McDonald's Corporation (MCD)

Fireside Chat

← View all transcripts

Dec 10, 2014

Good morning, everybody. Thank you for joining us for an investor session with Don Thompson, President and CEO and Mike Andres, President of McDonald's USA. We have a group here in Oak Brook as well as those joining us via the listen only webcast. My name is Chris Stent, and I'm the Vice President of Investor Relations. I'd also like to introduce the members of the Investor Relations team, Jennifer Heizer, Liz Kluge, Kim Yaman, Mary Kate Boyce and Debbie Schroeder. We will begin with opening remarks from Don Thompson and Mike Andres. Following that, we will open it up for Q and A for those in the room. We will conclude this portion of the event at noon, at which time the webcast will end. For those here in Oak Brook, at noon we will be joined by Eric Hess, Senior Vice President of Consumer and Brand Strategy. He will provide some background and context for the Create Your Taste platform, after which we will travel to a local restaurant, so you can see and taste how the McDonald's experience of the future and create your taste is being brought to life in the If you have a question, please wait for a microphone to be brought to you so that everyone in the room and on the webcast can hear you. Please provide your name and firm when asking your question. As always, the forward looking statements in our most recent 10 Q apply to all comments at this meeting. And with that, I'd like to now introduce Don Thompson, McDonald's President and CEO. Thanks, Chris. Good morning. Good morning. Well, first off, thank you all for coming in. We're used to an even larger group, but we don't typically do this. So this is a little bit different from the norm. But I really appreciate you all taking this time. And thanks to everyone that's also on the phone for joining us today. Today will be a bit more informal and hopefully more informative as to what's taking place as we see it in McDonald's today. This meeting is about providing a little more texture on the strategies that we're deploying as all of us are working toward regaining momentum by reinvigorating both our core business and deploying McDonald's experience of the future, which includes Create Your Taste. So there is a distinction here. Create Your Taste is not in and of itself the experience of the future, it is a part of the experience of the future. And that is our customizable burger platform and you'll hear more about that today and see more of it. We also wanted to give you an opportunity to hear directly from Mike Andres about the U. S. Business and the aggressive turnaround agenda that he and the team have put together and also touch he'll touch on some of the longer term growth plans as well for the U. S. Before we dive into the specifics on the U. S, however, I'd like to discuss some of the actions that we're taking globally to evolve alongside our customers and to improve our performance. The one constant regardless of the market that you're in around the world is that the actions are grounded in what our customers are expecting of McDonald's today. And we've been talking quite a bit about that, getting back to the point of really leading everything we do with customer and consumer insight. You'll have a chance to ask questions about the changes that we're making to address the near term results in some of the priority markets we've been discussing, markets like Australia, where we're starting to see an uptick, Germany and the U. S, 2 markets with aggressive plants for 2015 to help the turnaround and markets like Japan, which is a market with significant challenges for us and our team is working to overcome those. Our actions are guided by the framework of what we have called our strategic framework, which is the plan to win and they're grounded in our 4 strategic growth priorities as we position the business for longer term growth. We're evolving the customer experience to keep pace with their expectations of eating out and their expectations of McDonald's and those are not always the same things. McDonald's experience of the future builds on the investments that we've already made and been making in technology, investments in reimaging, operations with an increased emphasis on customer centric innovations for menu and service to profitably grow the business. And again, you'll see and experience some of those things. Like what some of you experienced in France and the U. K. A few weeks ago, what you'll see here today and what we'll share about our progress in places like Australia and Poland is that markets are implementing specific components of the work that we're going to talk about that are most relevant to their local customers. So this is not one size fits all. It will be relevant to the as we strive to serve our customers' favorite food and beverages. You'll see changes in the way that we deliver that menu. This can include menu customization, which is designed to reassert McDonald's burger leadership, as well as it's designed to strengthen our overall menu pipeline. If we do this right and we believe that we can, it creates new menu news that excites consumers and lifts sales also of our core classics and that's a very, very important point. This is not exit stage left for McDonald's. This is a balance between our core classics and offering new service platforms, service innovations and new menu news. That's very, very important. You'll also see changes in our service models as we work to create more memorable experiences and deliver on parallel convenience. For example, you're going to hear us talk a lot about multiple order point strategies, which includes self order kiosk table service, mobile order, web order that you've seen over in Europe, and also mobile payment to simplify how customers interact with our brand and quite simply to simply make it easier for the customers. As you'll see a shift in the way we engage with our customers and you'll see a shift in the way that we talk to consumers in general. We're being even more bold and direct as we talk about what matters most to our customers, like the quality of the ingredients that we use to prepare the great tasting food that we have in our restaurants, the quality of the beverages that we have in our restaurants and all of the food that we serve. This experience of the future that we've been talking about and that our markets are really creating also as we move forward is underpinned by the hard earned competitive advantages on which we're building. And those we talked about before, but just to restate, our size and scale is a strength. Our geographically diversified restaurant portfolio, definitely a strength. Our iconic brand, our global infrastructure, particularly the operating model of franchisees, suppliers and the company in our outstanding real estate locations and also our supply chain capabilities. These are the things that allow us and enable us to truly believe in what the future of McDonald's can afford for our customers. And our strong financial foundation enables us to pursue our global growth priorities, while we also return significant amounts of cash to our shareholders each year. The work that we're doing today to create the experience of the future will inspire a very different stronger relationship with our customers. You'll see that for yourselves. It's a relationship that will energize our sales and our guest count momentum. It will build even greater demand and drive sustained profitable growth in the future. And again, as a reminder, the balance between our existing business and those new offerings that we have is what will drive the business. So with that, I'd now like to introduce Mike Andress. Mike is the President of McDonald's USA. He has some prepared remarks. He'll give you a little bit of background on himself as well. Mike? Thanks, Don. Good morning, everybody. Thanks, Don, and thanks for this opportunity to meet with you today. For those of you who don't know me, I have even though I just came back to McDonald's, I've been around for a long time. 32 years ago, I started as a store manager. My parents' restaurants were franchisees in Northern California. And even before that, my father was Ray Crocs pilot, if you can believe that. So I really am grounded in the heritage of this business, understand where we came from and where we need to go relative to the future. And I've had some unique experiences along the way, CEO of a fast casual chain, Boston Market and CEO of a casual dining chain, most recently at Logan's Roadhouse. So all those experiences though fundamentally it's all about the customer and understanding where the customer is going and that's where we are today with McDonald's. I want to share my perspective on the U. S. Business with you today and what of course at the top of your mind what we're doing to turn around the business. And to answer this question, 1st we need to ground ourselves in the realities that we're confronted with today and why we're perhaps seeing a decline in our performance. A couple of things. Number 1, this pricing gap that we have in our menu. Today, there's too much disparity between the entry level, the core and our premium price tiers. The dollar menu has served us very well over the last many years and but the anchoring of the menu around the dollar price point has meant that some of our core menu items have absorbed a disproportionate amount of the inflationary pressures on the business. This has distorted the pricing relationship across our menu moving customers naturally to the lower priced items. And also perhaps it's contributed to some decline in quality perceptions because people are basing their quality perceptions on our value sandwiches which is the McDouble and McChicken, which are great products, but they're not the Big Mac and they're not the quarter pounder with cheese. 2nd is the pace of change. The pace of change outside of McDonald's has become faster than perhaps the pace of change internally. Consumers have redefined quality and value. And the focus more as you all know is more on wellness and that talks about eating well. And it also includes our competitive set with traditional competitors being more focused around value and new products. And then fast casual kind of meeting critical mass and taking the lead on real and fresh perceptions of customizations which is closer to the consumer definition of quality. Next is complexity, complexity of our menu and our menu boards. Yes, we've added over 100 SKUs over the last 10 years, making it more difficult to execute our menu and maybe difficult to order off of our menu. But I also added in those same 10 years, we've added $770,000 to the average restaurant and a proportionate about $70,000 in cash flow in the same period of time. So moving forward, we have to be very careful on how we address the menu. So these are transformational times with the consumer and as a result the impact on the industry. And in confronting these challenges, my team and I are aggressively working to transform the U. S. Business and addressing 3 main areas. We want to evolve our culture. We want to build our organization to optimally support our business. And finally, we want to refine our vision and strategies both for the long term and the short term. So talking about our culture, I know you're interested in seeing about our turnaround agenda, but you know what, sometimes culture trumps strategy. And especially in a company like McDonald's where the culture is very, very strong. So I want to talk about how we're going to evolve our culture since these are foundational to the strategic changes we're making. Our destination is a modern progressive burger and breakfast restaurant company and this will be based on a customer obsessed insights driven culture, customer obsessed insights driven culture. Our actions will be guided by a deep understanding of how we solve for our customers' needs, how we meet and then exceed their expectations, and how we act in a manner that's, yes, generationally enlightened moving forward. We all know that our country is very diverse and to approach our business needs with this homogeneous one size fits all plan is not going to be effective today or in the future. I just want to share with you kind of a perspective on the U. S. Business to understand why this is important that we change the way we approach it. So if you look at this particular slide here, this is the CREST data which talks about the average IEO consumer. And so if you're thinking about this from a local market perspective on how you're going to drive the business, if you're in the Northeast, your average consumer is a 50 plus adult with a higher income than perhaps in the Southeast, which is 35 plus and then on the West Coast under 40 parents with kids. And then when you think about the diversity, we all recognize the diversity in our country. African American population, the consumer group is more if you look at the southeast part of the country and then Hispanics in the west, this makes an impact on the type of taste preferences and the way we market those particular markets. Then if you look at taste preferences, very diverse as well. So if you look at the middle of the country, you're talking about pork and chicken and fries. And if you look at where we have our biggest share in that East North Central that's because people love fries, sandwiches and burgers. So if you look at the West Coast, premium beverages and salads. So if you think about trying to come up with one product that's going to meet all the needs and the preferences across the country, It's really probably an exercise in futility today. And then you think about taking this to the next level, we all know McRib is a very popular iconic product for McDonald's. But this follows really the taste preferences of what we're seeing. So if you look at that center of the red part, their sales of McRib are double the sales of those markets in the dark blue. Again, so we think about how we're going to market in the future and the effectiveness and the efficiency of our marketing dollars. These things need to be taken into account. And then the competition of course. We know there's different competitors. But if you look at this is just kind of the share of winners most recently in different parts of the country where you have traditional QSR in the Northeast, but then