McDonald's Corporation (MCD)

Investor Update

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Nov 10, 2015

Hello everyone and welcome to the TIME Center. My name is Chris Stent, Vice President of Investor Relations at McDonald's. We appreciate your interest in McDonald's and for taking the time to join us for today's meeting. I also want to welcome those joining us on the webcast. This year, we are utilizing a mobile app to detail our agenda, bios of management attendees, meeting materials, Wi Fi instructions, Investor Relations team contact information, reception menu and other relevant information. This afternoon, we will provide an update on our turnaround plan, discuss our progress in our major markets, explain how we are building brand excitement, and how we are enhancing financial value. We'll also provide some context for our optimism regarding McDonald's long term growth opportunities. In just a few moments, McDonald's President and CEO, Steve Easterbrook Chief Administrative Officer, Benson and Chief Financial Officer, Kevin Ozan, will discuss our strategies and global priorities for the future. Following that discussion and Q and A period, our business segment presidents, Mike Andres, Doug Gore, Dave Hoffman, and Ian Borden, will provide an update on how our global initiatives come to life in their respective geographies. Following the U. S, we will have a Q and A session and then a short break. After the break, Doug, Dave and Ian will share prepared remarks and then have a combined Q and A session. We'll end the afternoon with a final Q and A session with Steve, Pete, and Kevin to cover any remaining questions. During the afternoon break, you'll have the opportunity to interact with management while sampling our fruit and yogurt parfait, apple dippers, and delicious McDonald's cookies. At 5 o'clock, we'll conclude with a cocktail reception that provides ample time to mingle with our management team as well as officers from various disciplines within the company who are here with us. We'll also be serving hors d'oeuvres and cocktails made with McDonald's ingredients. Our chefs will be circulating to explain their unique and fun recipes, which we hope you enjoy. Your name badge is your access to all events, so we ask that you wear it at all times. We'll be issuing a press release this afternoon summarizing the highlights from today's meeting. We will pass out hard copies of the press release at the appropriate time, and it will also be posted on our website. In addition, key slides will be posted to our website and will be accessible through the mobile app. Webcast participants will see slides, but not the commercials and videos. Fact sheets, capturing highlights from the segment presentations, and other relevant information will also be distributed and accessible on our website. Finally, before turning the meeting over to Steve, I want to remind everyone to please silence your phones. With that, let's start the meeting. It's my pleasure to introduce McDonald's President and Chief Executive Officer, Steve Easterbrook. Thank you, Chris. Good afternoon, everyone, and appreciate you all being here with us on this rather damp afternoon here in New York. When I took over as CEO, I ordered a dispassionate look at our business. I set out to be objective for all stakeholders, customers, franchisees, employees, suppliers and importantly, shareholders not allowing history or legacies to color judgment on how to create value for the short and for the long term. Our business model strength is enduring, but no business or brand has a divine right to succeed. All great brands constantly need to challenge thinking, talent, processes and services. With immense pride in our heritage, I set out to push this company to reanalyze prospects and priorities, structure and accountabilities. Today, we will provide a view into the changes set in motion to turn around our business and the progress we're making within the context of the turnaround blueprint. In the audience is a talented team of global leaders. They're also listed in the mobile app for this event. As you spend time with them, you'll hear more about their deep knowledge of our business and their specific experiences within functions or markets. Designed to reverse decline and restart growth, the turnaround blueprint put customers, restaurants and crew back at the heart of what we do every day. It's challenged all aspects of the business to make McDonald's better. We refocused on running gate restaurants, driving operating growth, building brand excitement and enhancing financial value. We are leveraging the PowerBar system and bringing new thinking to how we doing so in a way that wins customers while building on our unique business model and the advantages we've created over time. Our first advantage is geographic diversification. We have unrivaled access to a broad base of markets with different economic and social conditions. That makes us very robust and reduces risk. To optimize this advantage, we completed the most significant restructuring in our history in a matter of months. We moved away from our geographic structure and created segments with similar characteristics. We removed distractions and bureaucracy to speed up decisions and increase our ability to move winning plays quickly between markets. This shift sharpened the focus and is driving greater accountability. It brings the customer voice into the half of the business, more action, less reporting, with a focus on serving customers. Our franchising model and the entrepreneurial power and energy of local ownership is our 2nd key advantage. When the company, franchisees and suppliers align, the shift in momentum is palpable. Brilliant people and outstanding businesses driving in the same direction. It creates a virtuous cycle based on shared risk and reward. Ownership is a powerful driver of growth. Earlier this year, we announced that we would accelerate our franchising. We believe we can go further than refranchising 3,500 restaurants by 2018, now aiming to refranchise 4,000 restaurants in that same period. This will move us from 81% franchised today to about 93% franchised globally and closer to our longer term goal of 90 Putting even more restaurants in the hands of our dedicated franchisees gets us closer to the customers and communities we serve. It also unleashes more entrepreneurial spirit, risk taking and innovation across the system. We remain committed to company operated restaurants in certain markets with a portfolio that is financially strong. We believe they're important for alignment, important for operating credibility, people development and demonstrating we have skin in the game as we develop and test new concepts in which we ask our franchisees to invest. In addition to intangible value, these restaurants will meet strict financial hurdles. There will be high volume stores with strong margins, delivering higher levels of free cash flow than would be possible under franchising. You would have noted from our commentary in recent months that we've given real estate, investment trust or REIT serious consideration. We hired external advisers to give us expert financial, tax and property perspectives. We engage in very robust debates within management, and we've been challenged and stretched by our Board of Directors. The detail will be covered by Pete in a moment, but our conclusion is that we don't believe it serves the best interest of shareholders to pursue a REIT at this time. The potential upside is not compelling, and the future value at risk is too great. Our 3rd competitive advantage is the size and scale of our system, particularly within the context of the 1.2 $1,000,000,000,000 global informal eating out category. We are bigger than our rivals by some distance. It's hard to miss our collective buying power and the ability to collaborate and deploy new thinking with huge impacts. McDonald's is the category's largest player, yet we have less than 8% market share. Clearly, there's room to grow. And announcements like this summer's agreement to develop 100 new sites in German autobahns, fuel and service stations demonstrate the growth potential and an entrepreneurial spirit that's alive and well. And our ability to share capital expenditures with franchisees and reinvest to support top line growth at a level that others can't match enables us to generate industry leading cash flows. What is clear, however, is that size cannot mean lumbering. The system has to be fit and lean. We're committed to driving savings and eliminating unnecessary costs. We believe we can achieve these goals whilst reducing G and A by $500,000,000 compared to the $300,000,000 target announced in May. And Kevin will provide further details momentarily. Our 4th major advantage is our brand. McDonald's is one of the most recognizable and valuable brands in the world, ranking once again amongst Interbrand's top 10 global brands. Our best way are fun and enjoyable. We're constantly working to reach people in ways that drive greater excitement and are meaningful to them. We're taking bolder steps to disrupt and delight people in our restaurants and beyond them. And nowhere has that changed more evidence than here in the U. S. For years, customers told us they wanted breakfast all day. They didn't understand why they couldn't order an Egg McMuffin at 10.45, 1.45 or 5.45. They wanted something we could deliver but didn't. That's changed. And last month, we launched all day breakfast nationwide. This commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume commercial break. 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All day breakfast is bringing customers into restaurants, lifting guest counts at lunch and creating a more positive mood around the brand. When the system aligns, we gain momentum. We power up, you see it from franchisees and in our crew. And that translates into a better experience for the customer and higher levels of satisfaction. We're starting to see overall measures of customer satisfaction trend upward, and Mike will share more details when he speaks. Selling more breakfast products across all dayparts also has favorable implications within our product mix. They're accretive to margins. We also continue to look at new ways to use our convening power to reach people in meaningful ways that deepen relationships with communities in which we operate restaurants. From global events like I'm loving it 24, which you saw come to life in the opening video, to local engagement through sports team sponsorships and Ronald McDonald Houses. Being a good neighbor is part of our heritage and our future. We're passionate about creating positivity for who we are and what we stand for. And people is our last advantage. A major part of reorganizing our business has been putting the best talent in the most critical positions. We're focused internally leveraging our strong experienced system leaders, including those here today as well as identifying and promoting the next generation of talent across the markets. We're also going outside, bringing in dynamic executives at the top of their professions to provide new energy and innovative thinking. External talent that we've added to our leadership ranks include Chief Communications Officer, Robert Gibbs Chief Marketing Officer, Sylvia Lagnado and Chief Strategy Officer, Chris Kaminski. These individuals bring strategic expertise and a track record of success. They are playing an instrumental role as we work to once again be recognized by customers as a brand they feel good about, a modern, progressive burger company. Now these are the major advantages we own. Our ability to drive them in new and better ways ignited our turnaround. This revitalization and our ability to restart growth is the first step. It positions us to strengthen and grow as a more competitive and modern business that takes back market share across the informal eating out category. That's how we'll ultimately accelerate to the point of leading once again. So how does that look in reality? We applied a forensic approach using data and deep analysis looking back 10 to 12 years. We understand the actions underpinning movement in markets as we continue to rigorously analyze performance. Those markets where sales momentum is negative but improving, the urgent priority is stabilizing, reversing negative trends, they are in slowing decline. Next are the markets that are beginning to reemerge and turn sales momentum positive. This is the trajectory change stage. 3rd is the stage in which there are sustained positive sales momentum and positive guest count momentum. This is the sustained growth stage. At the beginning of the year, the distribution of the U. S. And international lead markets, Australia, Canada, France, Germany and the U. K, looked like this. Add in several more critical markets, China, Russia and Japan, and this creates a clear picture of where performance was poor. Some of that could be explained by exceptional circumstances and tough economic conditions. The plain fact is we were not executing to our standards. We were missing customer expectations in too many places. Above all else, turning our business around has required us to recommit to running great restaurants, to recommit to hot fresh food, fast friendly service and contemporary restaurants at the value of McDonald's. For too long, we've asked customers to adapt to us. A big part of remaining of regaining momentum is flipping that paradigm, giving customers more choice and personalization and always adapting to meet their needs. So if this was a picture at the beginning of the year, today, we see progress. We're moving in the right direction across most markets, and we are regaining momentum. We've begun to build traction to take hold in the business. And whilst we're realizing the benefits actions in recent weeks, it takes time for the actions underpinning this shift to take root. There is no silver bullet or single solution. We have to reset the foundation of our business first and then look to layer on initiatives that generate longer term growth. Markets that are winning customers are doing so because they are focused on fewer, more substantive actions within 6 categories that generate bigger rewards. Quality service cleanliness, as we describe at QS and C. Core, iconic classics that define the McDonald's experience for so many, like our Big Mac and world famous fries. Value, convenience, new platforms and the restaurant experience. Each segment present will share insight into how their markets are moving the needle across these areas. So I'll simply give you a flavor of what we're doing differently in a few. Let's start with quality. McDonald's is well regarded for consistency and a predictable customer experience. Whether you're here in New York or on the other side of the world, you know what to expect when you visit McDonald's. We want people to feel good about eating McDonald's, so we're constantly working to a better job serving our current menu, toasting buns longer, changing the way we grill and sear beef to deliver hotter, juicier sandwiches, addressing accuracy with improved procedures and training programs. We're also responding to consumers' increasing interest in sourcing. Just this year, we're using our influence to convene NGOs and industry experts to define sustainable beef. We're moving from conversation to action, working with ranchers to ensure cattle are verified and sustainable. We're committed to halting the use of antibiotics, important to human medicine, in our U. S. Chicken supply. And we confirmed our aspiration to end deforestation across our entire supply chain. Convenience is another cornerstone of our brand promise. We disrupted the industry with our drive thrus and again when we made it popular to eat breakfast out of home. Mobile technology, innovative uses of GPS and increased penetration of smartphones are redefining retailing. More than $500,000,000 of venture capital investment has gone into new convenience oriented food service and delivery models in the last 6 months alone. We continue to simplify for greater transparency, accountability and speed as we experiment with convenience advancements that make meaningful change for customers, like delivery and the rollout of a global mobile app. Faster innovation, progress over perfection. We can make our customers' lives just a little bit simpler, a little bit easier and a little bit more enjoyable every time they visit. The last area I'll highlight is value. Much like our customers count on the consistency of McDonald's menu, they also expect a consistent value proposition. At the same time, we know people are willing to pay more and wait longer for food they perceive to be of better quality. This trade off is not new, but we have focused too intently on the functional components of value, specifically price. This has emphasized the transactional, less emotional aspects of our brand. So we are refocusing and working to ensure our value propositions feel relevant and enhance the overall customer experience. And long term, we're looking to tap into the power of relationship management, or CRM, to tailor offers and create individual value for customers. I believe we can own the modern definition of value in IEO by meeting customers at this intersection of quality, convenience and price today and laying the runway for the experience of the future. Experience of the future is not one action, but it's not target one trend, nor one customer group. Experience of the future is many things coming together to fundamentally change our relationship with customers and how they experience McDonald's. However, the principles underpinning our actions are consistent. We're giving people greater freedom, choice and control in how and what they order. We're emphasizing personalization through both the food we serve and the value we create for each customer, one to 1. And we're delivering modernity and comfort by creating a more seamless flow between areas of the restaurant that suits different occasions. It's all of these and more many touch points, multiple layers of new value that fundamentally change perceptions and truly delight our customers. As we've said before, the experience of the future will not look the same in every country. Using a lead market approach, teams in Australia, Canada and France are learning quickly so we can scale winning plays worldwide. With Experience the Future already in hundreds of restaurants, we are seeing significant sales uplift in markets approaching critical mass, like Australia and the U. K. Now let me finish my remarks by returning to our current performance. Our absolute priority is to stabilize and revitalize the business, and I'm encouraged by our operating performance. We're gaining traction. In the Q3, all segments delivered positive comparable sales, and we grew consolidated margins, operating income and earnings per share on a constant currency basis. Every market plays a significant role in our global turnaround. Growth in top line is translating to growth in the bottom line. Looking ahead to the Q4, we delivered the solid start we had indicated for the month of October. And as I mentioned on our Q3 earnings call, global comparable sales were expected to be positive in all segments for the quarter. Our strong financial foundation, supported by industry leading average unit volumes, enables us to pursue growth in every type of operating environment while returning significant amounts of cash to shareholders each year. Our philosophy regarding the use