly, with trends in food, in technology, in behavioral patterns, it's more important for us and our people, not just our leaders, but all of our staff to be closer to the action. And whilst this is a beautiful facility and we've loved work being here and being based here for more than 40 years, It's a little remote from the day to day realities of life. And frankly, life is moving so quickly, we think we'd be better positioned as a business to be closer to the trends in the marketplace. In terms of timing, we're hoping to have that building completed. We're saying it in the spring of next year. So it'll be around this time next year. So I'm guessing it will be unlikely the next shareholder meeting will be held in this venue, and we'll consider where the best served us so well, and it's such an important part of our history and our legacy. But we're also going to look forward. And we think, for the benefit of the business, our people and frankly, our customers and shareholders, that we also head down town. It seems so much more convenient to get out here for people out in the western suburbs anyhow than to get into Chicago or drive in or take transportation and then get to the location. So I'd appreciate it probably if the annual meetings were still held out. So I appreciate it's very convenient for yourself, sir, and maybe one or 2 others. But we have shareholders all around the world. So we'll try and make the best decision we can on behalf of our shareholders. Al, thank you for your questions. Yes. I was wondering about the people come into the restaurant and they have a choice of hamburger or breakfast, but sometimes you want something real light and healthy. So I was suggesting that they would have a soup soup of the day or so they can come in and have a soup and possibly a side salad and a drink, which should probably come to about $4 which is cost efficient because the soups come in frozen and there you add 50% water to them, most of them and you get a gallon at a time. So you can control it and also you can reserve it the next day as long as it's not a cream soup. But also it doesn't take much to serve it. Okay. And also I'd like to say that there were business strictly business wise, there's been 20 5,000,000 abortions. And I feel that all these people would be eating at McDonald's right now. So thank you for your question. Can I ask a question? Are you a soup supplier, Al? No? I love soup. Okay. I can tell. So thank you. So a couple of points to this. I mean, part of the changes we consciously made and here in the U. S. Business in 1 or 2 other markets around the world was we overcomplicated our menu. And that impacted the quality of all billing items, but also the speed of service. And it just made us less efficient at what we do. So in certain markets around, we've had to make some tough decisions by taking some items off because we think that will provide notable benefits overall. So I'm not sure if soup will muscle its way back onto the menu or not. But frankly, we'll always be led by the customer. And if there's a demand that grows with that, then we would go with that. But your broader point of just lighter options, I mean, part of what we've I mean, certainly through the salad range, there's some lighter options anyway. But also, we believe, and I referenced in my prepared comments around the opportunity around snacking. And we think around snacking and baked goods is an opportunity where you could just have a coffee and a croissant maybe or coffee and a muffin and something like that, just to help keep you going. So we'll continue to evolve, but I appreciate your comments, and we'll always keep an eye on soup. You can always use an English cone. Well, there we go. Excellent. That's now you're talking. Now you and me have bonded really well now, Al. So I appreciate it. Thank you for your question. Now I would like to ask Geopolo Reyes to the microphone, please, who's got comments to make on political spending and trade associations. And then perhaps we could have Prentice Shaw, who has a question on China. My name is Delphi Lorelles, and I'm here today on behalf of the Nathan Cummings Foundation, which earlier this year engaged McDonald's on its political spending. I'm also the National Research Director at Restaurant Opportunities Centers United, which represents 25,000 restaurant workers, over 200 employers and thousands of consumers around the country. The foundation appreciates the steps you have taken to disclose McDonald's political contributions and its membership in various trade associations like the National Restaurant Association, also known as the NRA, and we think this is an important step. But today, there's a growing perception that the NRA is pushing to repeal the Affordable Care Act, stop $15 an hour wage requirements in cities and states across the country and keep the federal tip minimum wage at $2.13 an hour and this is despite the fact that both limited service and full service licenses have increased in New York State since its adoption of a $15 minimum wage. When trade associations like the NRA walk the quarters of Capitol Hill or City Hall, they are perceived to do so on behalf of their members. And when they align themselves with anti worker and anti health policies, they are a source of liability to McDonald's and its investors. We would like to encourage McDonald's to push the NRA and indeed all of the trade associations to which it belongs to support policies that better align with the values McDonald's claims to espouse. Thank you. I'd love for your comments. Okay. Well, thank you, Pierre, for your comment as well. So I mean, here's our approach to trade associations. We support trade associations that we can work with to better understand and appreciate a whole broad range of user perspectives. And it works for the benefit of our business and our customers in a number of different ways. 1st of all, interacting with other companies within our sector, it gives us exposure to better appreciation of some of the issues that we have in the common grounds. And also, certainly, for people within our business, it gets them access to people in similar positions in similar type businesses where we can collaborate and understand certain situations and just move the entire sector forward. But also, we have very strict policies on our dues as well. So our dues cannot be used for, and it's clearly stated, political contributions, for any independent expenditures, any electioneering communications or ballot initiatives. So we have a very precise expectation of how our dues are used and why we and we're also very transparent about the trade associations we're with. So I appreciate your comments, and I hope you also recognize, understand our position on that. Absolutely. Just wanted to ask you to consider the fact that association with the restaurant association as it takes increasingly aggressive positions such as on healthcare and on immigration, might tarnish