you have C Stores in the East OR Central and Coffee in the West. So again, specific individual market by market understanding who the competitors are that are taking share and what do we need to do to take that share back or from them moving forward. And then of course what's happening to relative to the impact on our P and L. So state minimum wage landscape, we're all very familiar with some of the things that are happening in the states. So we have 22% of our states or stores are affected by the higher minimum wage, but we have 40% that's still on a federal minimum wage scale. So this impacts the way people think about the impact of how they're going to run their businesses. It all kind of weaves into cash flow. And when you have we've got great cash flow. Our competitors would love to have our cash flow, our average restaurant cash flow, but there is a difference in cash flow across the country. And this impacts our owner operators in terms of how they think about value, how they think about reinvestment. All these things need to be woven into very market specific plans that are going to drive their business locally. I want to just take it to a next level. We think about how this impacts, we talk about moving towards more locally generated, market generated plans. So if you think about this as a national calendar, which we all know this is OpMed for McDonald's. We'll be talking about brand. We talk about in this case this example core burgers, core breakfast. We have a kind of an underlying value for a national plan, dollar menu and more. And then we're talking about relative to family with our food, your questions and then we're talking about QD's today. So you think about that kind of as the umbrella messaging around brand. The real work, the real impact looking at understanding what's going on in the local marketplace is what our local markets can do to drive a plan that will address the diversity of their marketplace, the competition in their marketplace. So in this particular example, you've got this region is doing a direct mail piece. They're going to be doing multiple layers. So they'll be doing different dayparts. They'll be doing disruptive value. So this idea about retail surge, these are disruptive value price points in the marketplace. And then operations, coffee accuracy guarantee. This market also is doing several 60 second service guarantee. They're going to be doing a crew all star competition. So we're starting to see the type of entrepreneur igniting that entrepreneurial spirit that comes across in terms of how we plan locally to supplement the national market to take share and drive the business moving forward. So we look at moving forward, today's environments we have to be more nimble. We have to be faster, faster to market with new ideas and more responsive to competitive threat. As a result, we're making significant changes to our organization to put in decision making and accountability closest to the customer and we've moved from the former division structure into a different model focused on empowering and supporting our regions. Our regional structure was designed many years ago to ensure that the local market conditions, diversity of the local customer base, the local competitive set and the local economic conditions determine the course of action by regional leadership and franchisees. These organizational changes will enable us to be more sophisticated in how we use local intelligence to address specific consumer needs in our diverse markets across the country. And as I mentioned, they're going to reignite the entrepreneurial spirit of our franchisees, our suppliers and company employees with the focus of putting the accountability, accountability and ownership on winning market share back in the hands of the local markets. So moving to vision and strategies, we are not going to re energize this business by taking incremental steps. We have created a turnaround agenda designed to meet the challenges we face and move us forward as a business into a very different future. This turnaround agenda is intended to change the conversation internally and externally about McDonald's to keep us focused on the customer to make meaningful progress in our business and to communicate and ensure understanding of each of our respective roles. It's built on 7 big actions. While I won't cover each of them with you today, I would like to highlight a few areas we're aggressively focused on in the near term. The second action, win with our food. We are a restaurant company. We must and we will win with our food. We will align our food story around the consumer's definition of quality and value addressing their questions of what's in it, where does it come from, how is it prepared. We're also focused on enhancing the appeal of our core products including looking at new and different cooking procedures and holding technologies and looking at every ingredient in our product. And finally, we're focused on innovation, whether it's through customization and made orders such as create your taste platform or simply adding new ingredients to create menu news for our existing products. We're also looking to compress the time required for menu innovation to more effectively meet local needs, consumer taste and competitive threats. Number 4, big action, we're just going to create the McDonald's experience of the future in the U. S. And the experience of the future will elevate the entire dining experience and drive greater relevance with our customers by providing them with a more personal, more convenient and more enjoyable experience. The changes we're making as Don mentioned, they're going to be comprehensive and consider every touch point both practically and virtually and they are enabled by the digital advances that we've made as a system across the years. We are targeting to have this expression of the elements of Experience of the Future including Create Your Taste available in 3 markets by Q3 of 2015. Number 5 is owner operators owning the community. More than ever, people want to feel good about the businesses that they and the brands that they do business with and they want these businesses to be an integral part of the communities that they live. We are engaging with and activating our franchisees to strengthen community connections including rebooting local store marketing tools and training. McDonald's was the pioneer in this area. We are also refocused on retaking our leadership as the place to go for families. It needs to start with mom we will be helping her to feel great about McDonald's. Whether it's McTeacher's Night sponsoring kids sports or being a visible partner in local initiatives, we need to reclaim our position by investing in the communities where we do business. So we are committed to these changes and in regaining our leadership position in the eyes of our customers, I'm confident we are aggressively taking the necessary actions to make the changes the customers will notice and appreciate and position the business for profitable growth in the future. And now, we'll get ready to take some questions. Okay. Thank you, Don and Mike. We're going to run air traffic control here. I've got David Tarantino, John Ivankoe, John Glass. Hi, good morning. It's David Tarantino from Baird. I guess a lot of, Mike, your commentary is about the vision for the brand and the experience, and you didn't talk a lot about the operations. And I'm wondering, if you characterize some of the current issues, my understanding at least is a good portion of that has been the operations. And just wondering where you stand with that. And some of the things you're talking about could add some complexity to the operations and slow down the speed of service. And I was wondering how you're balancing that and if you could comment at all about how you're focused on improving the execution at the unit level? Sure. A couple of things, if you noticed on our agenda, one was inspire our people and we are working to reinvent our whole training apparatus. And the second one was keep it real and keep it quick. The idea is that we want to make it less robotic, if you will. Sometimes some people describe the experience at McDonald's and let our people be themselves. So keeping it real means more authentic service, more authentic and I think you're going to see some of that in the restaurant today because we took a very different approach on how we're training in more of a hospitality bent in terms of an efficient effectiveness. Now efficiency is important. As we talked about, complexity of our menu has challenged our drive through times over the last several years. You're going to see starting next month, we're going to be putting out a new menu, which reflects some of the things that we've done to rationalize our menu. We're taking we're reducing the number of EVMs, we're reducing the number of products on our menu, reducing some SKUs. And in our test markets, we have seen immediate impact on the overall drive through times and improvement. So we're talking about things relative to the core issues of training and hiring people. We're talking about in terms of either systematic issues potentially of the complexity of our menu and that will be an ongoing challenge that we have where we're confronting. But as you think about the changes we're making relative to moving the decision making closer to the customers, the marketplace will be able to understand what they're capable of really adding into the mix relative to driving consumers. And they will they're better than anybody of understanding that and being able to be able to instead of having us suggest a new platform or new something at this point in time, they'll be able to determine really what they need to do to meet the needs and how it will affect and impact their operations. David, you are going to see so to pick up on Mike's point, one of the things that you are going to see is us being able and we are able to offer our call it service options. So if you think of it today a person comes to McDonald's you either in the front you come into the restaurant front counter service or you go through drive thru. Drive thru is about speed. If you're a customer and you're coming through drive thru, you want to make sure that it is quick, you want to be on your way. A lot of drive thru customers, they don't get out of the car for a reason. And so, we want to make sure we can still satisfy that need. If you come into the restaurant and say you wanted to place a mobile order and you didn't want to talk to anyone, you just want to place an order on your phone, go to the pickup area, pick up your food, you'll be able to do that. If you wanted to come in and enjoy a sit down experience, you've seen us, you heard us talk about table service, You could do that. If you wanted to park and enjoy a relaxed environment, but not come into a restaurant. So what you're going to see is rather than us just talk about speed, speed, speed, we're going to talk about really at the speed and expectation of the customer. So you can choose different service vehicles or models. And I think today when you all are in the restaurant, you'll see a bit of that. And so you'll be able to determine. What we can't do is to say that a person who wants to sit down, who wants to say the customizable burger kind of an option, Most customers there don't have a problem if that comes in a little bit more time. A customer that wants though, I want my traditional Big Mac EVM with a Coke, they don't necessarily want to wait the same amount of time. And so we've got to satisfy both of those and our operating systems are capable of doing that. Okay. Can I ask just one quick follow-up? Could you give us an idea of how many SKUs you're eliminating next month? Any metrics related to how you're simplifying the menu? We're going to be going from 16 EVMs to 11 EVMs, and we're going to be taking out 8 menu items. Okay. Next question, John Ivankoe. So I'll stay on the steam and then I'd like a separate question as well. It was my understanding that labor hours per store maybe wasn't up to some of the McDonald's standards that were previously set. I mean, you can agree with that or dispute it, but that's fine. But to what extent have you gotten buy in from the franchisees and your willingness to yourself in terms of increasing labor hours presumably in front of the traffic that might be generated at the customer level? I think the operators understand and embrace the peak hour approach to making sure we've got enough labor to really ensure we've got the ability to impact those peak hours. The challenge of course is you just can't bring people in for 2 hours, 3 hours in a day. And it's I think what we're working on now is kind of a reallocation of labor. I think the bigger idea is that we believe that there are certain things that we're going to challenge relative to our complete labor model that there is some efficiencies to be taken. And again, I'm not suggesting that they're going to be flow to the bottom line, it will be reallocated to different parts of the experience for the consumer. And so I think there's some encouragement certainly from that standpoint that as we look at some of the inflationary pressures we're going to see on our labor line moving forward, that we've got a plan to aggressively address that on many different levels, but specifically on again challenging the way we've thought about labor in the past. Okay. And separately if I may, I think you mentioned there's a $770,000 increase in restaurant sales, a $70,000 increase in cash flow. Is that correct? In the last 10 years. And so you would think that the flow through on that level of sales would be much higher. I mean what does that tell you in terms of like a less than a 10% flow through on that level of sales in terms of the sales levels that you pursued? And does it make sense for you to begin to think about cutting hours or cutting not just cutting an SKU or cutting an EVM, but entire product lines of things that with hindsight you've actually seen as being perhaps unprofitable given that level of sales? Yes. I think that that's an average and averages are what they are. So I gave you an average for the last 10 years. So I think that clearly if you look at where McDonald's has gone since the early 2000s relative to the competition, the things we've done have been compelling to the