of cash has not changed. Our first priority is to reinvest to drive future growth. After that, we expect to return all free cash flow over the long term to investors through a combination of dividends and share repurchases. I am pleased to announce the Board of Directors has authorized a 5% increase in the 4th quarter dividend to $0.89 per share. Year to date September, we have returned $7,100,000,000 to shareholders through dividends and share repurchases. As part of a complete review of our business and financial areas, we also examined our capital structure. We now believe that now is an opportune time to take advantage of favorable interest rates by adding a meaningful amount of incremental debt. As a result, we're increasing our cash return target for the 3 year period ending in 2016 to about $30,000,000,000 This proactive move further highlights our willingness to challenge legacy thinking and make appropriate and prudent adjustments where warranted. Our confidence in the long term is well founded. We have set in motion a series of changes in how we do business that makes us leaner, nimbler and more effective. Our turnaround blueprint is working. Yes, it will be bumpy, but progress has been consistent. We have a system which is fundamentally advantage. We have one of the world's most iconic brands. We proudly serve nearly 69,000,000 customers per day. We are operating from a position of deep strength. And the global informal eating out market is healthy and is projected to grow 2% per year for the next 5 years. For 2016, we have set the following constant currency financial targets: system wide sales growth of 3% to 5% operating income growth of 5% to 7%, excluding certain charges in 2016 and 1 year return on incremental invested capital in the high teens. These targets are more consistent with our previously stated long term average annual targets. We will share longer term strategy with the McDonald's system in the Q2 of next year and with you shortly thereafter. In the meantime, we remain sharply focused on our operational growth led turnaround. I am confident McDonald's is an investment that will yield meaningful long term returns for all of our stakeholders as we make even greater progress toward being a modern and progressive burger company. The common thread across our actions is this. Everything we said we would do in May, we have done. Now we're going even further. We're revitalizing Grand McDonald's, establishing the right foundation on which we'll strengthen our business and ultimately accelerate growth and reassert our leadership once again. Thanks, everyone, for being here with us today. And now I'd like to turn it over to Pete. And after hearing Kevin speak, we'll open up for your questions. Over to you, Pete. Thanks, Steve. We've just issued a press release highlighting the updates Steve shared on the progress we are making as we execute our turnaround plan, as well as the updates around the financial areas of opportunity. We are passing out hard copies of the release now, along with the fact sheet that Chris mentioned that contain highlights of our new operating segments. This information will also be accessible on our website. We'll pause the presentation for a few minutes to give you a chance to read through the information before I return to deliver my remarks. All right, everyone. Now that you've seen our release, I'd like to talk in more detail about 3 specific areas. First, I'll provide some insight into how we approach analyzing the financial areas that we'll cover. Next, I'll talk specifically about our ownership of company operated restaurants and how that will change over the next few years. And lastly, I'll discuss our analysis of potential real estate structures. As Steve mentioned, the senior leadership team and the Board have approached all these areas with appropriate rigor and urgency. We've been open minded and sought fresh perspectives from external advisors with deep expertise in these areas. We've also considered investor feedback on these topics. I believe it's important to begin by describing the lens through which we view ourselves, which is that of a global consumer company. We operate in 119 markets around the world and over half of our income is generated outside of the United States. Consumer demand for our brand and products drives our financial results and overall valuation. Because we are primarily a franchisor and the majority of our income, just like our franchisees, is dependent upon top line sales. This alignment of interest with our franchisees is imperative to our brand's continued success. Our geographic footprint, relative size and scale, and franchise business model make us unique within both the restaurant industry and the broader business community. As a global franchisor, we are stewards of valuable assets. Our brand, our intellectual property, our physical assets, and most importantly, our unique business model that has served our business well over the past 60 years. We, senior management and the Board, make decisions that we believe are in the best interest of all shareholders over the long term. As we evaluate our global business, we believe that our business model is working. We acknowledge that certain markets currently have stronger performance than others. We fundamentally believe in the power of our unique business model. Having said this, let me assure you that the new leadership team is acting aggressively and with a fresh perspective to improve all aspects of the business. To create more sustainable value, we are committed to raising the bar on our financial expectations and performance. This means pursuing opportunities that enhance the brand and shareholder value without compromising our business model or long term perspective. As a result, we're committed to refranchising company operated restaurants that do not meet our newly established criteria, focusing on operating fewer but more profitable restaurants and markets, eliminating costs while preserving our ability to grow and drive value And finally, instilling higher levels of discipline around total spend to be more efficient. As Steve mentioned, the most important filter through which management and the Board evaluated the financial areas with how they could contribute to the operational turnaround. We did not let legacy thinking or inertia sway any of our conclusions. The one constant, which has always been key within our business model, is the focus on driving top line sales. Over the long term, this leads to income growth, cash flow growth, and ultimately, the greatest amount of shareholder value creation. You will recall that on May 4, we shared our plans relative to a number of areas, including refranchising 3,500 restaurants by the end of 2018, which would take us from the current 81% franchised to about 90%. Since then, we've continued to analyze the refranchising opportunity and challenged our thinking even further. We took a step back and considered the criteria that determine the most attractive markets in which to operate Macapkos. A strong competitive position, relatively low economic and political volatility, large markets that can lead the global system with initiative testing, talent pipeline and the customer experience sustainable company operated margins of at least high teens and significant incremental free cash flow. And lastly, but critically important, in markets where we would like to franchise, we always consider whether or not sufficient franchising laws are in place to protect our brand. We evaluated our planned Macopko estate against these criteria and concluded that we should refranchise an incremental 500 restaurants through 2018. We now expect to be about 93% franchised at the end of 2018 with a longer term target of 95%. I thought it would be helpful to provide some detail on how we expect our refranchising efforts might impact our financial results during this period. Overall, we expect refranchising to be accretive to the company operated margin percent. Having said that, I would stress the primary building blocks to increasing company operated margins over time continue to be increasing comp sales, supply chain efficiencies, and improving restaurant level productivity. Traditionally, conventional franchising tends to have a negative impact on the franchise margin percent. As the newly franchised restaurants tend to have lower margins than the established base. However, converting a market to a developmental license has a positive impact on the franchise margin percent, because the margin on the royalty payment is effectively 100%. Because our refranchising will be a combination of conventional and developmental licensing, on a net basis we expect our refranchising activity will also positively impact the franchise margin percent by the end of 2018. Please note that we do expect some near term volatility based on the timing of certain transactions. In terms of operating income during this period, the decline will be relatively modest when factoring in the G and A savings. And relative to free cash flow, refranchising will be accretive due to lower capital expenditure requirements. The refranchising target of 4,000 restaurants by 2018 implies approximately 1,000 restaurants per year. Because some of the transactions will be large, such as Taiwan with over 400 restaurants, we expect variability around this within a given year. And finally, the majority of our refranchising will take place in the high growth and foundational segments. Let's now turn to our real estate analysis. We have a responsibility to ensure that all of our assets are optimized. This includes both domestic and international real estate. All potential structures and opportunities were considered, including a REIT, sale leasebacks and variations on these themes. At the end of the day, a REIT spin off received most of our focus. We have thoroughly evaluated the structure over the years. Most recently, we engaged a team of outside advisors, including Investment Banking Firms, Tax Attorneys and Green Street Advisors, a well known expert in real estate and REITs. Over several months, the management team and our Board met regularly with our advisors. We carefully analyzed how we might structure a REIT conversion and thoughtfully considered the pros and cons of a potential transaction. Similar to how we are approaching our operational turnaround, our Board and leadership team approached this opportunity rigorously and with a fresh perspective. We sought to understand how could we make this work. We identified 3 critical questions during the quantitative phase of our real estate analysis. How much rental income could be placed into a REIT? What are the likely valuation multiples of both PropCo and OpCo, now and over time? And what is the resulting financial condition of OpCo once it is encumbered by what would be a significant rental obligation. The tax savings associated with the REIT structure are primarily a U. S. Opportunity, so we focused on our U. S. Portfolio. From the total universe of about 14,000 locations, we concentrated our analysis on owned or fee simple sites, which total about 8,000 properties, primarily because leased sites are far less attractive to real estate investors. Of the owned sites, the portion of rents that would qualify for favorable tax treatment should equate to current market based rents. Our advisors conducted a site by site analysis and concluded that the amount of annual U. S. Rental income that might be eligible for favorable tax treatment range from $1,500,000,000 to $2,000,000,000 on these sites. From there, we analyze the potential opportunity under several scenarios and market cycles. Under certain scenarios, it is possible that some financial benefits could be realized. We weighed any financial benefit against the business negatives, including first, moving away from our business model, which is built on the concept of co investment with our franchisees. Without controlling the real estate, there would be constraints on our ability to invest with our franchisees in growth initiatives that have ultimately resulted in industry leading sales and cash flows per restaurant. 2nd, the potential impact on our relationship with franchisees and how that might affect the success of our turnaround. We believe a real estate transaction could negatively impact our alignment with them over the longer term. 3rd, execution risk, which considers the current political climate and recent statements made by both the Treasury and IRS regarding REIT conversions. This includes the September announcement from the IRS that advised companies it is no longer ruling on requests involving a tax free qualification of REIT spinoffs. In our assessment, these dynamics create significant uncertainty. And lastly, we considered the impact on our brand from undertaking what would be a high profile, potentially controversial transaction. As we weigh the potential financial benefits against these significant risks, management and the Board were aligned. We do not view a real estate transaction as significantly compelling to move forward. We recognize the value of our real estate holdings, so we studied it very carefully. However, we ultimately concluded that focusing on the operational turnaround without the added complexity, uncertainty and potential disruption of a real estate transaction is in the best interest of shareholders and is the most likely course of action to maximize long term shareholder value. Nevertheless, we keep our eyes open for unique opportunities where McDonald's restaurant may not be the highest and best use of a particular site. In those situations, we will seek to monetize our assets. For example, year to date in the U. S, we have sold 2 sites for nearly $30,000,000 and we expect to sell 2 more sites in the 4th quarter with both proceeds and gains on the sales in excess of $100,000,000 In several meaningful ways, McDonald's ends 2015 considerably different from how we began the year. New leadership has thoughtfully challenged the status quo in nearly every area, and we have swiftly enacted change where needed. We entered 2016 in a stronger position, a leaner, more focused company, poised to capitalize on our unique business model. We are committed to executing against our turnaround plan to drive value for shareholders in 2016 and beyond. I'll now turn it over to Kevin, who will discuss some of the other areas of financial opportunity and our expectations for 2016. Thanks. Thanks Pete and hello everyone. This afternoon, I'd like to focus my comments on 4 key areas resource allocation, including both capital spending and G and A McDonald's near term financial targets, our overall capital structure and credit rating, and our cash return to shareholders including our dividend increase. Similar to what Steve and Pete discussed earlier, let me assure you that it has not been business as usual at McDonald's in 2015. We have approached all of these areas with new perspective, challenging our thinking and moving with urgency to effect change where needed. I'll begin by providing a strategic overview for how we're allocating our resources and measuring our efficiency. As Steve mentioned, our first priority for the cash generated for our business continues to be investing to drive future growth and returns. Relative to our capital spend, over time we target a portfolio return on incremental invested capital in the high teens. We seek to balance new store investments where we have historically earned higher rates of return with investment in existing restaurants that has included reimaging, initiatives such as the expansion of our beverage business in McCafe and general maintenance CapEx. We assign different cost of capital hurdle rates to markets based on the risk and volatility. We promote a competitive environment where the best performing markets as measured by the strongest financial results and returns, coupled with the most attractive long term growth potential, typically earn the most capital. As our financial results have softened over the past few years, we have consciously reduced our capital expenditures from about $3,000,000,000 in 2012 to $2,000,000,000 this year. Our ultimate goal is to invest in targeted opportunities to drive long term profitable growth. Maximizing these opportunities and securing our future success requires ongoing capital investments. We see significant potential to expand our global footprint, so new restaurant development will continue to be part of our growth equation. In addition, reinvestment into existing restaurants will be a critical component of both our turnaround and longer term strategy. This includes the experience of the future as well as the opportunity in the U. S. To re image about half of our freestanding estate, which we expect to take several years to complete. We'll provide an update on these potential reinvestments as plans are finalized. Relative to 2016, we expect our capital expenditures to remain at about $2,000,000,000 split fairly evenly between opening about 1,000 new restaurants and reinvesting in existing restaurants. As we evolve to a more heavily franchised structure, we would expect our capital expenditures to modestly decline over time. The key variables are the investments related to experience of the future around the world and reimaging the remainder of the U. S. Estate. Let me now turn to our philosophy regarding G and A expenses. Over time, our expectation is to grow system sales faster than G and A. Earlier this year, we announced plans to realize $300,000,000 in net G and A savings by the end of 2017. We also indicated that we were not stopping there. Over the past several months, we expanded our scope and identified another $200,000,000 of net G and A savings, the vast majority of which we expect to realize by the end of 2017. The incremental savings are primarily derived from the additional refranchising that Pete discussed, as well as an expansion of our global business services platform. This brings our total net G and A savings target to $500,000,000 excluding the effects of any foreign currency changes. These savings represent a reduction of about 20% off of our G and A base of $2,600,000,000 at the beginning of this year. The $500,000,000 of G and A savings can be categorized into 3 main areas: ownership changes, which will enable us to achieve savings by moving to a more heavily franchised and less G and A intensive structure restructuring and market savings, which includes streamlining of corporate and former Area of the World Organizations, as well as individual market level opportunities and realizing greater efficiencies through our global business services platform. This involves reducing the cost of business processes and leveraging shared services and centers of excellence across functional and geographic areas. These aggressive cost reductions are primarily a non customer facing We're on track relative to our savings targets and expect to realize $150,000,000 in savings by the end of 20 16 with the vast majority of the remaining savings realized the following year. We measure the efficiency of our spend across 2 primary dimensions. 