McDonald's image as well. Okay. Well, thank you for your comments. I appreciate that. Thank you. It's Prentiss Shaw. Hi, please. I'm Prentiss Shaw. I was curious about how with the strange political climate we've had lately, whether we will have any problems with China as far as the business we do over there in retaliation for anything that we do over here. So it's a fair question. I mean, we operate in 120 countries around the world, and we operate under many governments and under many different leaders. So we're used to there being tensions or just dynamic changes in any marketplace. Our position on China is one of extreme confidence, to be honest with you. And you'll probably be aware that we've recently entered into an agreement, which we're hoping to conclude soon with what we call a strategic partner in China, where we're working with a combination of a one of the most significant state owned enterprises, which is backed and financed by Carlyle, who are well known financial vehicle. And we believe that, that combination will put us in a very good place to be better assimilated within China. As to any political tensions, frankly, we try and be as apolitical as possible at McDonald's. It just doesn't work for us to take a particular stance because we serve customers who have all different beliefs and political persuasions. So we believe that the local nature of the partnership that we'll be entering into in China will actually enhance our position, strengthen our position in China and would in no way compromise us back here, say, in the U. S. Or elsewhere. So we're confident. We believe we're actually going to increase our growth in China and do better as a result of this partnership. But we're also mindful of tensions around the world and protecting our people and our business. So your sensitivity is understood, and we do feel that as well. So thank you. Thank you. Right. Should we line up? I just need to keep a little check on time here so we don't go too far over. Perhaps we could have Deborah Brown come to the microphone, who has got a question around another menu question. And perhaps Howard Silvers as well. I'm Deborah Brown and I was visiting Florida a couple of years ago and was really impressed at the McDonald's. They had a custom made, custom ordered burger. Visited Florida again this year and that was discontinued. So just wanted to know, are there any plans to reactivate or reinstitute that burger, custom made burger? We really enjoyed it. Yes. It's a really good question. I'll tell you what, they were really delicious. They were and we sold it under the create your taste banner. I think if it does that ring a bell, create your taste? Yes. And we launched it through the all of Australia, and we used Florida here as our launch, let's call it, test market. What we found was customers loved the burger, but we could only serve it in store, in restaurants, not through the drive through because the preparation time took too long. And even the customers who actually loved the taste and the profile of the burger in the restaurant enjoyed it once but didn't come back and buy it again often enough, which is a shame. However, it did excite us about using different flavors and offering some opportunities customized. So if perhaps you want to take a look at the signature Crafted, which doesn't allow as much build your own, but really gets almost all those benefits, the taste profile, the juiciness, the freshly made for you, I think you'll find that actually, and we can offer that through the drive thru as well. So we think that's a longer term solution. But so for us, it was really, really important to do creative taste because you can learn things even if they don't ultimately work. You take the most beneficial parts of what you can learn and then take it forward and do something of maybe a better magnitude. So hope you try the Signature Crafted, and I hope you get to enjoy it either on a burger or chicken burger as well. Okay. And if that doesn't work, would you reconsider reinitiating it? I would hate to say never, but it's highly unlikely, let me say that. It's it really was operationally just we weren't able to offer a great tasting food at the speed that our customers expect from us, and that was ultimately just the final point. But thank you. Okay. We have time for one last question actually. And just like to make a brief introduction to our next questioner because I think in many ways, he represents many of our shareholders. He is an investor who clearly will want to get a return on his investment just like every single shareholder would. He's actually just a brand and business enthusiast. He's a regular correspondent with me in particular, whether it's on Twitter, LinkedIn, e mail. And he's a great generator of ideas. And it's with much anticipation and a little bit of trepidation that Howard, I'd be interested in your views today because then you can take us home to the end of the meeting. Thank you. I would like to know when we can get a world class McDonald's Museum honoring our founding fathers, our celebrities and professionals that had their first jobs at McDonald's. It would have the world's largest toy and memorabilia collection. It will honor our great athletes for the McDonald's All American games, the likes of Magic Johnson, Michael Jordan and LeBron James. And it would also have exhibits not only on the future of McDonald's, but the future of food in the world. These words, can you say, I am McDonald's? I am McDonald's. I'm proud to be your restaurant. Okay. Well, the time's up, Howard. So as I say, a brand enthusiast. Somewhere amongst your thoughts and your passion is a really interesting point, which is how do we maintain the heritage of a business which has such rich heritage that is looking to transform itself to be competitive in the modern day? And it's not lost on us also when you move from a location such as this into a new, but how do you take the heritage and the rich heritage from Ray and Fred and everything that has become something that we've all benefited from, customers and employees? And many of the other remarkable successes and brand achievements that we've achieved, and you listed just some of them, whether that's a physical museum, whether we somehow make our archive available to people, because we actually have an archivist in the company who can chronicle many, many wonderful items of our history. So somehow, we do need to find a better way. Whether it's a traditional museum, I wouldn't I don't know. If there's a way we can start to share the richness of our history with those who are interested, I think that could be a fun idea. So I appreciate it. Well, that is all we have time for today for questions. And for those of you who indicated on your question forms, if you'd like a response, we'll get back to you by e mail if we can get around to your questions. So with that said, thank you all for joining us today, and safe journeys home. Thank you.