consumer and we've seen it on our top line and our bottom line. And so the other question is, should we look at changing the way we do certain things relative? That's what I'm suggesting that we should be looking at everything. But at the end of the day, we have to I think the consumer is looking for some new news. We're going to continue to provide that to you. But again, we also want to focus on making sure that our core is the best it can be. John, also keep in mind that that is net of operating cost increases. So as an example, it's one thing to look at what the top line might be in terms of say sales. But if you were to net out, so let's take one of the years Mike's talking about, there was a $47,000 commodity increase. So when you look at the cash flow increase, it is above and beyond that. It's above and beyond the labor increases, above and beyond minimum wage increases, above and beyond insurance based increases in certain parts of the country, above and beyond energy rate increases, which have been substantial in certain parts. So one of the things that you have to do in this business and in retail businesses and the food business today is you've got to be able to exceed from a flow through perspective the additional cost basis that is increasing relative to the broader business. And that is basically the model that we've executed everything from the McCafe plus pieces actually when we went all the way back to Dollar Menu. It was to exceed those cost bases and be able to drive the business. And so, it's really important to look at those costs because the costs have been accelerating at a much more rapid pace in certain areas. So to be able to net positive, the last couple of years have been down. If you look at the last couple of years in the U. S. Cash flow has been down. So the cash flow number would have even been higher than that. And there's rationale and reasons that the number is down, but just make sure you net that out. And just one final point. You mentioned the words disruptive value and we could go crazy hearing those two words said together. So what does that mean? And how do you kind of view the short term versus long term of bringing customers back into your store, but not teaching them that for example a Big Mac is worth lower than the standard menu price? Well, I think the disruptive value is not going to be on our core premium products. It's going to be more around what you would think that it's a wow, that's a great price, that's a great value. It's using some existing, but also it's using the dollar menu as well. Okay. Next question, John Glass. And Jeff Bernstein is after John. Thanks. John Glass from Morgan Stanley. Can you go back to the I have two questions. First one is on the menu item reduction. So it's 8 items. It's a reduction of EVMs. How much of a sales reduction do you think is associated with that? Are you willing to take a sales reduction and associated with that, you get better profitability and better in flow through and if you're willing to talk about which kind of items they are it would be helpful. John, it's a great question and we did test this as you would expect considerably and we did not see the degradation in the sales piece and there are items that they're probably the lower sellers and some that perhaps if you look at the McGrath line, it might be one of those that take a lot of time, more time than typically one of the products when the back line would take. So all that thing was built into it. And I would suggest also that there's more to come, but I think that one of the beauties of this creates your taste idea is the ability to in the future is that we don't need to have a big menu board to offer variety. The variety is really determined by the customer themselves individually, independently. We can offer these high quality ingredients made any way. It could be a hamburger, it could be a chicken sandwich, it could be whatever you were looking at with different ingredients. So I think the future suggests that we can continue to really simplify our base menu and we all recognize that 80% of our sales are coming from a very small group subset of the menu. And in the future, the new product news can really come around this customization idea, which I think so there's a lot of benefits to pursuing this. For most of you, just as Mike said that I want to make sure we kind of right size this in your mind. So some are thinking, okay, man, so you're going to take away the fillet, the mac in the quarter. No. What this is, is looking at to Mike's point, if you've got 3 varieties of a certain platform, a certain sandwich, if you've got one of those that is not moving as much and there's a high trade potential of that third one moving into the other 2, then you can streamline and eliminate that. The way our menu boards are set up, each of those 3 counts as one EVM. So that's 3 EVMs. So in the case of change in say one of the burger options, one of the wrap options, that right there would give you 2 reductions. We also are looking there's a series of sauces and other SKU based things that if you don't have as many to offer it makes it easier on the ordering process and it makes it easier on fulfillment when the person is putting that order together. So this is from high EVM a la carte sandwich all the way down to sauces. So when we look at that piece of it And to your point, John, this is not a there's a different level of diligence that has been paid to this than the removal of Angus and Selects. So I'll just hit it directly. And that gets to the point that you're talking about. This is not about removing high margin, high sales items even if they were in one part of the country. Last thing I'll say on this, combine what Mike said earlier with this notion of menu rationalization. If I am in a certain part of the country, there are certain sauces and flavors I may want to have as a local option because they sell even more. But that does not mean that I need to have that same flavor across the United States in every single market and every single restaurant. So there'll be this opportunity for a local market to plus up if you would by getting that local flavor and taste. It may be that out of 3 sandwiches 2 of those really resonate in that area and 2 resonate in East Coast to West Coast, but they may be 2 here that are different than the 2 over here. And so those kind of things are the pieces that come together to help us with the menu aspect. Thank you. That's helpful. If I could just add one more, which is how do you close that price gap you talked about between the dollar menu and the core? The value menu has been 3rd rail for a long time and you move away from a dollar it has prices or how do you one has to move I suppose? Right. If I could. We've got some things that are taking place that we're looking at the broader menu board. And this is a broader question. It's not a U. S.-based question actually. It's a broader menu and pricing question across the system. So in several markets right now, we have some value testing testing going on that looks at menu tiering, what the price tier should be, also how we convey the menu board so that we make it 1 easier for customers to understand what it is we actually have and 2, it gives us the price flexibility to stretch across the entire board rather than have locked in low value and then you've got a premium based product. It really stretches in the core. It the resulting the resulting margin capabilities of that menu mix and what we would want to market and merchandise in what way to be able to make sure we have that balance. So we're being very careful how we move forward with this one, but we know that there is some opportunity here. And we'll give you guys more updates on that one probably be in the end of the Q1 of next year. Joe Buckley, Vivek, Merrill. Can you put in perspective the removal of 8 menu items? How many menu items are there today? What kind of change is that? I think, Joe, I don't know the total. But Joe, it's we looked at different ideas relative to how simplify. And as I mentioned, we want to do it carefully and prudently, but we also want when we do make the change with the menu board specifically, we want to make sure there's an impact. And so our franchisees or operators have been involved with this design piece. But I think the term of rationalization suggests that we are looking at understanding the relationships, understanding the impact of taking something off. Also what we're doing is we're also freeing up some space to, as Don talked about, put our products that have local relevance on there which are already there, but also reducing some of the impact. So it's not significant. It doesn't sound like significant from terms of a percentage of the numbers, but it is significant in terms of the impact on the back line. How many of you had a chance to go to the London trip just in Paris. How many of you have been in our London restaurants? Maybe that's a better way to say it. If you look at the difference there, Joe, as an example, I think London had about 8 core EVMs. Germany had about double that amount. The U. S. Had about double that amount. The point is that if you look at our results in London, now they flex in premium based products and other things, but the core was much smaller in terms of core EVMs. The direction that we have and that Mike's taken in the U. S. That several markets have taken is to get the core back to that size where a customer can come in and understand very quickly what the order is. It's even a larger opportunity in the U. S. Because if you come through the drive thru, you don't want a customer to be confused as they're coming through the drive thru, especially if you're advertising a premium based sandwich and the customer says, you know what, I didn't even go to the premium based sandwich. There was so much on the menu board. I just ordered what I normally order. What you just did was defeat the marketing that you put forward in all of the media messages. So I think this overall reduction will help in 2 ways. 1, simplify the menu. It helps operationally, yes, But it simplifies the menu for customers as well. And that's the driver behind it along with the simplification aspects. Can you I got one more if I could. Take a step back and talk about the performance in the U. S. This year. What's your research showing you in terms of why you're losing so much market share? What are why are customers going elsewhere and not to McDonald's based on the performance this year? Well, I shared some of the what I think are the reasons upfront. So you talk about not only customers not coming, but I think the bigger point here is that there's 2 things going on with the consumer today. One is well, there's many things, but in particular related to us, this whole idea of lifestyle, wellness, eating well. And so quick service restaurants, when you talk about those elements, sometimes they suggest that quick service restaurant doesn't stand for those things. And then perhaps the new competition really has kind of said this is where we stand for relative to real and fresh moving packs. So I think when you think about what we're working on today is all the things that you're talking about are important, but the bigger thing we're trying to do relative to our owner operators is really to think about this business long term, think about big. How do we redesign the quick service restaurant experience of the future? Today, you're lumped into a box with this is what a quick service restaurant experience is and whether it's food in a bag or going through drive through, everything's fast, everything's efficient, but you don't have the type of experience. The food, the quality cues we've talked about, the questions that people ask, what's in your food, where does it come from, how is it prepared. So if we look at how we have designed products in the past, it's always taste is going to be paramount. But we've designed really products that are easy to make, think about things in a big way that we can make sure that they hold well. In the future, we want to be much more culinary inspired in terms of how we look at our food. So next year, we're going to be talking about some of our core products. We need to think about our ingredient labels as being much smaller. The things that you get in your pantry goes into our food. The thing we just talked to the moms about putting fresh fruit in our Happy Meals with the cuties. We got 2 days into it, our Twitter 100 percent the tonality was 100% positive or neutral. That never happens. It's like, yes, thank you very much. This is a simple kind of signal that we're on your side mom, we're going to help you. And then as we talk about each ingredient in our product moving forward, the things that you'll see today, the freshness cues, those all impact we're talking about the experience of the future. Maybe the bifurcation or an understanding that there are different needs states of the consumer whether they're coming into our restaurant as Don talked about or going through our drive through. But if you can eliminate the perceptions or reality of the quality questions in people's mind about what you get at a McDonald's versus what you get at these new competitors. If you eliminate that, then we win on easy and we win on value. And guess what? People are always going to be looking for make my life easier and they're always going to be worried value is not a trend, it's here to stay. And so I think those are the things we're going to that we I think we've fallen behind which has impacted our business and we're going to catch up very quickly. Just one more. As you think about these changes, what are the costs, either actual costs or investments for the company and for the franchisees? And how do you get franchisee buy in given the experience over the last couple of years? It varies by this is going to vary by market, but if we're talking about the U. S, consider this to be something similar to CVB related costs. And what we're going to do is what we've done before, Joe. We have invested in a portion of the leasehold improvements. So today, you'll see some things, whether it be the front counter configuration or even in the lobby you'll see a couple of things. I don't want to give too much of it away. But as you see those things, we're going to contribute to those things. So we will, as we've