1st, our G and A as a percent of system sales, which includes sales of both company operated and franchise restaurants. We believe this is the most relevant measure because both corporate and field functions support the entire business, including franchise and company owned restaurants. We expect our G and A as a percent of system sales to decrease each year through at least 20 18 as a result of our efforts. And second, we analyze our G and A spend and resulting profitability on a per restaurant basis. McDonald's G and A per restaurant is currently about twice that of our QSR competitors on average. However, our profitability as measured by EBITDA for restaurants is about 4 times Our business model, geographic diversification, franchising strategy and overall support model are some of the reasons that our restaurant averages differ from our QSR competitors. We expect to significantly reduce our G and A per restaurant as a result of our Importantly, because we are committed to returning all free cash flow over the long term to shareholders, these G and A savings will ultimately directly benefit our shareholders. Given that we're currently about 80% franchised and moving to 95%, our franchisees profitability is critical to both their financial health and to enable them to adequately invest in their restaurants. As a result, we're also focused on ensuring the total system spend, which primarily includes costs borne by our franchisees, is as efficient as possible. I'll briefly touch on 2 areas of focus where we see meaningful opportunities to realize savings. 1st, supply chain. This involves lowering costs through strategic sourcing reviews as well as production efficiencies. Importantly, we'll be realizing these savings without compromising food quality or safety. And second, indirect sourcing and procurement. This consists of better leveraging our existing size and scale advantages to improve pricing and quality of products and services, including kitchen equipment, construction costs, and other non food and paper related expenses. These savings come at a critical time given the rising costs across restaurant level P and Ls due to wage increases, healthcare costs and overall inflation. This will help enable our franchisees to make appropriate investments in experience of the future and in areas like labor to unlock further capacity in our restaurants and grow sales and cash flow. As we strive to become more efficient and improve both top and bottom line growth, I want to provide some insights into how this might translate to our near term financial targets. As Steve mentioned, we're confident in our turnaround plan and returning the business to profitable growth. Given the significant changes planned to our restaurant ownership mix and the fact that we're in the early stages of our turnaround, we're focused on financial targets related to 2016. We expect to provide an update on longer term financial targets after we share our longer term strategy in Q2 next year. For 2016, we expect to get back to delivering results more consistent with our previously stated long term constant currency financial results. We're targeting system wide sales growth of 3% to 5% and operating income growth of 5% to 7%. Excluding potential charges in 2016 associated with executing against our refranchising strategy and cost saving initiatives. We're also targeting a 1 year return on incremental invested capital in the high teens. Further details on some of our projected 2016 information can be found in the outlook section of our 8 ks filing. The next topics I want to cover relate to capital structure and projected cash return to shareholders. As part of a rigorous analysis into all areas of our business and financial strategies, we analyzed our capital structure. Our goal is to optimize our cost of capital, while maintaining the strength and flexibility to invest to drive future growth throughout business and economic cycles. Given our global footprint and our desire to access global capital markets for funding, we believe that maintaining a strong investment grade credit rating is critical to our future success. We're mindful of this unique time with historically low interest rates, And our analysis concluded that we could optimize our capital structure by adding a meaningful amount of additional debt, likely resulting in a 1 notch credit rating downgrade. We now expect to return a total of about $30,000,000,000 to shareholders for the 3 year period ending 2016. This represents a $10,000,000,000 increase versus our previous target with incremental debt funding the vast majority of this increase. The $30,000,000,000 cash return target will be nearly double our return of $16,400,000,000 for the 3 year period ending We remain committed to co investing with our franchisees to drive future growth. We remain committed to co investing with our franchisees to drive future growth. Included in the $30,000,000,000 cash return is a 5% increase in our 4th quarter dividend, which Steve mentioned earlier. Going forward, we intend to manage to BBB plus at S and P and Baa1 at Moody's Credit Ratings. Beyond 2016, we remain committed to returning all free cash flow to investors over the long term through a combination of dividends and share repurchases. In closing, we're committed to operating a more efficient McDonald's, so that both the company and our franchisees can appropriately invest to drive future growth. We have approached the evaluation of our financial areas with the same rigor and urgency by which we're executing our turnaround plan. We believe that a strong financial foundation is a key element of our turnaround plan and ongoing success, and we rely on our financial strength and flexibility to pursue critical growth initiatives through a variety of cycles. Our business generates significant cash flow and significant free cash flow, which we are committed to growing over time. Thank you. I'll now join Steve and Pete for Q and A. Is going to help manage this. So I'd like to introduce Jennifer Heiser, Liz Kluge, front left and back right, and Kim Yaman in the middle here on the right, and then Mary Kate Boyce in the back left. I think most of you probably saw Debbie Schroeder as well when you checked in. We'll keep track of the queue and someone will bring a microphone to you. Please wait for the microphone before asking your questions so those on the webcast can hear you. Please state your name and your company name clearly and to give as many people as possible the opportunity to ask questions, we ask that you limit yourself to one question. And we'll come back to you as time allows. We're now ready to take the first question. Tim Ford? Hi, Greg Badishkanian, Citigroup. So my question is, you mentioned that Q4, you reiterated that you delivered you started off the quarter solidly, same store sales should be positive. So I'm assuming if you reiterated that that's probably the case as of today. And second, with All Day Breakfast, the positive comments that you made, should we assume that same store sales accelerated in the 4th quarter versus the third quarter trend? I wouldn't assume anything. Look, we have felt confident that we're getting traction in the business. And the way we've and I wanted to demonstrate it just through onto the slides where if you can get confident in your certainly the big six markets, but certainly that big 8 to 9, clearly that drives the bulk of the volume, if you like. And we've gone to a market level analytics on it. So it's not as if we're just hopeful. We've literally got it market by market, month by month, where we believe we can understand where the business is trending. So having seen the return to growth in quarter 3, understanding how the plans are delivered and how the teams are getting the job done in the markets, we always felt confident about quarter 4. And now we're 6 weeks, or 5 weeks into this quarter, we continue to feel confident. The U. S. Is clearly of high interest and understandably so. It is for us and it is for everyone else. They've had a really encouraging start to quarter, they have. It's but you tend to when you're in a launch phase of something, you've got intense focus in the restaurants, you've got above the line support, you've got the merchandising in the restaurant. It's been a really encouraging start all day breakfast. It's what we were it's probably a little above what we're expecting, But you always expect there to be a higher level of trading in it and then it'll settle down at a certain rate. But Mike will probably speak more to it after the break. But we're feeling good about a solid quarter. Great. Next question is from Paddle 1. Andrew Charles from Cowen and Company. We appreciate the detail for next year's guidance. And as we think about the 3% to 5% system wide sales growth, is it fair to assume it's an equal contribution about low single digits from both store growth and same store sales? And just secondly, as we think about also the new stores for next year, how skewed the developmental licensees will be? Thank you. I'll tell you, I missed the second part. Just repeat the second question again, if you would. Sure. When we think about the development, how much of the mix of growth for next year is going to be skewed to developmental licensees? On the first point, on the system wide sales, we would expect that to be slightly higher on the same store sales, the new store development. That's clearly going to be driving guest count and also average check growth. I mean, that's the simple components of it. So that's how and everyone should know last week, we had our 9 major markets around the world in and we had a deep dive into the 2016 plans and that reinforced our confidence to be able to share that type of guidance with you for 2016. Yes, and we talked about opening about 1,000 gross restaurants in 2016, about 40% of those or so wouldn't be using our capital, so primarily DL markets. Okay. Next question, panel 3 in the back there. Hi, thanks. Sarah Senatore from Bernstein. I wanted to ask about create your taste, because you talked about how it's really, you're seeing accelerating very strong trends in places like Australia and I think the UK. And yet here in the U. S. You sort of backed off some of the numerical targets. So, I guess I was just trying to get a sense of is it something that you expect to be a driver here as well or more broadly? And in that context, what are the implications maybe for CapEx for you and for your franchisees? Thanks, Sarah. What I'm hoping to do, just through the way we communicate today and probably the last two quarterly calls we've all been on, is to broaden the discussion to be around the broader experience of the future. And there's many components to that. There's different there's a multiple, many ways that we could adapt the service model at McDonald's. There's many ways that we can help offer customization or personalization on the menu. Create Your Taste is one of those. The way we're using the new structure, and particularly our more sophisticated, highly developed markets, is using them as lead markets and learning from them. So as Create Your Taste and have had strong conviction behind it as part of a broad suite of initiatives that have helped develop the broader restaurant experience. And they're seeing success with it. It is a slightly different configuration in the kitchen, and there's a slightly different service model that comes along with that. And the beauty is we've now got 900 restaurants that have been trading for a few months for us to learn and then work out. You understand the context of other major markets? Is that something you want to lift and transfer across? Here in the U. S, again, they're working on different forms of personalization of food and customization of food. The one thing we do know is that we have to we believe we have to evolve from that rigid approach where we define a strict menu and customers have to select from that. The world is moving on, not just in the restaurant sector, but right across life. People are getting used to all consumers are getting used to having more societal trend. We are looking to embrace that and demonstrate to customers that we get what it is they're looking for. CYT is an interesting thing, and we're definitely interested in learning from Australia and beyond. I wouldn't necessarily build it in as a strong expectation in the U. S. Right now. But what I do know is the transparency we have into our major markets now mean if we can identify something that's working, our ability to lift it and move it quickly is way stronger than it's ever been. Next question will be panel 2 in the back with Liz. Jeff Bernstein from Barclays. Just a question as you talk about the refranchising, it seems like the number continues to rise. I'm just wondering how you determine the right amount. I'm just wondering if you can maybe give some color on the franchisee demand or whether it's DL demand, I should say, whether you think there's just a few big players that would take these on and whether you're expecting lots of little ones. I know in the past you gave some financial metrics around the refranchising, selling the stores for $1,000,000 a store and different metrics like that. I'm just wondering if you can kind of bring in that big picture in terms of how you arrive at those numbers and the outlook there? Yes, Jeff. I'll give you some additional texture. As you alluded, we got a little more rigorous with some financial screens in terms of what was acceptable to us in terms of the margin percentage and the cash flow generation from the markets. And we really use those screens as we went through market by market. The 3 of us along with the 4 segment presidents are aligned around going after those 4,000 restaurants. As I mentioned also in the remarks, it will be a combination of conventional franchising and developmental licensees, and we're not getting into specific detail around which markets per se. As you can imagine, if you're making those kind of decisions, it does have an impact on the market. It has an impact on the people. We want to have the conversations appropriately before we go public with some of the details. So we're committed to updating you along the way as we make progress, but we feel very confident in our ability to get after those 4,000 restaurants. In terms of proceeds, I'd say because the mix of these restaurants is maybe a little bit different than we've traditionally franchised, I think you could safely put a floor at about $2,000,000,000 dollars of proceeds that we'd expect. And again, as we move along and have a little bit more detail to share, we'll continue to update you on those. Next question is Paddle IV with Kim. Hi, it's David Tarantino from Baird. My question is on the return of capital to shareholders and the very big increase in the debt upon that. It seems like there's a little bit more emphasis on share repurchases versus raising the dividend. And I just wanted to ask about your overall philosophy related to the dividend, especially as you move to a more franchise model, more lean SG and A structure with less CapEx. Is there an opportunity to push the dividend a little bit further in terms of the payout ratio long term? Yes. Thanks, David. The way we've always talked about our capital allocation and I think we reiterated today, its first certainly is investing in the business for growth. Next comes the dividend is the way we think about it And we've grown the dividend every year for the past nearly 40 years. We're committed to the dividend. Our payout ratio has gotten a little bit high partly because our earnings in the last few years have been a little soft. And so we still think about growing the dividend over the long term relatively in line with earnings growth, but it has gotten a little bit high over the last few years because of our earnings. And so, we don't view the 5% increase as a, I'll say a negative or trying to bring anything down, but it's just in line with kind of where we are right now. Next question is Peddle Ihn with Jim. Hi. Thank you. It's John Ivankoe with JPMorgan. Pete, I think I heard you say in your prepared remarks that you said the operating income decline would be relatively modest as I think the loss of the Copco profit would be mostly offset by G and A. Could you clarify what you meant by that? And I guess it's on the 2016 event, and is that what you're trying to signal for 2017 2018? And I have a follow-up as well. Yes, John. I was trying to signal over that 3 year period as we embark on this franchising, the net where we would consider Hamburger profit loss will be offset by franchising income gains and G and A reductions. There will be a modest decline over that period, but essentially and part of that is due to where the restaurants are that are being refranchised and their relative profitability. And you're trying to I'm loud, you're trying to express that on a net basis I assume? Correct. Okay. And then secondly if I may, you talked about U. S. Real estate where presumably the value of the real estate is worth more than the discounted cash flow of the restaurant that sits on it. How much of a global opportunity is that? And you have a lot of iconic properties around the world, which I know do mean a lot for the brand. But how much of a financial exercise really is this where you're looking at the value of those individual properties and potentially monetization could be a bigger thing than we're thinking about? Yes. It's it definitely is a country by country opportunity, John. And while I'd say we make some effort through normal course of operations, it tends to be when some of these deals start to come to us that we take a hard look at it. But there's nothing else for us to signal in terms of additional proceeds or additional actions that you might see other than as they become opportunistic. Next question is with Mary Kate, number 3. It's Priya Oreste from Barclays. Thank you so much for the color around sort of where you look to manage your credit ratings longer term. Just one quick sort of confirmation, whether these plans on adding incremental debt to fund the $10,000,000,000 in shareholder returns next year have been run by the agencies to confirm that it's just going to be a 1 notch downgrade near term. And then as you think about sort of managing more to the mid to long term, you talked about high you just talk about why you wouldn't go to mid BBB and increase the amount of flexibility around returns? Yes. So we have had discussions with the I think we believe it's likely that it will be a 1 notch downgrade based on our conversations. As far as why not going further, what we're trying to strike the right balance between is optimizing our cost of capital, but also retaining financial sure that both we and our franchisees have the right access to funding when it's needed, so that that doesn't become any kind of barrier to reinvesting or investing in the business. And we believe that the BBB plus and BAA1 is kind of that right balance, if you will. Next question is Peddle, too. This is Jake Bartlett from SunTrust. The question is about the modern definition of value. If you can go into that a little bit more, maybe help us understand what that means. What the implications are for falling food costs in 2016? And is there a danger of going in a direction if your competitors are still kind of in the prior definition? Do you risk losing some traffic? That's a good question. If very crudely would describe value as being an equation of experience over price, that is an important consideration for us. So if all you're going to do is pull the price lever, then that can create value clearly. But if you enhance the overall experience, that also creates value in the mind of the consumer. Not all consumers, so it's important to still have entry level value, stroke entry level price because there is some price sensitivity, but not across our entire consumer base. So part of what we have seen, and we've seen this in markets around the world, that when we enhance the restaurant experience, whether it's through our reimaging, whether it's through investing in the quality of the ingredients, in areas that customers care about, they will be willing to pay more over time, whether it's in the service initiatives we have, whether it's in just the I mean, there's all sorts of ways of adding value, whether it's from free Wi Fi all the way through to allowing them to communicate with you via mobile apps and order ahead and maybe you can smooth the service experience. These all create additional value in the minds of a consumer. So it's not that we walk away from price, there is an important role that price pays, but it's not the only role within the whole value equation. So our belief, and we have seen this play out time and time again around the world in many of the major markets, and one of the examples will probably come up through this afternoon. As we build our experience of the future, that has a value element to it, the consumers value in the minds of consumers, not minds of us, minds of consumers. And that gives us a bit of pricing power. Next question is panel 4. Thank you. It's John Glass from Morgan Stanley. Can you talk about your decision about keeping your CapEx to about $2,000,000,000 at least in 2016? What kind of discussion went around whether you should continue to open the stores at the rate you've had or spend the amount you've had historically? And can you help us think about how what the cost remodeling is in the out years? And what does this business look like once you're fully refranchised and remodel on an ongoing CapEx basis? Do you continue to perpetually fund the growth of your franchisees, for example, or has that questioned in this discussion as you've challenged all your assumptions? Yes, John, I'll take that. For 2016, we still earn very good returns on new restaurant openings. So we still think there's a lot of opportunity in a lot of the countries around the world to continue opening profitable new restaurants. So a little less than half of that 2,000,000,000 dollars is new restaurant openings. A little more than half of that obviously is kind of the reinvestment side. And we need to continue to invest in the business to grow. And so in the near term, I wouldn't think that well certainly for 20 16 that $2,000,000,000 won't change a lot. Over time as we refranchise more, we would expect that number to modestly decline. Again, the one caveat is the U. S. Right now is only about half modernized, about half of the restaurants are modernized. And so we may at some point determine that we want to invest capital in the near term in order to accelerate something like that. And we also need to look at things like experience of the future. We'll only invest capital if we're comfortable that we're going to get the right returns. So that really is kind of the underlying philosophy on investing capital. We're not specifically tied to a number, I'll say, on the capital side. It's more about what can we invest and get the appropriate returns on. And just to support that, John, it's these are market by market level decisions. I remember back in the day about 10 years ago when I was in the U. K, the capital allocation I was granted was very dependent upon the returns I was generating out of the market. And the stronger we did, perhaps the capital envelope would open up a little bit, and that gives you a chance to continue to enhance those returns. If you're not delivering against it, then there's going to be other markets or other ways of using that cash. So the sort of discussions we had last week with the major markets was around exciting plans. There's an accountability that comes with delivering against those exciting plans, which is there's a duty all stakeholders and shareholders in particular as well to deliver a return on that spend. So I think that kind of that sense of accountability is a great screen for us in terms of just judging what the right level of capital is. If we are generating better returns than high teens, then I guess on behalf of shareholders, we would maybe even increase capital if we were generating returns on it. I'm not suggesting we are, but to me, this is one area which becomes easy to be more forensic on a 1 to 3 year basis because there's still a lot of value to be had out there about investing and co investing with the operators A Question on the 1,000 unit openings for next year. Is that a gross number? And if so, could you share a net number? And then question on the U. S, seem to move pretty quickly from the downturn category on that interesting sales chart to the trajectory change category. That's a pretty abrupt change, which I'm thrilled to hear your report, but I guess I'd like to know more about that change. Is the all day breakfast that powerful or are there other factors in place to give you confidence that the better U. S. Sales could be sustained? I'll take the second one, Joe. The way we define those phases, if you like, was there was a slowing decline and then a trajectory change. The slowing decline the U. S. Has been moving through slowing decline. And as we went through quarter 3, it moved into positive territory and therefore went into trajectory change. It's certainly not in the sustained growth category because we want sales growth and guest count growth over a more prolonged period of time. But given the trend that had been on for 2 to 3 prior quarters and then moving into growth, That's how we've defined that. And typically, as we've looked at a lot of our more mature markets that have been in turnaround situations the last 10 to 12 years, we've got a pretty good feel as to when the traction takes hold, what the key indicators are and help support our confidence in the momentum in the business. So, and as we enter quarter 4, we felt confident, I felt confident saying that we expect to have like for like sales growth in the U. S. As well quarter 4. And I think that sort of that meets the definition of trajectory change from our perspective. There's some question about gross. It's about net openings on the 1,000. The 1,000 is growth. Net openings for 2016 will be maybe half of that because we actually have some closings. If you remember the first quarter of this year, we took a charge for some restaurant closings. Some of those actual physical closings won't actually occur until next year. So on a net basis that 1,000 becomes closer to about half of that 1,000. Yes. And that's actually in the outlook section that's attached, Joe. So you probably didn't get a chance to get that far. Great. Thank you. Next question is Paddle III. Thank you. Matt DiFrisco, Guggenheim. A question on the G and A side. I was a little surprised that only it looked like a third of the savings on the G and A are roughly is coming from the is that the way we should interpret it from the refranchising efforts? Because I guess in a lot of turnarounds, there's always an investment needed or something that you guys may have targeted that was lacking investment in the past, namely technology and mobile. A lot of people want to see more on a global basis coming in the front. I wonder if you could talk about those levels of areas where you might need to invest more amid this aggregate improvement on the G and A where we could see some more efficient or effective investment in those areas? And is that correct to interpret that the refranchising is 1 third of the 500? The refranchising is roughly a little more than a third I'd say of the total and those are net, one of the challenges is to do it net. So those are all net numbers, if you will. It includes the fact that we'd obviously would still be reinvesting in certain areas, things like digital and some of this experience of the future. And so roughly, I'll say they're roughly a third each, although the structuring in corporate and areas of the world structures a little bit more than a third, the global business services is probably a little less than a third, and the refranchising is probably around a third. But all those numbers, that $500,000,000 is a net savings and so it incorporates the fact that we still will be investing in areas like digital and other areas to grow the business. We have time for one last question. It'll be Paddle 2. Great. Thank you. It's Paul Wustrich at Stifel. Just one more follow-up on your commitment to modernize. You mentioned, I think, half of the freestanding units in the U. S. Or your real estate portfolio. Any quantitative or qualitative numbers around that? How many stores does that mean? How much would it cost? How fast can you do it? And exactly what are the qualitative elements you're installing? Like what are you committing to today? Is that inclusive of some elements for concepts of the future? Or is it not more color the better? Thanks. Yes. So first let me give you some numbers I guess associated with it. When we talk about modernizing, we've been focusing on freestanding estate, which is about 12,000 of our 14,000 restaurants in the U. S. If we look at what's remaining that to get to about 80%, which is kind of what we think of is like getting the critical mass, it's in the roughly 3,500 ish additional restaurants that would need to be modernized. But one of the aspects as you rightly mentioned is, we need to determine what is that appropriate reinvestment related to Experience of the Future in the U. S. And so there are no specific definite definitive plans at this point as far as how or when that will occur. That will unfold as we get some more learnings related to some of the tests going on in the U. S. About experience of the future and other things we're looking at. I think Mike will touch on some of that in his remarks, Paul, so you'll get a chance to hear how the U. S. Team is thinking broadly about Experience of the Future. Okay, great. Thank you, Steve, Pete and Kevin. That concludes the strategic focus segment, and we'll let CP and Kevin take their seats. And I would now like to introduce Mike Andres, President of McDonald's U. S. Thank you and good afternoon. Thanks for this opportunity to share our perspective on the U. S. Business, our recent performance and the comprehensive strategy that we have in place for turning our business around. In particular, I'll talk about our critical areas of focus in the U. S, food, customer experience and value. For those who I haven't met, I started my career about 33 years ago as a restaurant manager, and my family is McDonald's in Northern California, and I've been in my current role in about for about a year. I'd like to begin by putting our recent performance in perspective. Understanding these results and the underlying consumer insights have been critical in the development of our current priorities. At the end of last year, the U. S. Business represented approximately 30% of McDonald's global revenue, over 40% of consolidated operating income and roughly 40% of the global McDonald's population. Our more than 14,000 restaurants in the United States are about 90% owned and operated by more than 3,100 franchisees. Our traditional freestanding restaurants achieved industry leaving average annual unit volumes of $2,500,000 and franchisee per restaurant cash flow of approximately $315,000 Year to date September 2015, comparable sales for the U. S. Business were down 1.2%, and our operating income was down 6% to contribute to the company's overall turnaround, and we are making progress. What's notable about our financial performance is the 3rd quarter. Our positive comparable sales of +0.9%, which marked the 1st positive comp sales quarter in 2 years in the U. S. And serves as a key proof point that our initiatives are starting to gain traction. While our guest counts remain challenged, our combined solutions plan, which I will share some elements of today, is designed to increase frequency from our loyal customers and win back our lapsed customers. To date, our U. S. Business top line performance has been influenced by the strong competition we faced in the QSR sandwich category, which reflected positive comparable sales year to date September 2015. While our relative performance of the category for most of the year has resulted in a negative comp gap, More recently, we've experienced a reversal of the decline with our first positive weekly comp gap against our traditional competitors in over 71 weeks. That was in September, and this trend has continued into October. We have a unique and powerful field organizational structure that when optimized gives us a significant competitive advantage. As you'll recall, a year ago, we made some changes that essentially flattened our organization. This raised the level of accountability for our 22 regions to sharpen their insights around their unique customer profile and diversity, competitive threats and macroeconomic challenges. This renewed sense of empowerment has unleashed one of our greatest strengths, which is the entrepreneurial instincts of our franchisees. While it is essential that we maximize the power of our scale and national advertising footprint, we are also encouraging our local markets and regions to help us innovate and create a pipeline of ideas for the future. Examples of this would be in Southern California, where a small group of restaurants are currently selling a breakfast bowl that will roll out across that region in Q1 of 2016. The Boston region offered a lobster roll, which incidentally had an advertised sales price of $7.99 for a limited time during the summer months this year, and Raleigh has launched an all new biscuit platform. Here in New York, we introduced mozzarella sticks, which will be widely offered across the country next year as a snack item to add to your order. While we know the vast majority of our growth will come from national initiatives, regional empowerment has given our local markets the power to plus up the national plan, drive incremental sales and profit and provide a pipeline of new ideas for the system. We have a powerful culture within McDonald's that has served us well throughout history. And we've been confronted as we've been confronted with the significant headwinds to our business, the foundational change in our way of doing business can be summed up as customer obsessed and insights driven. Customers have redefined quality, service and value. We can no longer define it for them. We are a restaurant company. We must and will win with our food. Our customers tell us that they want our food to taste great and they want to feel good about eating it. They want to know what's in their food, where it comes from and how it's made. While we are very proud of the quality of the food that we serve today, we know we can do better. We have a committed attitude around real and fresh, specifically around the ingredients and the evolution of the menu. We have demonstrated this commitment with the changes we have already signaled, including our announcement that we will not use chickens that have been treated with antibiotics that are important to human medicine by 2017. Our introduction of artisan grilled chicken in the spring, which is made with all white meat chicken and other simple ingredients that you might find in your pantries at home and our ongoing work to improve our core products, which includes the changes we made to our beef cooking and bun toasting procedures, which improve the taste and juiciness of our hamburgers. Our advertising will also celebrate our food and feature strong images reminding our customers why they love our food as we give them new reasons to feel good about eating it. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. This summer, we also launched our new buttermilk crispy chicken sandwich prepared with real buttermilk, and our customers love it. In fact, throughout our 3 weeks of national advertising beginning in late August through the 2nd week of September, performance of the new product exceeded the high end of our expectations. We followed that by the return of our classic Egg McMuffin recipe featuring a fresh cracked egg, butter in place of margarine, the original English muffin recipe, Canadian bacon and cheese. Again, we reminded our customers why they love the taste of our Egg McMuffin. And with the changes we made to the ingredients, it's better than ever. In the middle of this advertising flight, we made our announcement that we're moving to cage free eggs over the next decade. This continues the positive sequence of new news about our food, which is delivering on better taste at the same time helping people feel great about eating it. Our advertising has a new direction and orientation to celebrate our food. So let's look at our 2 recent food news events around buttermilk chicken and Egg McMuffin. For this commercial break, the meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial Sales for Egg McMuffin in September were up 21% compared to the ongoing period. Equally important is how we time this ahead of our all day breakfast launch. So those lapsed users who may be returning to McDonald's to fill their need for breakfast at lunch or dinner are getting the great Egg McMuffin taste that they remember and they will come back for more. As you heard from Steve, we have also made several important announcements regarding changes in how our food will be sourced. We will continue this type of work already exhibited throughout the year, which is committing to responsible sourcing, simpler ingredients and a committed attitude to give customers more of what they want and less of what they don't. In 2016, we will make further enhancements to other core products to ensure that we are meeting or exceeding customer expectations around quality. As you look back historically at successful turnarounds in the U. S. And around the globe, there are several consistent elements, one of which launching new consumer driven platforms. We expect that All Day Breakfast will be our next growth platform. If offering our classic breakfast products all day long was the number one request from our customers, why does it take so long for it to happen? Our determination to be able to say yes to this request suggests a fundamental shift in how we are evolving our culture to compete more effectively and aggressively in this rapidly changing environment. And again, it reflects a customer obsessed mindset. Perhaps the bigger story is our ability to move this idea from a test in one market in April to a national launch in October in over 14,000 restaurants. It showcased the power of our partnership with our owner operator leadership, who led the efforts to find the solutions to the operations challenge, including an ongoing effort to simplify the overall menu. It demonstrated the strength of our supplier partners who were able to manufacture and distribute the equipment needed in a compressed period of time as well as ensure that we would have an assured supply of safe and high quality eggs. This level of collaboration and communication on behalf of our customers was evident in that this initiative received a positive vote in over 98% of our co ops. That speed to market is new to the U. S. System and culture, but it will be the model for the future in the dynamic business environment which we do business. We've had a lot of fun with this announcement, starting with the tremendous social media buzz that followed the initial test market introduction in May to announce that we're taking the idea nationally in early September. And we created a remarkable imprint on the American social landscape. Within 3 hours of the announcement, all day breakfast was trending on Twitter and Facebook, and within 24 hours we had received over 120,000 mentions on Twitter. This is far more social engagement than we've generated with any other promotion this year. Finally, we used actual tweets to develop this tea spot ahead of the launch and built on this idea in one of our launch spots. 