called it invest, co invest with the franchisees as we move this forward. It is interesting. The franchisees that have seen these and that are coming through already are going, wow, I'm ready to go. I'm ready to move forward. But we're also being very specific about which operating and operational levels you have to have in the restaurant before we make this change. So Mike and the team will be focused on securing that base as we also begin to move this and implement this in many of the restaurants that we have. We're almost having 2 conversations also. You got one that is about where we're going and we're very focused on where we're going. There's another one that is the realization or the acknowledgment of what has occurred in the business. Before Mike came here, there were several decisions that were made and you could argue decision right, wrong or indifferent, but the reality is there's 2 in particular. If you look at comp sales gaps, one of the major impacts is value and the value reset. There's no doubt about it. You guys have seen it. We made a change relative to the dollar menu more. It's because we have to do a reset at some point. You can't have everything anchored in $1 and keep taking price on the Big Mac mill and a quarter mill, etcetera. So there's been a change there. That change has yielded less and we knew there'd be an impact, but that's been one of the impact points. The other one is if you look at the menu and you look year to year, there's a comp difference in terms of what we've served up. We've chosen again to focus on that operational side to make sure that we're ready to evolve the business and do some of the things that Mike is talking about, which we need to do. What that means is that you're going to be doing some level of rationalization, which has already occurred and you're also going to be doing some things relative to the products that you now implement. We've had a couple of promotions that were a little bit softer. So if you look at our partnership with the NFL and what we did, great partnership. Hopefully, we'll be able to continue it in that vein. Our timing was a little bit off possibly as we're having this kind of a dialogue and we're moving forward with this promotion. There's also certain things that were happening in NFL. But nonetheless, we value the partnership and think that it will be great it's a great partnership moving forward. So there are some things that didn't quite hit what we wanted. There's a couple of conscious decisions that we made, Joe. They will be good decisions in the long term. In the short term there's been a little pain as a result of some of them. Okay. We got Jeff Bernstein then Keith Signer then RJ then Neil then Jeff Farmer. Hey, Jeff Bernstein from Barclays. Just one clarification and then I actually had just two quick questions for Don. But Mike, on the clarification to the question earlier about kind of what's happened over the past number of months, it does seem like and it's probably not fair considering you just came back a month or so ago. But it seems like the you had a decade of market share gains and then you had some period of time where it was market share neutral or modest losses perhaps due to the volumes you guys are already generating. But over the past number of months, it did seem to accelerate. And you had mentioned kind of the quick service challenges more broadly in terms of better for you alternatives and fast casual perhaps. But it did seem like at least the past number of months, quick service peers are actually sandwich peers the way you define it are holding up quite well and perhaps benefiting to a certain degree. So just wanted to make sure I understood like what you think has happened over the past few months? Was it what Don just mentioned in terms of, I think, with the NFL or a couple of promotions? Or it just seems like there's been a drastic widening of the gap over the past number of months to try and put our finger on exactly what that is? Well, if you look at the sandwich category, I think only 7 in the last 45 weeks have had positive transactions. So the sales that I think some of our traditional competitors are getting, they're obviously getting it in check. They're driving their check, the bundling. I think they're kind of pulling out the plan to win playbook that obviously growing off a bigger base. But I think moving forward the things that I think in essence also we've relied, we've created I think the sense of there's an answer to the monthly sales challenges, the market share battle coming from the center, coming from OPNAD, a new platform coming from the company. And what happens is that I think what we've tended to do is we've taken these tremendous entrepreneurs that we have and they've got into this business because they want to run their businesses, they want to take we need to put draw the battle lines if you will, on the four corners of every street in America versus thinking about this big one size fits all op net plan, you have what you need to win the battle against a traditional competitor today. What do you need from us? We're there to support it. I think so if you look at the last few months, it's been waiting, waiting for what's next, what's the big home run where we're really now looking for bunts and singles to continue to drive the momentum moving forward. And I think that's where we're starting to see the energy at this pivot point of this just like we talked about this a month ago and you're starting to see the plans roll in for early next year, which I think are very, very powerful And you see the ownership and accountability built into those plans. Maybe Mike can talk because some of you may catch what Mike is saying, others who've been with us a while, others may not. Just a little bit on the difference between what you're talking about now with shelf promotions and pull downs versus the way the what the local markets have been doing, which is echoing the national a little bit. Right. So maybe you just talk a little bit about that because that herein lies also a gap that we know we have some opportunities that will be positive as we move forward. Now quickly, I think when you look at us trying to put together this homogeneous plan for the U. S. And they were saying we want you and local market to build off of that plan, I think we've hurt ourselves in a couple of ways. One is that as we've talked about diversity of the U. S. Which I showed you, it's not there. You're not going to be able to find that one thing that's going to drive it. Then you're again watering it down in terms of the local relevance by asking the local market to kind of fit hand in glove with that plan. Now we're saying you understand, you use the insights, take the insights and you take the connected activities or the strategies around those insights. So it's around your consumer, it's around your competition, it's around your economic conditions and drive the business. And then just two quick things for Don. One, you mentioned that the size and strength global size and strength was a benefit to McDonald's and presumably that is from a purchasing and marketing in certain degree. But in what ways would you think that it's a weakness? Because it seems like the smaller peers maybe are more nimble and historically feels that all McDonald's has the size and strength. But is that working against you now, do you think? I would so this is actually I'm going to pick up on something Mike just said. If you look at some of our smaller markets around the world, the real mix is when you leverage the strength and the size and scale that the McDonald's global system can put forward I. E. Supply chain level strengths, franchising capability and strength, When you look at the operational nature of what we do I. E. The Made for You platform individual markets don't have to create that. Those things are huge, huge global strengths that we have. So if I'm going to France or I'm going to Poland or I'm going to Korea, South Korea, they're able to leverage the strength of McDonald's, but they are very local and they have to address their things locally. Now I want to come back over to the U. S. Which we a lot of the conversation is about. What you don't want to do is you don't want to run the U. S. As a U. S. You want to run the U. S. As and not even as 22 odd regions. There are many, many markets in the U. S. And what you really need to have is leverage those regions, but even within the regions, you may have 5 co ops, you may have 10 co ops, you may have 1 or 2 co ops, but leverage those co ops to give you that local market flexibility. So when I say size and scale, the thing that we do have and even in the U. S. When you've got the diversity of those markets, when the operators get behind something, the strength of that is tremendous. You guys have seen it. I've seen it over my time at McDonald's whether it was when we decided to go with Dollar Menu and what we did, when we decided to do McCafe, when we made some basic menu changes, when we moved to Made For You and we didn't even advertise Made For You and there was a benefit to it. Those things are absolutely huge as the operators engage. And so part of this is in everything that we do, you don't make a demand of the franchisees. What you do is you involve them in that vision and where you want to go. And they will if it's a good business case, they'll go there. That's a strength, Jeff. That's a huge strength. Average in our system, 5 restaurants per franchisee. On one hand, does it make it is it more difficult on the front end? Is there a lot more conversations and meetings and things you have to do? Yes. But the strength of that is that if you only have 5 restaurants, each one of those is very, very, very important versus if you had several 100, one restaurant is not quite as important. And so the strength of the franchisees that we have and how they address the business in their local communities is absolutely a strength. So we have to leverage the scale. We say we like to be globally very, very strong in those systems, but we want to be also locally very strong in the execution and how you relate to the market. So we've historically said we're a global company more so than just a global company and it's very true. When it works well, it's true. If I could just ask one last thing, Don, it might just be a simple yes or no answer. But 6 to 9 months ago, you talked about returning more cash to shareholders as kind of an aside and here we have to be conscious of value creation while we're struggling. Do things change on that front at all as perhaps the weakness has been more accentuated more recently or is that just a totally separate conversation and that's our 3 year plan and we should think anything different about the leverage, the refranchise of real estate? The 18 to 20 is still the 18 to 20 and that is consistent. But what we believe is a broader return to the shareholders is in addition to the 18 to 20 is to drive the business. And one of the reasons that Jeff we didn't talk about levering up even more is we knew we were sitting here with this experience of the future opportunity that we also want to bring to the market in a more accelerated timeframe. So how do you do that? We do that the way we've done other things that have been very, very successful for us and the shareholders, which is to co invest with the franchisees. And so we knew that as we've been moving through this, but it does not in no way change our commitment of $18,000,000,000 to $20,000,000,000 to shareholders. What we think is that that combined with driving the business and moving it is the opportunity that we have and it's also the opportunity for our shareholders potentially. Okay, Keith. Thanks. It's Keith Signer from UBS. So earlier this year, you talked about reconsidering or optimizing the global ownership structure and Global. Owners. Global. Yes, franchising. Right. And most of that was geared towards APMEA in Europe and you talked about thinking through challenges facing particular markets and how that influenced that ownership decision. Well, in the 6 months since you announced the 1500, like the challenges have changed here in the U. S. It seems to be more acute to some extent. Does this influence or does this cause you to at least to some extent rethink the ownership structure in the U. S? Keith, we've never said we would not consider the U. S. So what we said is that we knew that the predominance of the refranchising would be an apnea first and let's just take it China because we had 2,000 restaurants and we had very little franchising. So we already knew we were going to be moving forward. We talked about the 20 percentile level of franchising by the end of I think we said the end of this year. And then that moves forward from that point. So we know that we're going to be refranchising, if you would, China. So that part was very, very easy. What we want to do is accelerate that. We also know that, say, in the U. S, we're 89% franchised. Across the system we're 81% franchised. So we knew that we had some other opportunities in other markets even mature markets. The U. K. Has an opportunity. We've got opportunity in all the markets. The U. S. Even at 89, I would tell you, yes, we have conversations about what is the optimal level of Macapco restaurants that we should have. And I've had that conversation, those conversations with Mike and the team and we have some agreements around where we want that number to be. So we believe that we have opportunities around the world. Mike, then a question for you. It's about net unit growth in the U. S. And we haven't had a chance to talk about this before. But now that you're in the seat and you're sitting down and talking to these franchisees and against backdrop of really not much net unit growth for the category in the U. S. McDonald's had 121 ish net new units last year. How does that conversation proceed with the franchisees? Like how should we think about that net unit number in the U. S? And especially given some of these challenges, is 121 too many net new in the U. S. On an annual basis? Should that slow? Could it slow? How do we think about that? I think the I think we should put it in perspective. I think the bigger conversation I'm having with the franchisees is about organic growth, is about how do we take market share. I mean, if you think about 120, that's