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After 4 full weeks of advertising during the month of October, and while we are still in the early stages of our platform launch, all day breakfast has continued to exceed our launch volume expectations. We're currently seeing more than 15% of food purchases outside the breakfast daypart that include an all day breakfast menu item. The lunch daypart is providing the largest impact to the all day breakfast with promising results also during dinner. Rest of the day average check is higher among those purchasing an all day breakfast entree. In addition to the positive financial results, all day breakfast has helped with McDonald's brand perceptions according to a recent YouGov survey, which indicated that our perception score surged 17 points since the beginning of August. The foundation of our turnaround framework is to run great restaurants, to enable our crew and managers to deliver a quality experience at the speed and convenience of McDonald's. We are committed to a systematic effort to simplify our operations procedures, make it easier for customers to order and effectively manage the size of the menu. I refer to the comprehensive efforts ahead of all day breakfast launch to simplify our menu and operations. And during our growth period of 2,003 to 2012 and in recent years, we've added a significant number of SKUs to our restaurants. Absent the proper disciplines to manage aggressively, we had introduced a level of complexity that has created challenges for our managers and crew to deliver our menu at the levels of service that meet our own expectations, much less our customers'. We've established more sophisticated disciplines around our menu management. One example of those disciplines is that each co op will have access to a tool that has their menu mix sorted by menu complexity, margin and consumer demand allowing quick read as to which menu items earned a place on the menu and which should be removed due to the fact that sales and margin performance of that product doesn't justify the added complexity. For example, ahead of all day breakfast launch, many markets have removed 1 or more of the McWraps, Bacon Clubhouse, Quarter Pounder Deluxe and or snack wraps. Last December, when I spoke to many of you, we had 16 extra value meals on our menu nationally. Today, we have 9. In July, we deployed our drive thru express menu boards. This move took our total price points from 130 to less than half of that, which of course simplifies the customer ordering process. We've also engaged a select group of our owner operator mid management to help review every procedure in our kitchens, including simplifying training and improving restaurant technology and systems to help eliminate unnecessary steps that don't produce any value to our customers. Furthermore, we will be deploying indoor digital menu boards in all U. S. Restaurants by Q4 of next year. And through our digital menu boards, we'll be able to automate the ways we promote our food to consumers inside of our restaurants. As a part of this deployment, we will install a robust content management system that will engage the customers with food show quality moving pictures, enhanced capabilities that will adjust the menu board based on time of day and product mix movement. It can monitor the temperature outside. It will know which products sell better at hotter or colder temperatures and will promote those products. It will be able to monitor the sales of limited time only to ensure that sales match inventory. And based on results in our Canadian market over the past 2 years, we expect these new digital menu boards and content management system generate higher average checks and incremental sales in our in restaurant transactions. Simplifying our menu and operations, making it easier for our guests to order and interact with the brand, these are foundational elements to running great restaurants. There is much work to do, but we are seeing progress. Our customer feedback system, which we refer to internally as the voice, as in the voice of the customer, now tracks approximately 10,000,000 customer touch points each year and reflects consistent improvement in customer feedback scores. We are seeing this across all key categories, feedback scores measured with most significant improvement seen as areas we have focused on, namely food quality, friendly and fast service and order accuracy. In short, our customers are telling us we're running better restaurants this year versus last. As I mentioned earlier, we are making meaningful important changes to our food. That is foundational. We are also working to evolve our concept so that is more in line with the consumers' expectations around the service experience that they have inside of our restaurants. The U. S. Joins our colleagues around the world defining and refining the experience of the future. The essence of this new experience is based on solving for our customers' needs, which will continue to change. For over 60 years, we have dictated the terms of our customer interaction. Today's consumer wants more control. They want more choice in how they order. They want to be able to personalize the food that they order. They want to know all about the food that they're eating. They expect functionality, but they also want the experience to be more relational, fun, engaging and relevant. Currently, we have about 130 restaurants that are presenting the experience of the future in the U. S. And advertised sales tests are scheduled to go live in 6 markets by the end of the year. Early results of our insights from our voice metrics indicates that Experience of the Future restaurants outperform national voice averages, all leading to improved brand perceptions. We will refine the Experience of the Future concept based on what we learn in participating restaurants and the in-depth customer research we are conducting in the test markets. We will continue to expand the deployment of Experience of the Future in additional markets and regions. As a part of this effort, we will continue to modernize our restaurants. Our interior, exterior and drive thrus will communicate that McDonald's has evolved to meet the needs of the customer. Our new restaurant development plan for this year and next speak to our renewed emphasis on restaurant reimaging, with gross restaurant openings of about 125 for 2015 and about 50 for 2016 and a net reduction of about 100 locations in each year. Another critical element to our turnaround is the understanding that in virtually every turnaround, it includes a strong value component. Affordability is an expectation of our customers. Roughly 25% of our customer visits are motivated by value and many of those customers have been tempted away from McDonald's by a more consistent value offering by our competition. Offering a consistent, predictable and compelling national value platform is a critical component to our combined solutions plan. As you recently heard Steve talk about during our Q3 earnings call, we are aligned with franchisees on how we are now aligning with them on how that will be executed and communicated. The new platform will not be tied to a singular price point, but it will enable our customers the opportunity to bundle their own meals to suit their desire, which they have indicated to us is very important to them. In addition, the regions will have flexibility to tailor their offerings to reflect local preferences. Our overall goal with our value strategy is to 1st and foremost offer items that our customers want to allow them to choose while still contributing to restaurant guest traffic and profitability. This growth strategy will be augmented by our digital platform, which allows us to move from transactional relationship with our customers' more purposeful relationship where we understand them on an individual basis. Think of this as mass personalization. Launching mobile offers via the McDonald's app, which is now live in more than 13,500 restaurants, is an important first step. It lays the foundation for our digital strategy. Since going live, the app has over 3,300,000 downloads and over 2,800,000 offer redemptions. Based on accounts created in initial rollout period in early August, we've seen 54% of new accounts redeeming at least once and 30% of those redeeming more than once. Offer redemptions, which are available via the mobile app in 95% of U. S. Restaurants are generating a higher average check. Excluding free food offers, average check from offer redemptions has been stronger than our overall U. S. Average customer check. Our digital strategy will enable us to enhance the service experience, capture additional demand and engage with our customers through innovative and personal ways. Through the app, we'll also be able to provide individual value conscious customers with 1 to 1 offers targeted specifically to them. So we are committed to these short- and long term priorities because we believe they will help us regain our leadership position in the eyes of our customers. We will build brand loyalty through a cutting edge customer employee experience through improved hospitality, innovative technology, simplified operations and passionate ambassadors, both our employees and our customers. And we will create new occasions for customers, particularly in the dining room. We also win with our food, and we will continue to have a committed attitude to make meaningful improvements in the quality of our core menu, ensuring that it's 1st and foremost that it tastes great. We will continue to evolve our menu and menu items to have more simple ingredients so that folks feel great about eating our food, and we will enable our customers to personalize their experience. I'm confident that we're being aggressive and taking the necessary actions to make McDonald's a modern progressive burger company. We're making the changes customers will notice and appreciate, and that will ultimately have them reward us with increased visits. Thank you. I'd now like to invite to the stage our Chief Field Officer, Karen King, who is in charge of our field team our Chief Financial Officer, Mike Stankey, who also is in charge of restaurant development and supply chain and our Senior Vice President of Customer Experience, Eric Hess, who has menu, customer insights and the experience of the future. Thank you. We could turn on the sound for paddle number 2. Let's see. Okay, now it's working. Keith Signer from UBS. I just want to talk about the price value challenge of this marketplace right now, especially given labor inflation? And I understand you're working on this with the franchisees at this time, but with the tremendously different cost structures. Right here, With these tremendously different cost structures from New York and San Francisco to Alabama and other markets like this, Is it out of the question to have a national value price point or platform? Is this going to be more just targeted offers? And when you think about the competitive sets, it's trying really hard to have national platforms. Is it possible to compete on a regionalized basis with those national offers? Thanks. Thanks, Keith. What we recognize is that probably the most powerful retail megaphone in the world is opt at is our national advertising. And quite frankly, in the last 2 or 3 years, we've kind of relinquished that advantage. I think clearly, our operators across the board recognize that we have to get back to a national platform. But you point out the challenge. The challenge is we have quite different cost structures in New York versus Indianapolis versus San Francisco. But having said that, we've got to the point where we understand that the design of this platform, yes, certain periods throughout the year where we will go national, but that will be have a lingering effect on the local be able to take that and tailor it to their local needs, their local cost structures, but also create a value locally, certainly comparable to their competitive set. And so that's where we have aligned with our operators today. We're going to find the solution as difficult as it may be and start to use our national advertising in a much more powerful way. Next question will be Peddle 1. Brian Bittner with Oppenheimer. Thank you. You talked about your comp trends turning positive against the industry starting in October, and it was a big negative gap all year long. But you talked about that happening a couple of weeks prior to the All Day Breakfast launch, which I think it's really important for us to understand maybe what really at the core drove that improvement versus the industry prior to the All Day Breakfast launch. Was it everything you were talking about getting ready for it all that advertising the new products? Just dive into that a little bit because that's a big reversal prior to All Day Breakfast. Thank you for the question. So we did start to see an uptick momentum in September and did time with one of our other breakfast product launches, that is the new recipe launch of the Egg McMuffin with the fresh butter, the new improved Canadian bacon and of course that was supported by heavy advertising. So that certainly had a halo and a benefit in September. I would just add that we feel that we've made a lot of progress in a number of different areas. Things I've talked about simplifying our operations, we've challenged the perceptions of our food. I think the industry suffers from certain perceptions. We've challenged them head on with some proof points of what we're doing around our food. We had a great menu event this summer that contributed to the change. We had our first national value offer, the $2.50 double cheeseburger and fries. While it wasn't a barn burner, what it did though was it aligned our system again on a national offer. And then a lot of our markets continue to perpetuate that into September. Like here in New York, they added 4 different items. So they had a district of the double cheeseburger, you had the 6 McNuggets and you had mixed snack wraps, etcetera. So they kind of as a springboard to what we've been done. So I think you've seen a lot of the things that we've been put into place over the last 6 months are starting to make impact on our sales. Next question will be paddle number 3. Thank you. Joe Buckley, B. A. Merrill Lynch. Two questions. The sales lift in the test markets when you first did all day breakfast, I think would describe as actually being strongest in the breakfast day part. Has that continued? You mentioned a pickup at lunch and other dayparts, but I was curious if the breakfast daypart was getting that lift? And then just to follow-up on the National Value Program question, Do you envision having national pricing or are you suggesting the pricing may vary depending on the cost of the different regions? Thanks, Joe. I would say that I think the exciting part about the test markets with all day breakfast was quite the contrary, that we were seeing the lunch and dayparts and snack dayparts perform better. And as you know, we've struggled with that. Breakfast has been our biggest sales increases we've seen. That's the biggest contributor to our sales. So what we're excited about with all day breakfast, and we saw this in the test, is in fact we were able to see movement in those other dayparts as well. And as far as the value is concerned, yes, we were looking to do a national price point. And again, especially as we kind of see the idea with the consumer, we think it's important that we have a consistent price point across the country, but we do think that ultimately the local markets will determine what will be their everyday price based on this particular platform, and then we would kind of pulse in on opnad price points throughout the year based on the time of year and the need to drive guest counts. Thank you. Next question will come from Paddle 2. Hi, Karen Holthouse from Goldman Sachs. Actually a follow-up to that last question. So is the idea that individual markets, the price would actually change throughout the year depending on whether it was being promoted nationally at the time? And given sort of the challenges of increasingly different cost structures, sort of have outside of the box options been discussed or is there a way to subsidize price points in certain markets with dollars from the ad fund or dollars from McDonald's corporate sort of understanding the power of that national price point you being consistent? So I think that the answer to that is we are learning about first of all, this is going to be a platform. As I mentioned in my remarks, it's not about a singular price point. The platform gives us flexibility. It gives the consumer the ability to bundle different items, which is very important to them. They told us that in all of our research. They don't want just this is what you get for this price. So we've got several test markets that are starting this month to learn and then also we'll learn as we go as we learn we're still in the process of aligning with our operators and getting that vote in for what it would look like for next year. But hopefully that will give us some information too as well. But if we design this right, it will allow us to give flexibility, but also allow us to pulse in on a national basis Thank you. Bob Derrington, Telsey Advisory. Mike, my question is around the brand McDonald's and essentially why do you think in your view the company has had less success, less traction with higher end products and principally more value convenience. Is there something about the brand that consumers are resistant to stepping up to an Angus Burger or is there some kind of resistance to a certain price level within the brand that you see as a challenge? I would I'll start and let Eric talk. I think that I think Steve hit upon this in terms of what the definition of value is or how the consumer is redefining value. It's really what you get for what you pay, not initially the price point. So I think by simply just talking about a price point or a premium product, it has to be, I think, supplemented by an improved experience in the restaurants. So all the things that we're talking about to experience the future takes our current what people perceive as a visit McDonald's and elevates it. So the investments we're making in our food, the investments we're making in the experience in our restaurants ultimately gives us more price elasticity to be able to meet the headwinds that we're going to see. We know we're going to see relative to the cost and also elevates us to a new place where the consumer expects us to be in terms of experience. And just to build on Mike's comments for a second, we know experience of the future is out there, but the way to get there and it's what we've been doing to date is really working on the core. So before we sell a $5 or $6 burger, we want to make sure everything that we're doing in our core is creating value for our customers. So things like the 22 Second Toast or the longer sear or the Egg McMuffin, that's the pathway to selling a better the best burger. So we've made more improvements in our core in the last year than we have in the previous 13 years. Okay. Thank you. Next question is going to be panel 4. Hi. Jeff Bernstein from Barclays. Just a question on the franchisees and the health of the franchisees. Obviously, with a 90% franchise system, that's really the crux of this story here. I know you mentioned earlier that the business is still in a delicate place and we've heard about the cash flow pressures, whether it's the softer sales or the labor inflation. So I'm just wondering how maybe the corporation is there to help. There was some mention of maybe helping to subside certain things, whether it's co investing. I'm curious what would be the top of the list that you potentially co invest on or maybe some rent relief if you're still going to be the owners of the real estate. So just wondering how you're potentially working together with the franchisees, if you're hearing from them there are any concerns on that front. And just as an aside, do you hear from them in terms of pricing? Are they maintaining kind of level headed as they look at their menu? Or are they doing certain times knee jerk reaction and maybe getting too aggressive on price with some of this inflation? I'll start and then I'll turn it over to Karen or Mike. First of all, I appreciate the question because I've spent I've been in front of about 700 franchisees over the last 3 weeks. And our franchisees are energized, They are focused. They are committed to winning. No question about it. And I have a unique perspective. My parents were McDonald's franchisees. My brother was a McDonald's franchisee. By definition and by nature, they are entrepreneurs, and the definition is they are fiercely independent people. And appropriately so, they're never satisfied. And I think that shows up in the results of us having the type of average volumes that we have and the cash flows that we have. But we have great alignment today with our operator leadership. This combined solutions plan is part of the elements that I talked about today. This was a product of us collaborating on the plan and we're aligned around and committed to executing it. Yes, I would just Jeff, it's a great question. I'd like to add that Mike talked about alignment and what I'm excited about is that we're aligned, owner operator company leadership that the best way to address the economic headwinds and cost pressures is by growing top line. That's going to create the best enduring profitability for both the operators and the company. We're also aligned on the need to modernize the other half of our portfolio. And so clearly, as we move forward that we talked a little bit about how we enable to get to market quickly with all day breakfast. We did help our operators and co invest to get there quickly. And certainly, the next big thing on the horizon is modernizing the rest of our portfolio. And we're working closely with them in the spirit of continuous improvement to look at our modernization program and to make sure that we're best equipped to get to that 80% level that Kevin talked about earlier. Next question is Paddle 1. Hi, Karen Short from Deutsche Bank. Actually just following on that, Can you give a sense of the timeline on when you'll make a decision on the reimaging? And then I guess maybe can you give an update on what you think the cost of the reimaging would be and maybe a little bit of details on what you would expect on sales lift and return? Those are all great questions. Let me caveat what I said with it's work in progress, company leadership, operator leadership working on how to move forward in an aggressive fashion. So it would be premature to share any of those that information while we're working through that with our leadership teams. Next question is from Paddle 3. Thank you. Jeff Farmer from Wells Fargo, just following up on an earlier question. If you found a bundled value offer that you believed would work, just how quickly do you guys think you could execute on that and actually bring it national? I'm curious if the all day breakfast rollout is a good proxy or perhaps that was something that was executed very quickly and is unique. So again, if you found something that resonated nationally, how quickly could we see it? Well, as I act in the future. So the expectation is we would act in that time frame quickly. So we're working with the operators right now on the timing and execution of that. Hope to have that the votes wrapped up here in the next 10 days or so, and then we'll be able to determine what the timing of that will be. But certainly, I don't want to signal the timing of our value plan nationally right now. Next question is from Paddle 2. Thanks. It's RJ Hodavy from Morningstar. I had a follow-up question on the rollout of All Day Breakfast and the speed to market. It's refreshing to hear a 6 month turnaround after going through a couple of years of either product delays or sometimes outright product cancellations. So the question is, what really changed? Is it something simple as better communication with the owner operators and the suppliers, particularly on the supplier side where in the past you'd run into pain points of getting enough supply for certain products? Or is there something more structural at play here? Yes. Thank you, Suraj. I think what's critical is continue to start to think project outward versus inward. We were thinking more about ourselves and the issues that confront us versus what does the customer want and how can we solve for that. And certainly, all day breakfast was the number one thing. And heretofore, we were just reticent to do that because of the complication to the back of the house, the challenges we've had. And I think there's just been a change in our operator's mindset is that they're going to do whatever it takes to satisfy the customer. And they took the lead with this. So they put together a task force. They determine how we're going to solve this from the operations complexity point of view. It was a massive undertaking in terms of the communication with all of our operators, webcast, going into our restaurants to test and to retest, 3 test markets, etcetera. Anyway, so it is, I think, just the change in the way we do business, also recognizing that Steve talked about the fact that we're big doesn't mean that we're going to be lumbering. We have to be more nimble, quicker to market. Does that mean that we might make some not totally successful launches? Of course. But we're willing it's more about not a question of taking risks, it's about managing risk in the future. And Mike, I would add that part of this task force was looking at how do we accommodate this in the kitchen. So the work that was done around simplification and we're referring to it as net simplification. So although we had 7 new products added to the menu as part of all day breakfast, the markets also chose to remove items, 7 to 10 items that were low moving, low margin items. So between the operator leadership group sitting together, actually is led by an owner operator, went to market advertised sales tests in April, April 20 in San Diego to our national launch October 6. So a good representation of a speed to market that we intend to continue. Next question is from Pat O'Hoyn. Thank you. Matt Frisco, Guggenheim. I guess looking at the momentum that you detailed starting back in September, is there any concern that you might be losing the lack of a better term desperation by the franchisees that might now be less willing to embrace a value menu because they're already seeing that gap turn and reverse. I guess I specifically was looking at restaurant news talking about the vote at the end of October for Pick 2. I wondered if 2 for PIK2, if that was voted down? Or is that still on the table? Well, I read that article too. I think that I think what there's not a desperation piece, but there are there's a realization that we have got this is a market share business, and we've got to get our traffic back up. And so I think that's the impetus for value more so than anything else. And so it's aside from what we might be seeing with all day breakfast or the other issues that are giving us momentum, it's all about we want to get back to where we were in driving guest counts. In that 10 year period where we were rolling and going, we and the operators know that. They also know that simply raising prices and cutting costs is not a sustainable strategy. We have to get more people into our restaurants more often. And so in our I think and they're aligned around finding out what the solution would be. Next question is from Paddle 3. Hi. Sarah Senatore again. Recognizing that you're 90% franchised in the U. S, I did want to talk about profitability just in your company operated stores, but also, profitability just in your company operated stores, but also, franchisees. It looks based on the EBITDA per store that maybe they haven't seen quite as much pressure as you have in your company operated. But I guess, broadly speaking, you've invested a lot into human capital. Can you just give me a sense of whether you think the previous margins that were sustained at roughly 20 percent restaurant margins for a very long time is the right number? And how do you get back to that? And I guess maybe on the franchisees, am I right that they haven't seen quite as much pressure from the imperative to invest in labor that you have in your company stores? Sarah, I'll take that question. It's a good question. So first, let me just reiterate the Q3, Makapo. Clearly, in the Q2, we made the decision to invest in our people via starting wages, via paid time off. We knew at that time, it was going to have the type of impact that we saw in the quarter along with all of the state minimum wage increases that were occurring as well. We also knew when we did that, that we were making an investment, engaging better with our employees to ultimately engage better with our customers, right? And it was going to be something that built over the long term, and we still expect to see that happen. Without getting into exactly what level of margin that would result in. From our operator point, quite honestly, there's we have 3,000 individual business owners across the U. S. That have been making employment decisions on their own and continue to and many of them were already at a higher level than us And whether they followed what we did or not, they may have already had those higher labor costs baked into their EBITDA or their margins. So it varies by operator would be the case. Clearly, either with the mixture of them already being there, not moving in the same direction or some of them possibly moving in the same direction, overall, we didn't see that same level of impact on our owner operator cash flow or margin that we saw in Macopko in the 3rd cast audience, we'll be taking a short break from now until about 3:35 p. M. Eastern Time. We'll resume the second part of the meeting promptly at 3:35. For those in the room, we invite you to make your way to the lobby for a brief break and Please welcome Doug Gore. Thank you, Chris, and thanks to all of you for joining us today. Just a few words first for those of you who don't know me. I've been with McDonald's for more than 35 years, most recently in the last 4 years serving as President of McDonald's Europe, responsible for about 8,000 restaurants in 39 countries. Prior to that, I was responsible for our worldwide supply chain and development and also held a number of leadership positions throughout the U. S. Business. I really appreciate the opportunity to provide you with an update on McDonald's business in our International Lead Market segment, which is made up of Australia, Canada, France, Germany, U. K. And the related markets. I'm joined today by Paul Pomeroy, our CEO of McDonald's U. K. And Andrew Gregory, CEO of McDonald's Australia. I'm really excited to be leading this segment of our business. Collectively, these markets are very significant to McDonald's system. We have over 6,700 restaurants or 18% of our worldwide system. And as of year end, we contributed approximately 30% to system revenues and 40% to consolidated operating income. We're about an 80% franchised marketplace. These are some of the largest, best resourced and most established markets in the system, where McDonald's has operated for more than 40 years. We're operating from a position of strength with a largely re imaged asset base, significant McCafe presence across most markets and high average unit volumes and franchisee cash flows. In fact, our trailing 12 franchisee cash flows in the majority of our largest markets are at or near record high levels. We operate in stable developed economies and in most cases face similar competitive dynamics. We have a track record of innovation and sustained investment, particularly around menu, running great restaurants and creating brand excitement, providing more ways and reasons for customers to choose McDonald's. And we're helping to define what it means to be a modern Progressive Burger Company over the long term, playing a leading role in the turnaround of the system globally. Now there's much we can still learn from each other within the segment that will help define our thinking and priorities over the long term. And with no layers in the segment, I can directly engage with market leadership to leverage resources better and scale the best fact, current forecasts for IEO growth in 2016 are positive across 4 of the 5 largest markets ranging from plus 0.5% in Germany to 2.6% in Australia. We're also expanding our presence through opening new restaurants. In 2015, we'll have opened roughly 150 restaurants with a similar number planned for 20 16, and we see continued potential for new restaurant openings in the future. Now I know you've all seen our results, so let me comment just briefly on our recent financial performance. The segment as a whole has strong momentum. Year to date September 2015, our comp sales were up 3.2% with 4 of the 5 largest markets delivering positive comparable sales. France was the exception due to the macroeconomic headwinds that exist there. And from a market share standpoint, 4 out of the 5 markets are maintaining or growing share. Operating income has also increased, up 3.4% for the segment on a year to date basis in constant currencies. And as we look across our largest markets as of year end 2014, you can see that France contributes most of the segment's operating income given its large average unit volumes. In fact, it's the largest average volume across our 9 markets and the 9 biggest markets in the system, along with very strong margins. U. K. And Australia committed contribute about 20% to our segment's operating income in Germany and Canada about 10% each. Let me now turn to our strategic priorities. Above all, we're relentlessly focused on our customers using superior insights to better understand their needs and expectations today as well as in anticipating and responding to their changing needs and expectations in the future. So let me talk a little bit about our food. Our food work and the work underway to unlock potential within our menu is ongoing. And let me start to talk to you a little bit about quality work. Consumers' definition of food and food quality is changing. They are more interested than ever about what's in their food, where it comes from and how it's prepared. The steps we're taking around menu are focused on addressing those questions and ultimately improving quality perceptions. But quality starts with our core and ensuring we serve all our food, including our core, at its best each and every time our customers visit. As a first step, we're continuing to modernize our cooking and service platforms to allow us to freshly prepare menu items specific to each customer order so the customers know their food will always be hot and taste great. We're also focusing on new recipes and quality ingredients. For example, we're enhancing our menu in the U. K. With the introduction of new taste and ingredients, such as the Bacon Clubhouse Burger, which originated in the U. S. We're working to address changing customer demands for more premium products with the launch of the Big Flavor Wraps last month and the testing currently underway on a new signature beef range. In addition, we're focused on innovating and creating even more reasons for customers to choose McDonald's. In France, IEO customers order salads almost as often as they order burgers, as reflected in the salad take rate of 10% compared to 13% for burgers in the industry. We're testing an innovative salad concept where customers can see their own salad prepared in front of them with delicious ingredients and the ability to customize the order to their taste. Initial customer response has been positive with 89% saying they will purchase a salad again on a future visit. We'll have this platform in place in over 100 French restaurants by year end this year, and we plan to deploy more as we go into 2016. Also want to highlight the ways in which we're elevating the overall experience for our customers starting with service. Our customers are increasingly expecting to be recognized and treated as individuals, which includes the ability for much greater customization of what they buy and how they buy it. The enhancements we're making to modernize our cooking and service platforms will give us the flexibility to customize sandwiches to suit our guests' individual tastes and preferences without creating operational challenge. We're also enhancing the ordering process. Customers have traditionally had limited choice on how they order, pay and receive their food at McDonald's either at the front counter or in the drive thru. We're now leveraging technology including kiosks, web and mobile. This enhances experience for our customers by giving them more flexibility as to how they order, pay and are served. Now the benefits of this technology extend well beyond the flexibility it offers. When a customer orders by kiosk, they're able to browse and take their time, resulting in higher average check, as you heard from Mike. With kiosk, we also have the ability to go further, offering customers the choice of collecting the order from the counter or choosing table service that allows them to sit down and have the order brought to them. Related to all this is increasing consumer expectations around personalization, very much on the same theme. Our service is generally fast, but it is perceived by some as being very functional rather than personalized. That is changing and our approach to service is increasingly about hospitality. By leveraging technology to handle more orders, we need fewer staff behind the front counter, but this is not intended to reduce staff overall. The staff we do have will be more customer facing, engaging much more with customers throughout the restaurant visit, not just at the time of ordering, but to understand our customers' needs and assist them throughout the McDonald's experience. It's when all these elements come together, enhancing the quality of our menu, providing choice and variety with food that's served hot and fresh every time, offering enhanced customization, but without compromising operational standards, with service platforms that are fast and help us personalize and step up our hospitality culture. That's when customers really notice the difference. And that's how we're working towards McDonald's Experience of the Future in our markets. All of our markets are developing their restaurant Experience of the Future framework and are at different stages of the process. France has been leading the field with a holistic approach called full restaurant experience. We have kiosks in over 90% of our French restaurants and will operate table service in almost 900 by the end of the year. Web and mobile ordering has been in place there for 2 years and we're testing curbside pickup as an additional method of delivery. So let's take a look. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. The meeting will resume after this commercial break. 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We expect to have over 130 full restaurant experience conversions complete in France by year end this year and accelerate into 2016 and beyond. Another example in Australia, we've taken the lead from a menu customization standpoint with Create Your Taste, now rolled out across the entire market. This premium dining experience allows customers to build their own burgers and with gourmet ingredients ordered via kiosk. So far it's proving really popular with customers and we're extending the platform by adding chicken and salad offerings. Now in Canada, they recently announced Vision 2017 with a goal of creating a deeper, more meaningful connection with customers. This includes a focus on food quality through clean labels and customization, people and hospitality, the simplification of restaurant processes as well as the customer experience, including modernized restaurants, stress free order and collection points and digital solutions for payment and engagement. And in the U. K. And Germany, they are both deploying their versions of the experience of the future. By the end of this year, the U. K. Will have 300 restaurants deployed, and Germany has a number of concept restaurants in place today and has plans to deploy more broadly in the coming year. Now as we evolve to meeting the changing consumer needs and expectations, we must continue to excel at those areas that have always been important for McDonald's. One of these areas, as we talked earlier, is about providing outstanding value to our customers. France has done some great work here with the introduction of value offers at new price points to close the gap that existed relative to competitive offerings. For example, earlier this year, we introduced McFirst, a 3 item meal combination for under €5 More recently, we extended our entry level value platform, Petit Plaisir, across categories as well as dayparts and including a new petite bagel and new pastries. In Canada, we're extending the McCafe brand more robustly into food as we tap into the $1,100,000,000 Canadian baked goods category. The new bakery line features pastries baked fresh daily in our restaurants with most ingredients sourced from local Canadian suppliers. Customers will be able to enjoy these new bakery products paired with their favorite specialty coffee every day as part of a compelling everyday platform. Now while we enhance the restaurant experience for our customers and continue to provide outstanding value, we're also engaging with our customers on a more emotional level, continuing to shape and build our brand for the long term. We have a rich history across our markets of solid investment in the brand, and this work will go on. This crosses a range of areas, including food, sustainability and our role as a responsible employer in giving back to our local communities. Example, in Canada, this includes a focus on local sourcing with our new advertising campaign around not without Canadian Farmers. It also includes a pilot project to source verified sustainable beef, applying the global principles and criteria ratified by the Global Roundtable for sustainable beef to Canadian production. The U. K. Is undertaking a program called Good to Know, giving even greater transparency around issues that are important to our customers, including our food sourcing and production. And Germany has recently made a major public contribution to the handling of the European refugee crisis, providing online language classes to assist with refugee integration into society. So as you can see, the International Lead Market segment is committed to enhancing our system understanding around customers' changing expectations and adapting our approach to evolve with our customers as we look to the future. We recognize the critical role we play in contributing to the global turnaround, and I'm confident that the plans we have in place will further solidify our strong foundation, while positioning us to grow our profitability and build our brand over the long term. I thank you. And with that, we'll take questions shortly. But first, I will bring up Dave Hoffman to go through our high growth markets. Dave? Thank you. Okay. Good afternoon, everyone. It's a pleasure to be here with you today. And also by way of introduction, I've been with McDonald's for more than 20 years. I came up through the U. S, held a number of leadership roles, and for the past 9 years, I've worked in our Asia Pacific region. I most recently served as President of the former Asia Pacific, Middle East and Africa Business Unit, and now I'm proud to lead our High Growth segment and discuss our plans with you today. The segment is made up of 8 key markets across Asia and Europe. In Asia, we have China, Korea and related markets, including Hong Kong, while our European markets include Russia, Poland, Italy, Spain, the Netherlands and Switzerland. Altob told the segment represents just over 5,000 restaurants or 14% of total system restaurants with China and Russia accounting for over 50% of the segment's total locations. Now as of Twelvethirty Onetwenty fourteen, this segment represented about 25% of global particularly in China and Russia. As you know, from our year to date September 2015 results, we've started to recover. 3rd quarter comparable sales for High Growth were up 8.9%, bringing the segment's year to date comp sales performance to 1.4%. Year to date operating income has also grown this year, up 1.5% for the segment in constant currencies. Putting our performance drivers into perspective, the high growth European markets account for nearly 90% of the segment's franchise revenue, while China and Russia account for more than half of the segment's company operated sales. Our goal is to continue driving top line sales across all restaurants to fuel the segment's overall contribution to consolidated results. And over the next few minutes, I'll lay out our plans and how we're working to do it. As the name of our segment indicates, we're focused on seizing the significant potential in our markets and expanding the brand. All our market share all our market share is similar landscape of underpenetrated growth. And by bringing these like countries together, we're looking to learn faster, share ideas more quickly and make a bigger impact for our customers. We've been a segment now for 4 months, and our level of energy and engagement has been tremendous. We've got a clear identity and purpose, and it's fueling great collaboration and creativity, and a real commitment to pushing forward and taking the brand farther. We see ourselves as an agile, nimble segment, ready to seize the future for McDonald's in our markets. Our overall mantra and our number one competitive advantage is first to market. Our key priorities for this segment are driving new store development, extending our refranchising and boosting operating income growth today as we also build the McDonald's of the future by modernizing and transforming the customer experience. Now in the area of growth, we are on pace to open over 400 restaurants this year with 400 to 500 total openings planned for 2016, primarily in China, with a strong emphasis on drive thrus. At this pace, the high growth segment represents about onetwo of the systems global openings for next year. This is an area where our new segment structure enables us to share knowledge and expertise more quickly. China is a system leader in development strategies with lower cost building plans and real estate optimization. And we'll share these strategies across our markets so that we're growing in the most effective cost effective manner. On refranchising, we are eyeing a meaningful number of divestments to enhance greater financial value and put more restaurants in the hands of our outstanding franchisees. In the area of operating income growth, we're committed to improving the business and our financial performance by running great restaurants and elevating every aspect of the customer experience. We're moving forward on creating a true customer experience of the future for our guests, and we're seeing some encouraging results. But first and foremost, we have to drive the business today and do our part to continue the McDonald's turnaround momentum. We're moving in the right direction, but we know there's still much work ahead to achieve sustainable and predictable revenue and income growth. So in all our markets, we're focused on delivering truly customer centric plans that differentiate us in the marketplace. Plans that focus on running great restaurants by elevating our foundation of quality, service and cleanliness creating customer excitement through menu, promotions and value a digital strategy with specific mobile solutions and actions to drive brand trust from sustainability to food quality to our great people. With that, I want to take a closer look at our 2 most prominent high growth markets, Russia and China, which together represent over 50% of our segment revenues. Both markets share a similar narrative right now, recovery to resurgence. Each country has managed through a major challenge to the business, including recent political turmoil in Russia and a significant supplier issue last year in China. Both markets have rebounded and are driving growth. I'll start with Russia, where the resurgence is not quite as pronounced as in China. It's still a difficult economy in Russia with declining consumer purchasing power. However, that said, the market is regaining momentum, growing its IEO share and sales performance in 2015 with year to date September comparable sales at 0.5% and 3rd quarter comparable sales of 7.9%. Russia's plan for continued growth includes building on a strong food and employment trust campaign that is resonating with consumers, driving burger leadership by strengthening core and launching new platforms such as Angus, and a focus on strategic pricing, which is vital amid the market's hyperinflationary environment. In addition, Russia is moving assertively on its version of Experience of the Future, expanding on Made for You, our kitchen production platform, upgrading McCafe and developing mobile ordering. Regarding development, Russia plans to open more than 60 restaurants in 20 16 off the current base of roughly 520 restaurants. And over the next 3 years, we intend to evolve Russia from nearly 100% company operated to approximately 75% company operated. Okay. Now let's turn to China, which remains the major consumer growth story of our time. While China has experienced some economic turmoil of late, its GDP growth rate still outpaces most markets. In addition, China continues to grow in wealth and consumption power with 18% of the world's population and a middle class that is nearly 10x larger than it was a decade ago. We remain keenly focused on China and getting back to driving sustainable growth. We've made a strong recovery from the China supplier impact, and I want to commend our outstanding China team, employees, suppliers and franchisees. We put a huge emphasis on rebuilding trust and driving value and it helped us reconnect with our customers. In 2015, we strengthened our brand health with all of our brand attributes higher than pre crisis levels, including company I trust and quality ingredient scores, and we returned to comparable sales growth this July and have continued to regain lost sales with year to date September comp sales of 5.2% and 3rd quarter comp sales of 26.8%. Now that we've regained momentum, our strategic plans for growth can be summed up as bigger, better, stronger. In terms of bigger, we'll continue driving China's development potential with the plan to open more than 2 50 restaurants in 2016. As part of this effort, we're putting a greater focus on penetrating lower tier cities, Tier 3 and 4 cities that have population sizes of 5,000,000 and below. These cities present a long term opportunity to continue extending our brand and connecting with the country's growing urban population. And when it comes to better, we're committed to improving our margins by enhancing our emphasis on quality store openings, lower cost model and productivity improvements, franchising and of course, compelling value in menu pricing. On the consumer side, we intend to keep innovating and elevating the customer experience, delivering differentiated value and menu offers with a focus on premium burgers, breakfast and snacking and more choices for children and families becoming more convenient through greater integration with 3rd party delivery platforms and launching our global mobile app in 2016 as we make a bold entry into mass personalization. And our goal in the market is to reach 10,000,000 users in year 1. And in the area of stronger, China is expected to be one of the system's most significant contributors to the company's global refranchising plans over the long term. Overall, we remain very bullish on China and the plans we have in place to continue expanding the brand in this critically important high growth market. But what has us excited across the entire segment is how we're focusing on the present while also seizing the future. And as I discussed upfront, the value we bring to the system is the speed with which our markets can innovate and stretch the brand. We also plan to continue to modernize the McDonald's experience for our customers. We drove that point home this summer as a number of our markets began rolling out our experience of the future concept, including our customized burger offerings, self order kiosks, hosts and hostesses, table service and a variety of digital enhancements. It's a holistic experience that delivers the McDonald's people love in a whole new way, and the early results are encouraging. China launched the experience in several restaurants in Shanghai and saw an immediate positive impact on brand perceptions. They plan to bring the Experience of the Future to a quarter of their top tier restaurants by the end of 2016. Hong Kong opened its first Experience of the Future restaurants to drive sales and brand perceptions. Korea is also incorporating the Experience of the Future into some of their restaurants they launched in August and plan to have it in 135 restaurants by the end of 2016, which represents about 35% of their restaurants. And in September, Poland began testing the experience as well, so we're bringing these elements of the new customer experience to our high growth European markets as well. This is all an example of our first to market mentality and how we intend to be fast innovators for the system and help McDonald's move forward more quickly. We're excited about our new segment and our dual focus on winning the President and seizing the future. We're committed to the turnaround and growing our sales and operating income by meeting the needs of our customers in better ways. We will deliver new growth for the system, while modernizing the brand and the entire experience we deliver. And finally, we are keenly focused on the significant opportunities that exist to capitalize on the entrepreneurial spirit and drive of our talented franchisees within the segment as we pursue our global refranchising targets over the next few years. Thank you again. I'll be back up here for question and answer after I turn it over to Ian. Thank you. Good afternoon, everyone. It's a pleasure for me to be here with you today. To briefly introduce myself, I have been with McDonald's for more than 20 years, serving in functional leadership roles and running markets mainly in Canada and Eastern Europe. My last position was the CFO of McDonald's Asia Pacific, Middle East and Africa. Today I'm very proud to be leading the foundational markets. I would like to start by providing some context for the foundational markets business unit. We are the largest and most diverse geographical segment, spanning over 80 markets and over 10,000 restaurants across parts of Asia, Europe, Middle East and Africa, and Latin America, and containing most of our DL markets globally. The foundational markets are home to about 60% of the world's population and represent about 1 third of global GDP growth. Clearly, there is incredible future potential. As of December 31, 2014 we have 28% of system wide restaurants and generate more than 10% of worldwide revenues and global operating income. Our contribution to system wide sales is actually higher at about 20%, due primarily to our ownership structure in Japan. As an affiliated market, sales from all of our Japanese restaurants are included in our system wide sales, but our operating income only reflects the royalties we receive based on a percentage of sales and our share of the market's net results. We also contribute significantly to global restaurant openings. We expect to open over 3 50 restaurants in 2015, representing about 35% of global restaurant openings, and we plan to open another 300 restaurants in 2016. With 90% of our restaurants franchise today, our segment is characterized by a strong entrepreneurial spirit. At the same time, we are fast followers of system innovation, quick to adopt, adapt and scale ideas in locally relevant ways, driven by our incredible franchise partners. Many of our markets have developing economies and so there is significant growth opportunity in core platforms such as drive thru, breakfast, McDelivery and menu. Year to date September, comparable sales for the foundational segment were down 0.9% driven by Japan. Japan. Outside of Japan, you can see the good momentum we have across all other regions, which each delivered positive comparable sales performance. Financial results in Japan reflect the opportunities that exist to improve business performance. Though recent declines have slowed due to the benefit from comparison to the 2014 China supplier issue and the results of our customer recovery efforts. This is reflected in 3rd quarter comparable sales of minus 4%. As a perspective, Japan represents about 20% of the segment system wide sales, but only about 5% of operating income based on year end 2014 results. I'll talk more specifically about Japan shortly. As a segment, we are working hard to drive better results and I am confident that every foundational market will contribute to the global turnaround plan today while working towards unleashing growth opportunities for tomorrow. I want to share with you a few of my key priorities for the foundational markets. First, execution against the turnaround plan and the key strategic initiatives in each market. At the core, this is about ensuring every market has customer centric plans. These plans will be grounded in the critical elements of our business that will differentiate us, which broadly speaking include customer experience and our food. On customer experience, we have a renewed commitment to the fundamentals of quality, service and cleanliness, and we will run great restaurants in every market by focusing on impactful customer facing change. In addition, we continue to enhance convenience including drive thru and mix delivery even in our more established markets. And we are listening to our