not a lot over 22 regions. And we're being obviously very careful. There's conversations about reallocation of capital relative to we've got some big ideas that we want to move forward. And so those decisions about relative to new store growth could be impacted. Some of the other things we're looking at could be impacted. We look at the modernization of our restaurants, rebuilds and things of that nature. You got to step back and say if we're looking at designing this new experience, we want to make sure we know what all the elements are before we spend the money on modernization so they incorporate all these things. So that's the kind of conversations we're having today. Keith, this is 100 restaurants is not a lot of restaurants. Even for McDonald's, if you travel around the U. S, there's plenty of opportunities to continue to build restaurants. The point is, at this stage of the game, where do we want to place the capital to Mike's point? And not only that, but where we're placing restaurants, if you looked at new store performance, new store performance in the U. S. Is solid. So we're not underperforming in the U. S. Now. I'm saying that by and large. Do we have a couple of markets here and there? We have this every year. Every year I've been around. You have a couple of markets that may develop a few too many over here and then they have to pull back a bit. And how do we know because of impact scenarios? But by and large, our new store returns have been solid. The new stores have performed quite well to market. And so we're not developing a lot of restaurants in the U. S. Relative to the opportunity that we believe is there. But we do believe that there's a prioritization of capital. And at this stage of the game, we think that there's some things we can do in the existing restaurant to get organic growth within the existing body, not just within the McDonald's brand that will be very solid for us. One last quick one for Don. The definition or not definition, but one of the points you made a modern progressive burger and breakfast restaurant. Even going back to the big analyst event here in November of last year, one of the key, key points was chicken and chicken is not in that definition. Is that just burger and chicken really kind of means one thing? Like how do I think about chicken not being in the definition? So chicken is still in our definition, Keith. But I would chicken is a definition. If you're in a U. S. Business, you're 50% chicken. Most people don't realize that. We have as much chicken sales as we have beef almost. In many of the markets, chickens are even larger. I would offer to you, As you look into next year, I'm sure Mike has some thoughts on chicken and there's things in the U. S. That will have chicken associated. As you look at what you'll see today, Just think of it as a platform. Think of it as our initial focus is burgers. Customers have told us make the best burger that you can. That's what you all need to do first. But when you see the platform, I think you'll quickly understand. I could have a nice chicken patty here or I could have a nice offering of some other sort and still build a great tasting sandwich. And so chicken is still a huge opportunity and is in our growth plan. Thanks. Thanks. It's RJ Hodavy from Morningstar. I had a follow-up question about the intersection about the size and scale benefits of McDonald's being more nimble and making local decisions based on consumer driven insights. Namely, how quickly consumer driven insights, particularly with menu decisions, be implemented at the local level? Or asking another way, how much opportunity is there to cut out implementation time to accommodate local decision makers? RJ, there is a huge opportunity. We have an incredible menu development team and process. But if you think about the culture I talked about earlier, we tend to be very risk averse. We tend to make sure we test and then test and test. We test against all the consumer, different consumer markets. We test this, then it goes into certain communities. We have, I think, the ability to greatly increase the speed to market. We've got the best supply chain in the world. We want to utilize their talent, their expertise. So potentially in the future, a region can go directly and work with a supplier in terms of developing the product. Of course we work through it in the food science aspect of it at the end piece. But we're working on very specific plans and ideas to rework our menu apparatus, if you will, and develop an organization to be able to be much more nimble, to be able to get to market quicker. And again, the ownership piece that Don talked about is so critical. When our owner operators, they generate an idea, they own it, they're going to make it work. And so we just need to make sure that we get it to them quickly and they'll figure it out. Instead of trying to have a product and go through all of the process and launch it nationally knowing that certain parts of the country are not going to do as well as other parts of the country. We saw that with Southern style chicken sandwiches. It takes a lot of the challenge of getting to market quicker. We can be much more nimble. And R. J, they don't have to start from scratch. So this is part of the when I say the global strength of McDonald's. I mean, we've got food and pipeline and sandwiches around the world that have done quite well. Now what the challenge is if you try to take one of those sandwiches and just drop it into the U. S. That's very different than if you're looking at a certain flavor profile and you look through some of the pipeline and say, man, these several seem to be really, really good for our market. We want to pull those down in and then you set that out so that our supply chain is able to deliver those. So I think on one hand you're going to see and there is more sharing that's already taking place, but you'll see more pull down now. I've been talking about this for a while. I will say that Mike and the team have taken it further faster. We are I mean next week Mike and I are in we're in Europe a couple of different markets and we're looking at everything from basically experience of the future and how it's being executed which is slightly different in a couple of markets to some of the food and how we convey menu and marketing. And so when you look at all those things and you come back into local markets, what local markets want to have is kind of a series of what we call shelf promotions that they could pull those down if they need it. But they also want the ability to do exactly what Mike said. They want the ability to develop the next Southern Style Chicken Sandwich or the next Angus beef burger, which both came from the franchisees. Those didn't come from a kitchen up here. They came from franchisees. So our execution of iced coffee came from the franchisees. And so we want to make sure that we have opportunity to do both of those. Just a quick second question, I guess, if you will. Just and I know it's early with the create your taste tests that have been out there. But in terms of expectations, in terms of not only average transaction size, but also incremental traffic, Just kind of where you thought they might be and kind of where the actual results were? And I know it's going to change as you roll it nationwide in other markets, but any kind of indications there about the performance of those tests? So two things. 1 is create your taste is not a test. So I have to make sure everybody understands this. This is a rolling implementation now. Australia will be complete in 2015 with the entire marketplace. The U. S. As Mike said will be in 3 markets by Q3. The I'd like even more, but I'm patient to a certain extent. But they we are looking as we go, we're learning as we implement. But relative to the results, we're going to hold on giving clearly for me to say it's a rolling implementation. We feel pretty good about the results above and beyond the investment that we're making and we and the total investment that we believe the franchisees will be making and are making in some of these markets that are already moving forward. So in due time, we'll give you some more feedback on it. We also know I'm very, very I almost said very, very optimistic, but I can't say that. So I'll say that we feel that this is an appropriate direction. But also what I want you guys to do today is I want you just to experience it. And you'll get a feel for a piece of what we call experience of the future. Thus far, what we've done still merits us to move forward. Is that okay, Chris? Yes. Neil, next question. Neil Chandok, J. Goldman and Company. You detailed some slides earlier walking through the differences between customer profiles of taste and the demographics of the consumer. So when you think about the experience at the restaurant level and the engagement of the brand with your consumers, I guess, versus your peers especially, how does loyalty and loyalty program sort of fit into that mold? I mean, is that something over the next 2 or 3 years we should expect to be developed further? Yes, Neal. It's an expectation today of the customer, especially the younger customers, loyalty programs. So if you look at our digital, I don't know if we've shared that with our digital pathway, it's part of that sooner versus later. Is that a 2 to 3 year? Sooner versus later meaning. No, it's shorter term than that. So you'll start to see things. Yes. You'll start to see the implementation right around the middle of the year in the U. S. I mean and basically, Neil, I mean, I think some of you may have heard from Atif Rafik, our Chief Digital Officer. Our overall strategy is broken into 2 areas. 1 of those areas is what we call engagement and the other experience. On the engagement side, that's the side where you're looking at mobile order, you're looking at mobile pay. On the broader side of experience, you're looking at basically those things that are value added services, fund based things. You're looking at the loyalty based opportunities. This thing will it does have a timeline. There is a defined timeline per market around the world. So we know where the markets will be at what point. It does vary slightly somewhat implement certain aspects before others. But to Mike's point, we think I mean, there's going to be quite a bit of activity over the next several years. And you'll see some other things. I mean, you will see things at times and you'll go, okay, is that part of it or not? Apple Pay. Yes, Apple Pay is a part of our broader strategy. You'll see us do some things with again a global platform. And we need a global digital platform because we want a bed if you would that the apps would all lie on top of. So we have some collective ability to be able to move forward with the size of McDonald's when we have a great deal if you will with a major company that we want to bring to markets around the world or at least a good size of them. So you're going to see quite a few things in terms of activity, but they will probably be you'll see them at a pace. You'll see us announcing things at a pace relative to what we're going to do. We just don't want to let too much of it out of the bag to be very honest. Next we have Jeff Farmer and then Josh you're after Jeff. Great. Thanks. Jeff Farmer, Wells Fargo. A handful of questions if you guys allow me. You touched on simplifying ingredients, which is an enormous task for system and supply chain of your size. Can you just elaborate on the game plan, the timeline, and what you can expect from this over the next couple of years, quarters? You think it is an enormous task and I think it's probably is, but we have to get started and you're going to see I think immediately in early part of next year, some changes. And I think it comes with an understanding of the velocity of our system. We do 100 turns a year in inventory. Why do we need to have preservatives in our food? It's a question that's I think pretty intuitive that we probably don't. And so I think what we're doing is that I think in terms of just addressing or challenging the things the way we've thought in the past, it really starts with being that basic and really understanding why is this particular ingredient in it? Why do we need it? Is there another alternative, a natural alternative we can put in there? And then we need to talk about it. Our quality of our food is great, tastes great. Our customers love it, but we also know recognize that there if you look at and I was with having dinner with our supplier advisory council last night about thinking big really about changing the world, how people eat. And there's nobody but McDonald's that can do that. And so we're talking about some big ideas from a sourcing standpoint and then it looks relative to the ingredient labels in our restaurant. I think Jeff if you look at some of the markets around the world, so you've got in some markets we'll we talk more about some of the produce or the products. We talk about organics in some markets. We talk about free range in some markets. And it depends upon the supply chain capability in many of those markets and where we're at. As Mike discusses what he's saying about preservatives as an example, what we're talking about is being even better than a grocery store in turns. And that's really the point because clearly we're not going to do anything that would undermine the quality or the food quality or the safety in McDonald's restaurants. We won't do that. We have a responsibility to our customers. But if you look at what we're able to do, as an example, to turn on eggs, Most people have multi week turn on eggs. We basically have probably 4 to 6 days max. And so when you look at things like it, what else can we do? What else on the ingredient labels? Is there as a safety and a precautionary measure and there on foods that you see in grocery stores on every label. But does McDonald's need all of those? And clearly as we move forward with those kinds of things, we consult all of the food biologists and technicians and the food safety organizations, etcetera. But there are some things there that the teams identified that we could look at. So we'll continue to do that. Okay. Then just two quick follow ups. Following up on Joe's earlier question, really big picture here. So just in terms of the feedback from your customer base, how has that U. S. Customer demographic changed over the last several years across, again, any way you want to, age, gender, income levels? We talked about it on the sell side a lot. It does seem like maybe you've lost some moms, you've lost some children. But what are you hearing from your customer base? Well, if you noticed, it's different in each part of the country. And but I think that when you see some of this new competition, what trading areas they're moving into, it's typically $35,000 plus, dollars 75,000 income and above. And that's I think putting some of the pressure on some of those restaurants in those particular areas. So but it's very diverse. But I think generally speaking, social is driving a lot of this conversation. And so when we're sitting here having to in essence defend our food, some absurd things, questions about our food, Our Food Your Questions is impacting that. Our brand index scores against millennials is positive, up 25 points since we started this. Against mom, it's like 18 points. So it's having to impact the idea of McDonald's being transparent, inviting you into our manufacturer into our suppliers' plants and things of that nature. So I think that the things that you could suggest contributed to the decline were starting to reverse relative to the attitude about McDonald's and rekindling that relationship that we've had with people over the years. I think some of you did some research, it's the brand is not the brand is fine. It's really they're waiting for us to execute better. They're waiting for us to respond to some of the questions that they have to really understand how are we positioning ourselves for the future. And they'll come back, I'm convinced. And then just last question on that front along the same line. So you mentioned reclaiming mom. Mom is obviously a little bit of a problem, but more specifically, how do you plan to reclaim the kids? And I'm going after the school systems here because it seems like the school systems are driving a lot of this. It's a lot of programs for these kids to eat well, whatever that means, at an early age. There has been pushback against just QSR in general. So you mentioned you're going after that, but how easy a battle is that? I'm sorry, Mike. I was just going to say schools is a whole different and I want to just we're not in the schools now. And this is we get asked about this point and this question relative. I think there's ample enough challenges relative to folks who are prevailing right now. There's a lot of changes that have been made in terms of schools and I think there's still debates going on. We still know that if a child had one of our Happy Meals, say a nugget Happy Meal from a nutritional perspective, it's a lot better than many things that are out there. I'll just suffice it to say, I'll stop there. But we have a broader challenge that is far beyond say schools. The broader challenge we have is the perception relative to moms, parents, consumers in general and some of the things that Mike has talked about, but it's not specific to schools and that's not we don't there's not a we don't have a huge business relative to our opportunity relative to going into schools with McDonald's. I think if you're talking about the perceptive changes that are being discussed in schools relative to food, then that gets to the point I think that Mike was talking about earlier, but it's not targeted at schools, it's targeted at consumers in general. Yes. Okay. Yes. Absolutely. And I talk about owner operators owning their community. That's a big piece. They have got to be in the schools. And some of our operators just do a fantastic job. And you look at the performance relative to their peers of the operators that have their restaurants are the hub of the community, it's significant. And so what we're celebrating that with the rest of the operators and making sure they understand that this is part, this is essential part of being a McDonald's owner operator. This is our heritage and the schools are a big piece of it and contributing to schools, investing in the schools, talking to schools, sharing the stories about the good stories about nutrition and balanced diets and wellness and how McDonald's can contribute to that as part of that. Okay, Josh. Thank you. Josh, Joshua Long with Piper Jaffray. Hey, Josh. Thinking about the locally driven organizational structure that we mentioned earlier and maybe this touches on RJ's question, how is that really the catalyst for unlocking kind of the value and the change? Or alongside that, does the Insights Group modify, evolve alongside it? And if it does, how do we think about those evolutions on the Insights Group? Thanks, Josh. We recently hired a new Senior VP of Strategy and Insights. Her name is Christy Cunningham. She came to us from Hess Corporation, their retail side and prior to that she was with Bain. She is in the process now of doing just that, Reorganizing our insights, aligning it, looking at the overall talent level, getting much more into predictive analytics. We've got some suppliers who do a great job of helping us with that. We just need to be able to use that information in a more sophisticated way, which we're going to do. And then helping the markets understand how to use those insights in an effective way. We are doing some, I think very unique we've got this predictive analytic tool that would be on a store by store basis. We're piloted in 1 co op starting this month, which again helps the operators as they're looking at what to promote. So would you promote a bacon, egg and cheese biscuit versus an Egg McMuffin? We've got as you would expect, years of data. We can help them understand what's the best margin play, what the consumer is going to react to in that particular market. If you think about that multiply times the number of co ops we have and the impact that has on overall sales and margins, that's the way we have to do business in the future. And so we're aligning all that with where we want to go. That's very helpful. And then Don, you mentioned inspiring your people at the store level. In particular, is what I'm thinking of, how do you reinvent that process? I mean, is it a new everything from hiring to coaching? Is it new technology? I mean, it seems like there's a paradigm shift in how you want to interface with your team level members or your store level members and then have them interface with the customer to kind of usher you into this next chapter. How do you think about affecting that change? I think Mike has it as one of the 7 pillars and I'll let Mike talk more about it. I'll give you a broader global perspective. Having traveled to the markets around the world, we see this in different forms and formats. So I would say that the first part is going to be what happens in the restaurant. And I think today you'll see some evidence of some of the things that we see as potential opportunities there from an inspiring our people perspective. I would tell you there are other aspects though. One of those is what we call archways to opportunity. And really at McDonald's, we have the opportunity to do something that not many others in the broader space can do. And if I look specifically at the U. S. As an example, we have a lot of people who work in McDonald's today that don't have high school diplomas or degrees, that don't have baccalaureate or associates or masters. We tend to be their 1st job. We tend to be the entry into the workforce. We also tend to be the place where if you don't have those kind of credentials you can also come and have a great career and opportunity. We have a big opportunity to be able to help them further their education. That's a very inspiring notion. And when you have the number of employees in the McDonald's system, both the corporate side that we have and also that our franchisees have, to be able to help them to do things like that enables their lives. And so we've seen a number of people come up through the McDonald's system, 60% of our franchisees started as hourly employees. It's a tremendous opportunity and tremendous number. But if we can help even more so on that base educational aspect, that's one of the things outside of the restaurants that we know we can do. And as a company that we are, we know that we can really facilitate that in a very strong way based on partnerships. So I think the inside of the restaurant piece we'll get into more of the training and other pieces and some of the things that Mike will talk about probably. But externally we have a huge push that we're going to make from an education perspective. I will say that that is not in lieu of us. Many people say, Don, is this because you've talked about minimum wage before and is this your way of addressing? No. We will pay competitive and fair wages across the board as we always have. But the wonderful thing about McDonald's is you can't matriculate through the system for opportunity. And that has been the net worth gainer if you would for many of our employees and that will continue and we'll continue to support it. Thank you. Next question Monica? Monica Robbins from Sanford Bernstein. I was wondering what does pricing look like for the system as a whole? Typically, I think of franchisees as being more aggressive on price in the company. Is this the case? You want to talk about the U. S. But? So typically operators are a little bit more aggressive. But I think where we are today, we recently just got underneath food away from home metric. We're looking at next year. We think we still have some room relative to Macapco to move on some pricing. If you look at food at home, that's we're seeing a spike. And next year is going to be an interesting year. America is going to get a tax break with oil, gas prices going down, their phone bill going down, all the things we're talking about. We want to make sure that we have the pricing structure, we've got the offers, we want to give more people more reasons to come to McDonald's to spend that money that they've got in their pocket now. And so I think we're in a good position relative to those metrics. A lot of our operators use 3rd party experts of course to help them price specifically around their competitive set and their market conditions. Okay. And then just a follow-up. Are you going to be able to sustain margins if you take price below inflation, especially considering commodities are getting more expensive? Margins are a sales game. They are top line game. And if we're able to drive the business, we'll be able to drive margins. If you look at our margins have decreased clearly over the last several years and it has been largely based on sales. We had 1 year that we hit a, I'll call it a bit of a pseudo high. It was a wonderful year. It was high margins, but it was also boosted by some lower commodity based costs. If you come back down into the more normalized level and then look at that, it is decreased based upon the sales impact or the lack of sales. So I would tell you we have to be able to move the market move margins, we're going to have to be able to drive the business. Now, I haven't said that there are some other pressures that will come upon margins. So to Mike's point, we're hoping that that flow through from the benefit, say, in the U. S. Of a tax break flows through well, but you're also going to see some inflation as a result of things like the affordable care, minimum wage changes across the states. Mike showed that on the charts. So you're going to see some inflationary pressures as well. So there'll be labor pressures that we're going to see. We're going to see some other inflationary base pressures across the P and L. So our goal though has to be manage those things effectively, but move and drive the business. And if we move and drive the business with sales, we will see some margins that move in appropriate direction. But we've got to drive the business. It is a sales game. Thanks. Okay. We've got Pete Saperstone, then John Ivankoe, Keith Signer and Isaac. Raise your hand if you want to join that queue as well. Pete? Hi, Pete. Jen, you want to hand Pete the microphone? Thanks. Pete Saperstein, Fidelity. Guys, you mentioned multiple drivers to kind of turn on the U. S. You mentioned localization, value reset or the GAAP reset reducing the complexity, creating your own taste and changing the health perceptions. I'm curious as you look at those multiple ones and there's probably more, which do you think will have the most impact on turning that business around in the U. S? And then secondly, do you think you're going fast enough across the board? You mentioned in Craig, your menu, I think 3 markets by the end of 2015. That just seems slow in my mind. I'm curious why not faster? What's holding that back in terms of the speed of that? I'll ask Mike to speak to a part. I'll give you a little bit particularly on the last day and then I made a little quip about hey, I'd like to see it come faster and I keep jabbing Mike and the others for it. But also I was also here when we implemented CBB and led that implementation. And the thing I would tell you Pete is that what you want is you want to get a great core set that is move forward. You understand the implementation challenges. When you're moving we got 14,000 restaurants in the U. S. When I say in Australia, we're going to have the whole market done next year. Well, keep in mind Australia's 800 restaurants. So what we hope to be able to do is get that good base built up and start of that implementation. Once we get that, we can scale fairly quickly. But we're going to have to build that up. The other thing we've got to do is in the U. S. We've got to tie that to what's going to take place with the reimaging aspects because we want to do a new experience in a new and a reimage restaurant. And so we got to make sure that we're pacing this appropriately which gets into the reallocation of capital how we apply our capital in existing restaurants and how we support the franchisees in both the reimaging process and programs as well as what we're doing with Experience of the Future. So, the things that will move it the broadest, I think you're going to find are going to be the same kind of framework bucket around the globe. There are some slight differences I'd say, but you're going to find one is the focus on food and the focus on authenticity in our food and how we convey that. That is a big one and it is that's one everywhere. Even in markets that are doing well, it's just a trend and we've got to get there. The second one is the digital experience and engagement. That piece, it's here. We said earlier we were late coming to the party, but we would catch up and we would accelerate and we're doing that right now. That one is another really huge one. So you look at the food piece and food on innovation and a digital one. Pete, I would actually stop at those 2. The third one that I you're going to have 2 different thirds. In some of the markets, they're focused on brand trust, transparency and respect at a higher level to further engage consumers. Other markets we may be focused on convenience based strategies a little bit more whether that be delivery or web based ordering. We're focused on that level of convenience and there's a big split here between say what happens in the U. S. And what happens in markets like APMEA. So those are but that gives you kind of the range. The top 2 as I look at them and we have to do these things clearly with the franchisees. Now I'll shift that's kind of a global perspective. I'll let Mike kind of give what he's focused on in the U. S. Well, as we transform the U. S. Business and the brand and the concept if you will, I trust the owner operators and I trust our regional leadership. That's where I think we're going to get the quickest impact of the changes we're making. And as I start to see the local plans come together and the energy around those plans and the multi layers approach, as I mentioned, giving more reasons to come to McDonald's, both from operations and execution, from the marketing, breakfast family, value, all the components. I think that's where we're going to see the turn come quicker as we start to build for the future. Well, those the areas where it makes sense to do on a national basis, we'll continue to do it. We're not taking our budget down from a national perspective. So if you look at the things that will build our brand, the messaging that will build our brand, the big leadership marketing ideas that only McDonald's can do, product platforms, new product ideas, they'll continue to be leveraging the national opnad platform. Pete, this is what we did before. This is Back to the Future. So if you look back even 3, 4 years ago, this was the way that we did it. What's happened is that as things have tightened a bit, it's been to Mike's point a little bit more in terms of the direction coming from an Oak Brook or the center in that direction then going down. One of the things that Mike has mentioned a number of times is and we've talked quite a bit about when that begins to happen, you lose the diversity benefit of the system. So rather than having 22 markets that are focused on potentially and it wouldn't be 22 different executions, but numerous different executions in a local window. You have 1 across all markets with the diversity that Mike showed and if that one happens to be something like say a jalapeno cruncher that will play very well in some markets and it won't play nearly as well in others. But if the local markets are determining their taste profile and moving forward, so maybe there's 6 or 7, 8 even different things around the entire U. S. In those local markets, you do get some diversity and some buffering relative to just those executions and they're more locally tailored. So it really is the way that we advertise when we've created OPNAD. OPNAD was created for national brand. And the local markets were there to be able to be locally relevant and move the business in that way. It's just we strayed a bit as we've as things have tightened up a little bit. Okay. We've got John Ivankoe, Keith Isaac and John Glass. And actually just a straight follow-up on that question and then another one. I think you're at 60 local versus 40% national now. Is that the right mix? 60% local, correct. 40% national. And that's a very high amount of local relative to other companies and kind of what we've been taught as analysts as national is much more efficient just in terms of overall spend in terms of reaching customers versus local. And I won't name the names, but a lot of companies have really pressed National and those companies have actually been very successful doing those and have gotten a lot of franchisees buy in. So just in terms of what your marketing people are just kind of telling you in terms of the efficiency of that advertising spend and if franchisees are getting the most out of their buckets possible? Well, in other words, it could be that you're shipping the wrong national message you know versus that you're not spending enough on local effect and asset in that way? Yes. Well, excuse me. First of all, there's a recognition that consumers are consuming media in much different ways. So that model of sixty-forty is becoming very challenged because digital spending as we start to be able not only to pinpoint our market, but pinpoint consumers who have our app, who are loyal to one particular store, we can talk to them directly, segmentation, that's the future. So this idea of CBS, NBC, ABC, that's moving quickly. So to apply conventional thinking to the future is not what we're doing. Okay. And just John, just so there's a I can understand how some would say that may not be as effective. But keep in mind, this was effective for us for a very, very long time. I mean, the last few years has not been as effective. We haven't done it as effective. But even through the days of whether it was go back McCafe, go back even when we implemented dollar menu, go back to last years, we always had a national local split and local always did those that top up and they did the shelf promotions etcetera. The other thing is most of our competitors don't have the local strength that we have. So we happen to have a ratio of 5 restaurants per franchisee. We happen to have 150 odd local co ops. So we have a different structure in order to be able to address local markets in a way that some of our competitors cannot address local markets in the same way because they're putting all of their media into that national basket. That still isn't my second question. It's a little bit of an observation. But when you're flying through some of the earlier slides, Mike, we kind of showed like where the McRib Under Index relative to sales. And one of those markets that was just there Southern California, San Diego, Central California advertised exactly the McRib in November. And it's just a very interesting thing to kind of see that, but maybe it's just that the maybe this is the point that the local market execution just hasn't used the data that you yourself has or just that the local markets just need to be much more intelligent themselves about how they spend that money? How would something like that happen just kind of in contrast to the own data that you yourself just showed? Or they didn't have the flexibility to be able to first of all, understand the numbers to your point. I'm sure if you talk to owner operators and say, McRib, yes, that's we can't wait. Now I think the flexibility of saying, okay, November is a local window. What do you want to feature in the local window relative to your entire plan? It doesn't have to be a product. It can be something else, but if it is a product, now we'll be able we provide them the information to tell them where those products index. Obviously, jalapeno crunch, those things are going to do well. Beverages, salads do well on the West Coast, allowing them the flexibility to do that versus saying here's what you got, you've got McRib or you've got McRib, which one would you like? I think that's a very different conversation. I think we talk about kind of igniting the entrepreneurial spirit. That's I think that's also inspiring them, inspiring the people piece. Okay. I think I understand. And Mike, you're with the company in 2,002? I was with the Boston market. Okay. So I'll add that then the question maybe will be for Don. 2,002 is this big operational reset. At that point you called it QS, E and V. It then emerged into the 5 Ps and the plan, the win that kind of came after that. But you got the system, you rack and stack. You had some good conversations, some bad conversations. There's some consolidation, but you did get the franchise system ready for what was a tidal wave of products and innovation and platforms from 2,003 that lasted for half a decade, maybe longer. So I mean, are you operationally set at this point for, hey, are systems ready for these products and platforms that can really begin to hit in 2015? Or does there need to be another 2,002 event that the system needs to get put in the right place and for you to have many of the tough conversations that I know happened a decade ago? Well, it's funny. It's easy to look back now even for me in the mid being in the midst of it and say, oh, we had it all planned out. It was just perfect execution. It just doesn't work that way. What we had was we had a focus that we knew in order for us to move the business and have many more customers coming to visit us, we wanted to have 2 things. 1 is we wanted to clean up our house as we used to say back then. And 2 is we wanted to invite new customers in. We're following a very similar path today. We're trying to clean up the house operations reset some of the menu optimization things, the rationalization that Mike talked about and invite new customers in. Some of the value work we're talking about, the local piece that Mike's talking about in a huge way. Back then we started the NABIT process, nuts and bolts implementation teams. So that whatever you did within a certain window or timeframe, we went through that and we made sure that operationally we were in sync and ready to handle that in the restaurant. Mike's right back at the same point with what he's doing, what he's saying about the operators being engaged to make sure what they choose to market in that window, they're ready to market and handle. We have regional teams that are set to be able to support that level of execution. So we still have the same regional teams. The focus is I think back on the right things as Mike's talked about it. And yes, we do have products and product templates and that piece. So those things we've got John. What we've got to do is clearly all this is talk, it's execution. When we did it back in 2,002, we executed and we executed well. And that's what we'll have to do again. We'll have to execute well. When we did it in 2,002, we did it with the owner operators. We'll have to do this with the owner operators again. It can't be dictated. It has to be collaborated if you will with the owner operators. Back then the whole system was rallied around it. I know that Mike and the team are doing some things to get to that exact same point and even further that point. I would tell you that today we've probably got more innovative things already coming together than we had back then. Back then, we weren't thinking of we weren't we thought about base execution of QSC and V. We were not thinking about base execution plus how we can be more innovative. Interestingly enough, when we did think about it, we didn't leverage it. So, Made for You was implemented in 1998. We never advertised the fact that you could get a sandwich built your way. And there were certain reasons we didn't want to say have it your way. But back then we never talked about Made For You. We had a couple of markets that did, they did great. But we didn't advertise food quality, authenticity. We had an opportunity. We did not advertise when we did free Wi Fi. We did free Wi Fi back in the early 2000s, long before anybody else, never advertised. And so I would offer that today we've got more things we're putting together into this experience piece than we knew to advertise and work back in 2,002. We reallocated resources the same way we're reallocating resources now to the point I think Keith brought up earlier. Keith brought it up around 100 restaurants in the U. S. I would tell you that we're not having conversations around 100. We're having conversations around where we put the capital. That's the conversation we're having. We're having conversations around how much capital will be allocated to the entire system, which I think Pete said in New York will be reduced. But it will be reallocated to the areas where we want it. And so I would tell you John, yes, we're ready and we'll be able to execute this. I'm very, very confident at a high level. Keith? Thanks. Keith Signer from UBS. So create your taste digital localization and decentralization for product innovation all this stuff, reimaging, I mean, it's all really exciting, right? But as you said, it's going to kind of roll over time. The system needs to be ready. But we have to acknowledge a little bit in the near term what's been running of late is not quite generating the results that I think the whole system would want. And I guess what I'm asking is, do we need a stopgap? Do we need to do at least something to kind of bridge the gap between now and as this stuff all rolls? Is there something we can do in the near term to kind of to get us to the point where this stuff hits that critical mass? There's not a stop right now, Keith. So, what you guys are going to see today, what we've been discussing is not we are not going to wait until we have create your taste and experience of the future in all the restaurants across the business. That no. When Mike talks about the localization aspect, that's a now. That's not a long term role kind of a deal. That's a now. When we talk about the changes that have been made in Australia, that's a now. That's the loose change menu, the aggressive way they position value, the changes in menu, innovations around rump steak, that's a now. When we're in Germany and we're talking about the value propositions that we have and downsizing all of the menu items that we've had to focus more on certain critical areas of menu. That's happening right now. What we're saying though is as that's happening, we're also laying in what the future growth aspects are. And we can do both. So locally, the execution that's taking place, you guys and Mike's talked about it, but you'll get a chance to talk more with Mike just 1 on 1 and really get inside his head relative to what this means. He's off and running. We've restructured the U. S. Business. I mean, this is not a wait and see kind of a thing. So we expect that we're going to see results clearly next year. We're going to see results starting. Now what we won't see is we're not going to see the business just flip from a negative from an erosion relative to the base trend line to get snap back positive. We're deep enough there that we've got to come back up. And so the way that I'm gauging our performance, engaging Mike's performance in the U. S, engaging those priority markets is have you stopped the erosion and is that coming back up. At the same time, we're going to be recovering in Russia. We're opening restaurants again. China, we're coming back much sooner than we thought. We thought 18 months initially. We still think we probably got 6 to 9 months, but they're coming back very solidly. Japan is a different store. Just straightforward, we got more work to do in Japan. I'm not putting it out there. Germany, the U. S, Australia, those markets coming back. Okay, Isaac. Isaac, it's Ekwu from Susquehanna. So a follow-up to Keith's question is on the value segment. And Mike, you talked about this where there's been a lot more levering to that segment. And that's where you've seen a lot of competitive pressures from your core traditional competitors. So can you talk a little bit about that, what you've observed, what you're doing differently, what's going to stop the erosion in the near term? Relative to value, Isaac, we have I think if we look at trying to build a national dollar menu and more base, it's going to be somewhat watered down by the virtue of the fact that we've got so many different situations across the country. So what we're going to do is we're going to talk about dollar menu more nationally coming up. There'll be a very specific menu, but it'll also have local options that you decide what else is on that dollar menu moving forward. I think even more critical is call it what you will, strong value, disruptive value, something that's like wow, transaction building type of thing. That's coming from the local markets in terms of their particular situation, what they're seeing, what they think they need to be able to do, how they can execute, their level of strength versus the competition and the ability to say we're stronger than you, we can stay the course longer than you and we're going to. That's the power of our owner operators And I think that's what we've kind of unleashed as I start to see these plans come in. And oh, by the way, we're also going to maybe bring back some old favorites from past venues past. They know what works and now they've got the ability to implement it and the local regions are supporting that. And our center, the center here in Oak Brook, we're redesigning. We're here to support the regions to innovate for the future, not to tell them what to do. And a follow-up. The Australia rollout of create your own happen a lot faster, right? So we're wondering I'm wondering why the U. S. Cannot do the same, especially since hard time to work out the Kings, apply the landings there, etcetera. So is there something else going on there that you're not acknowledging perhaps you need more time to fix the U. S. Before franchisees really get excited about implementing. Could you talk a little bit about the cost involved? Because you're having the conversations around allocating the capital and maybe franchisees are not as excited when the rest of the business is not doing well? So Australia, Isaac, one of the things is a little different. They had implemented what we call dual point service already. So Australia had dual point. They re imaged restaurants dual point. The technology new POS 6 system was in. In the U. S, the great thing is the new POS system is in. The restaurants do not have dual point yet. So part of this is the dual point migration in those restaurants as we move forward. So there is a different Australia is at a different point relative to being able to launch out. Even in that, the aggressiveness with which Mike and the team are going at this, I think it's appropriate. I think it's going to be slower on the front end and then it will accelerate. And once we accelerate, keep in mind Australia, 800 restaurants as I mentioned. U. S. Is 14,000 restaurants. So it is a different thing. The operators, Mike can talk more about his conversations that he's had with them. But he recently had some go over to Australia to see that and then he's got a different group and he's strategically looking at all this stuff that's going over to U. K. And France. I think he's doing it the right way because when the operators get excited, they'll tell the others. And when we go to these markets, we're not having corporate people present. These are franchisees presenting to franchisees and others mixed with corporate people. So, this is not a big sales job. This is and again, you guys will see it. You'll get a chance to understand it. And Eric will talk a little bit more about it. Our results are substantial enough that this is absolutely the right way to go and it is very much in line with consumer sentiment and trends. And one last one if I may. For the new bag as a creator owned platform, how comfortable and what are your insights around what your customer is willing to pay and where this is going to come in price at. And you haven't officially provided anything, but we see your top ins are probably going to $1 per an add on, which is going to put the average price a lot higher versus where you're currently selling your bag. So how comfortable what's going to be the uptake? What are you seeing so far? I'd say don't get too far ahead on the pricing pieces you just mentioned because it's different. Australia is different for those who've been online and if you've seen the McDonald's Australia YouTube piece and you see the guy ordering and every time he orders it's like an add on because he's ordering pineapple, guacamole, he's got tortilla strips and bacon and this burger that he built was about this high. I will tell you that they have a subset of things that they have incremental charges for. What you're going to see today is going to be a little bit different in the U. S. Market. You don't have, I don't think quite the flexibility to add on for everything, but I think we've got to determine which things are the add on prices. When you all go through the process today, you'll get a chance to see what the real add ons are. I think you're going to be quite amazed that it's not nearly as much as you think yet and still the average check is still quite positive relative to the base. We have a little less than 10 minutes left and 4 people in the queue. So I just ask everybody to ask one question. John Glass, you're next. Thanks. I'll just follow-up then from that last question. I don't think it was answered about what the economics of this look like early on or what your expectations look like. So what are the costs? What do you share with the franchisees? Just roughly the McCafe type of lift in type of economics or greater? And does franchisees have to vote on it? Or is this something they will do, as you say they want to perhaps but do they actually have a say in the implementation of this and whether they want to or not? So and this is a difficult one, John. So by country, it depends upon what's being implemented. So we'll just talk U. S. U. S. Cost structure will be similar as I mentioned to CVV. Relative to the uptick, we think it will probably be comparable at this stage. I'll leave it at that. I would not go further than that. What changes this a little bit other than in the combined beverage sale, we had a few options relative to how your drive through was configured. We had physical options more so. Based upon where Mike is going and the team are going, you may have the base of experience of the future entails kiosk implementation, it entails something we do with menu boards, it entails dual point service, it entails possibly a couple of changes in the lobby area and the kitchen area. So the combination of those things together, while we're not tearing out the walls and everything with the reset of plumbing we had to do for CBB, it is you guys will see it today, It is a different area in the restaurant that we're fashioning. And so that is a little different than what some of you if you were there may have seen in the U. K. Because as they're implementing, they're doing certain things, they're bringing in some different technologies relative to the lobby side. They've not done create your taste yet. So that would be implemented at some point as they get to a point of understanding what their base offering looks like, then they'll add it. France has everything with the exception of Create Your Taste. So the French cost structure will be different because they've already done the other part. They'll have 500 restaurants up on table service by the end of this year. So it's going to be a little bit different John in each of the markets. But the great thing we're doing is allowing the markets to determine their pace and what those options are based upon the local relevance. We've defined what's in the bucket that needs to be overall implemented, but they determine the sequence. And Mike's sequence will be a little bit different than the other sequences are. Next question is from Greg Long. Hi, can you hear me? Hi, this is Greg Long from Goldman Sachs. I work with Karen Holthouse. Just had a quick question on competition. There's been a lot of talk about competition. You guys had a pretty interesting chart on competition by market. So maybe we could shift the conversation over to competition by daypart. In that same chart, you guys talk about C stores and there's a little bit of context about coffee as well. So maybe if you want to talk specifically about breakfast? Well, obviously competition is very strong. Breakfast continues to be our strongest daypart relative to growth and we're not seeing the new competition that's come in and breakfast has not impeded. We look at stores around, for instance, the Taco Bell Bell that have we're not seeing an impact to our breakfast compared to stores that aren't around at Taco Bell. I think as we look at telling our story moving forward in competition, the competition today, there's very few of those folks that crack an egg, that have a kitchen that actually make breakfast. What they do is they reheat breakfast or they reheat a bakery product, we're going to start to tell the story about what you're getting at McDonald's. And it's a great story and it goes to real and fresh. And I think consumers today are going to react continually reacts favorably to our breakfast. And the other dayparts, lunch is just it's Dodge City out there. You're working on every day. That's why I mean it's so important to have that understanding of what's going on across the street down the road. It's a market share game. It's always going to be a market share game. How do you get them to pull into your lot versus your competitors' lots, making those decisions, making sure that our drive thrus are as efficient. We're putting we're accelerating our co investment, if you will, into side by side drive thrus next year because that's a differentiating drive thru experience than most of our competitors. It allows us more throughput. So we're going to move quickly on getting the rest of our restaurants that have the capability from a physical plant to be able to put side by sides in, we're moving quickly on that. That's part of that keep it real, keep it quick piece of our plan next year. So that's what's fun about the retail business. It's very competitive. Thank you. We're going to extend this just to get the 2 final questions in Jack and then Matt. Yes. It's Jack Hendergast with RBC. Just curious over the last few years, you've had products that tested really well, but that didn't necessarily bring the full lift that you guys would have expected when they were rolled out. So in terms of going into 2015, whether it's the marketing or advertising or the innovation you guys have planned, How well has it tested and what gives you confidence that's going to be successful also considering that you're trying to bring up increase the speed to market? I think the points that we've made over and over today are when you talk about products that haven't met the expectations, so one of those products we talked about last year, Mighty Wings, in some markets it did phenomenal, exceeded expectations. And guess which markets they are? You can probably identify it. Other markets, they didn't. I think that's the point is that we can test all day long. We can test against different consumers. At the end of the day, there is clearly preferences, taste preferences in the U. S. It's intuitive and intellectually, you know that there are there. So that's where we're moving. We're moving to more of allowing the markets to have the right type of product versus one product piece. Okay. Last question. It's Matt Hand with Wellington Management Company. Just wondering on the menu tiering that you talked about and price adjustments, what the offset is to value menu or excuse me, value meal or core menu options that theoretically have to come down over time? And as you talk about building the mid tier, is that items where prices come down to increase velocity items that are actually priced too low on the menu today in your mind or new innovations to get there? We'll be answer is yes, Matt. We'll be looking at you clearly have to look at if you're looking at the overall menu pricing structure, clearly have to look at what's at the base level. You have to look at whether or not your core menu items are at the right level. You look at the gap between those core and the premium products that you bring into the marketplace, you look at what I call are those more mid tier based than some of your alacarte pricing, all of those things we have to look at. And you also have to look at how consumers view pricing and bundling today versus when we implemented extra value meals back in 'ninety timeframe. So today is a different day and we have to be able to make sure that we have bundles, bundling opportunities and a price structure that is amenable to the way the customers want to order today. Okay. Thank you very much Don and Mike. That brings this portion of today's event to a close. We will now conclude the webcast. Thank you