customers even more. With new online customer feedback systems in a number of our markets, for example in Japan we received more than 1,000,000 customer comments in the last 6 months. And in Brazil, we receive about 55,000 customer comments per month in their system, which is based on the voice system in the U. S. This provides us with better and more timely information directly from our customers to improve the experience. On food, we are working to inject menu excitement with locally relevant tastes such as the Micarabia Flatbread in the Middle East and the Eby Burger in Japan. We are also focused on growing our core products where significant opportunity still exists, while ensuring that we have strong everyday value in place across the menu. And we are continuing to increase our transparency to create positive conversations around our food quality. For example, building on the success of similar programs in the UK, Canada, Australia and the U. S, we adopted the idea of Our Food Your Questions platform. Our 7 Gulf markets in the Middle East now receive over 100,000 unique visits to their website each month, providing us with great opportunity to engage with our customers on the quality of our food. The second priority is accelerating Japan's turnaround. Japan's performance has not been meeting expectations. Much of this can be explained by the significant setbacks from 2 major food incidents in the last 16 months. However, the brand was also losing relevance prior to these incidents and becoming more functional, driven by low price versus loyalty or a strong consumer connection. The Japanese team is making concerted efforts to win back lost customers and reengage with all customers by executing compelling strategies that center on value, menu, restaurant experience and brand engagement. Value is evolving from a reliance on 100 yen price points and daypart offers to consistent and predictable everyday low prices punctuated with compelling and fun promotions. Our menu will accommodate the appetite in Japan for variety and rotating new news, while more effectively engaging customers with the unique taste and the great quality of our core menu items. We're working to significantly improve the restaurant experience, both physically through accelerating the remodeling of our restaurants with a goal of having 90% of our restaurants modernized by the end of 2018 and also through a reenergized customer experience with a specific focus on hospitality and cleanliness. As for brand engagement, we're reconnecting with customers through compelling McDonald's brand stories after an 8 year absence. Next, the leadership and management structure of our Japan business has been strengthened. The team has added experienced new leaders in key positions and the market has reorganized into a regional structure to move field staff closer to customers and franchise partners. I am confident that the Japanese team is focused on the right initiatives to turn the business around, but turnarounds by nature are not linear. So we expect results will remain choppy in the near term. Moving on, another critical priority is delivering on our refranchising plans. Franchising is intrinsically connected with the foundational markets. Today approximately 90% of our restaurants are franchised. Currently, 66 of our markets or about 80% are developmentally licensed, and most of the remainder are conventionally franchised. We have sizable refranchising opportunities ahead of us, including the divestment of some markets that we currently own and operate. As we execute upon our plans, we are proud of the contribution we will make toward the global refranchising target. The refranchising process is already well underway. Excluding the Latin America transaction, Taiwan will be the largest single market that we have converted to a DL structure and it is expected to be completed over the next several months. And while pursuing opportunities in new markets isn't a significant growth plan for us, we are excited about the opening of our first restaurant in Kazakhstan in 2016. The market will be operated under a developmental license arrangement with Kairat Bornbayev, an accomplished Kazakh businessman who is also our DL partner in Belarus. And my final priority is to continue to involve the brand experience as we work towards the restaurant experience of the future. Experience of the future is not a one size fits all. Guided by local relevance, we will modernize our restaurants to elevate the customer experience with mobile ordering, kiosks, digital menu boards, menu extensions and more. And each market will execute their plans against the unique taste and flavor preferences of their local customers. Singapore, Austria, Portugal and the Middle East are some of the markets with exciting Experience of the Future plans already in the pipeline. In closing, I want to underscore our segment's relentless focus on the customer and on executing initiatives that will truly differentiate the McDonald's experience in our markets. Leveraging the passion, agility and entrepreneurial spirit of our DL partners and franchisees, we will reinforce the fundamentals of running great restaurants, strengthen our menu offerings and implement our roadmaps towards the experience of the future in each market to deliver on the expectations of our customers. I am confident that the foundational markets will contribute meaningfully today to the global turnaround and increasingly become a more significant contributor to the future growth of our system. And now I'd like to invite Doug and Dave back up along with Chris who will moderate our Q and A. Thank you. Thank you, Doug, Dave and Ian. We will now open it up for Q and A. Looks like panel number 2 has somebody in the queue. Thanks. It's John Glass. Could you talk about as you've changed the structure in the business to these lead and development the lead in the growth high growth markets, how has it changed at the country level? Has the infrastructure stayed the same? You just collapsed the structure over it? Or have you been able to lean out country specific structures in order to save some costs. Can you talk a little bit more about that risk? Doug, I think you've mentioned the reporting structure is much leaner. So can you talk about how many layers you used to have versus what you have today between you and the market, for example? I'll start, John. Thanks for the question. And I think Dave and I having both run Area of the World segments in the old structure, I would tell you, 1st off, from an opportunity for us as leaders to be directly engaged has changed in a significant way. So from our side, the engagement with the country has changed radically because it's much more direct engagement versus being engaged through teams of people. And so I would say the flip side on the country's perspective is that their engagement, 1, is more direct with segment leadership And number 2, the access has changed to where rather than working through a stream of people in a layered organization, they actually have the opportunity to engage across the segment now with folks that have the segment now with folks that have similar issues, similar opportunities, similar needs to them. And I would say that would be probably the biggest change from the country standpoint is now they're engaging not with a layered organization, but actually engaging with a small senior leadership group, but also having the opportunity to engage across the segment with markets of similar issues, similar types, similar needs. Dave? I'd just add quality engagement, it's a smaller portfolio. Quality engagement is deeper. We've tried to avoid a lot of disruptions within the markets, so you're not going to see a lot of changes yet, but they're all evolving the org structures within the markets. We've de layered the organization. I see us making decisions faster, especially as we went through the capital allocation and planning process recently. And I think as Doug mentioned, what's in having been in Asia for a majority of my career, I'm seeing ideas jump continents much faster than what I've seen before. So especially going through the planning process right now. So early signs are extremely encouraging. We feel like we're a lot more nimble and making decisions at a faster pace than ever before. Next question is going to come from Paddle 1. Thanks. Brian Bittner from Oppenheimer. Question about China. It looks like about 7% of McDonald's overall sales for the whole company are from China, but less than 1% of the profits, which I guess implies that the profitability there is extremely low. Why is that exactly? And what can be done to potentially improve that? And that's question 1. And 2, which is about Japan, you talk about really wanting to turn that business around. What does that imply for McDonald's overall profits? How does the agreements there work? And if you were to turn Japan around, how would that help McDonald's earnings? Let me start with China. In your handout, I think it represents 4% of the segment. That's sort of artificially driven down from the Housie incident. If you back half to a clean year, that would be over 20% of the segment's performance. So again, last year was related to the food crisis. We do have an opportunity in margins, and I would say we've invested we've made conscious decisions to invest in breakfast to drive that important daypart, so we're not getting quite the GP that we that other markets would get out of breakfast, but it's one of the higher breakfast percent across Northern Asia. As you know, drive thru is an important part of our portfolio. Again, conscious decision to invest in drive thrus. We think that's the critical long term play for us. That has a longer gestation period than other aspects of the portfolio. And then supply chain opportunities will be a bit more nimble. As we've gone through this review of our supply chain, we think we can get to a better balance between global and local sourcing in China as well. And then finally, when we started really ramping up in China, it was about reclaiming our strength and leadership in Tier 1 cities. As we move into Tier 3 and Tier 4 cities going forward with our more cost effective model, you're going to see greater gains and margin improvements through better occupancy, better labor rates and a better building model going forward. So at the end of the day, it's still about top line. Driving top line is mission critical for us, but there's opportunity. But again, we feel confident about the future in terms of how we can close that gap on margins. Then on Japan, as I said in my comments, is an affiliated entity. So we have a share in interest just under 50%. So our revenue from Japan really comes from 2 sources. We have a royalty rate and then obviously we have a share of the bottom line. And obviously, as we've talked about a lot today, the operational turnaround like in Japan is really focused on growing guest counts and sales. And so obviously, when we do that, we're going to have a benefit in both of those areas from that. Next question is from Paddle 3. Hi, it's Sarah Sinator again. I have also two questions. The first for Dave and then for Doug. Just Dave, on China, sort of follow-up, you mentioned growing now more in the lower tier cities. But maybe you could step back a little bit. I think you actually closed stores this past year, some stores in China, this idea of maybe reaccelerating growth. What kind of stores did you close that maybe now you'll have learned from in our opening? And I guess the second question second part of that is the 3 Tier 3 through 4 cities are where we're seeing some of the weakest macro data, just because of the nature of the sort of slowdown. Is that are they still though a significant opportunity? Or does that give you some pause about where you go next? And then I'll have a question for Yes. The narrative has always been how do you get to the Tier 3 and Tier 4 cities in the past because of the strength of manufacturing. As all of you know, manufacturing has taken a hit. Service sector is doing well, which performs better in the Tier 1 market. So long term exposure to Tier 3 and Tier 4, reduced volumes are more than made up for enhanced returns and Tier III and IV Cities and what we're doing there. So we like that even with the current headwinds around manufacturing. And then in terms of what we've learned, the restaurants that we closed in Q1, a bit of cleanup. These were ones that we didn't have any intention of investing in for the future. They weren't positioned right. Some of the restaurants that we opened in the past and it was taking advantage of cleaning up a number of our issues rapidly in Q1 was the result of that. So we've slowed down some of the pace of our growth from where we were before, and we feel good the pace of openings that we are today, about 250 next year. And from a high growth standpoint, we'll be about half of global openings, and we feel that's a reasonable run rate for us in the foreseeable future. And then just a check on the lead markets, which recognizing that in part they are in that category because they are so strong. Is there any kind of uniform characterization? I mean, just how impressive the performance is across the virtually across the board, Could you have substantially higher market share in those markets versus other markets where maybe you haven't seen as consistent performance. Is there something that you could point to, to characterize why you've had such strong performance in some of those markets, vis a vis the rest of the global system? Is it scale? Is it something else? Thanks, Sarah. Clearly, there's more similarities than differences. And I think the opportunity for me now to branch beyond Europe and get an exposure to Canada and Australia it just reinforces that one of the most common threads that I see across the markets that is transferable and I think all of us, Mike included and you heard Mike earlier talk about is operator alignment. And I think we're very fortunate right now across our system is my experience and what I've seen is the operator alignment with country management is in some of the best places I've ever seen. And so even markets that are still working through that acceleration and rebounding such as Germany, I'm excited about the position that we're in with that alignment between company management and operator leadership. And that's a very common thread that you see whether it's in Canada, you see it in Australia, you see it in the U. K, you see it in France. So that would be to me one of the biggest opportunities for those markets and obviously Ian has a lot of markets. Whether you're big or small, you got to bring the operators with you. I think the other piece is the balanced and holistic focus from a planning standpoint to drive that alignment through stratification of priorities and building a good holistic plan. And I see that's an ingredient across all of our 5 lead markets to where there's a great balance when it comes to value, food and experience. And each of those markets, while they may be doing it in a bit different way, those holistic plans are being very well defined and strategically prioritizing the opportunities. And just to hook on that, Sarah, because you'd say, well, what is high growth learning from that as you build out these other high growth markets? And the way I would interpret that is those markets have a great real estate portfolio. They have the most efficient supply chain. They have density of drive through. They have the best ownership model. And you wrap that all around with a strong brand in that marketplace, that's what we aspire to do within I know Ian and I, that's what we aspire to do within the high growth and foundational markets, and that's what you learn from the lead markets. I think the other piece there that I'm having the opportunity to see, I think Dave and Ian and I really work more closely together now is the innovation at times was pigeonholed into an area of the world geography. And I see the amount of communication cross boundary today. It's in just that change in structure in 4 short months, the engagement across boundaries is better than ever. And so it's going to allow us to explore, understand and determine what those key innovation and those opportunities are and then the ability to explore and scale faster. Pedal 4. Great, thanks. Peter Saleh from BTIG. Just had a question on Australia, impressive 7.1% comps year to date, the market where you have the Create Your Taste platform. Just wondering if you're seeing any success in that market with in the drive thru to create your taste in the drive thru. And if you could just tell us, are you seeing more check or traffic in that market? I'm over here. Okay. There you are. Yes, right here. Okay. I see it, Peter now. So anything you can tell us on create your taste, drive thru versus dine in in Australia and check versus traffic? Okay. We've got the luxury today Peter to have the CEO of McDonald's Australia. So Andrew, I'm going to call on you. I've been to Australia twice in the last 4 months. So I've been acquainted with the market, but I'm not going to tell you that I'm knowledgeable, but I know he's the guy that's knowledgeable. But what I will say is Create Your Taste is a food platform amongst a holistic plan. And when you look at what they've done from a value standpoint, from an experience standpoint, growing their McCafe business in the drive thru and bringing new food offerings. And this is even well in advance of the create your taste initiative that actually kicked off in July. It's a holistic experience and it's a revolution that is gaining steam with the collaboration of the operator leadership and the company leadership. And Andrew, so you got a mic there, I'd love to have you talk a little bit about your market. Thanks Doug. So I think the third thing with Create Your Taste is that it's not available in the drive thru. And so it's a change in the experience and the food offering that we make in the restaurant. However, our drive through comp is actually equivalent to our in store comp at the moment. And so that's a result of a lot of great value initiatives, but also we've been offering McCafe Barista Made Coffee in our drive thru also, which has driven significant incremental growth. And as Doug said, alignment with our operators, energy in the restaurants and a great energy from our crew managers. Great. Doug, Dave, Ian and Andrew, thank you all very much. I'd now like to invite Steve, Pete and Kevin back to the stage, and we'll begin the final Q and A session. At the end of this session, Steve has a few concluding remarks. Okay, it looks like the first is Paddle 2. We'll get the mic over there. All these guys are getting settled. Give them just a minute to get settled. All right. All right. Thank you, folks. Keith Siegner from UBS. Just a question on the refranchising. So based upon some of the targets we heard there, including Russia, it sounds like U. S. Is going to have to participate at least to a little extent. When you think about the U. S. Or how do you think about the U. S, is it a percent ownership that gives you the skin in the game? Is there a magic number that gives you enough critical mass to do the tests? How do you approach the U. S? And then one last one, and I'm sorry, Pete, I know I ask this all the time. But with that Japan operational improvement program, which is something we've been hearing about for many, many years now, how does the ownership or the Wholeco Japan play a strategic role in that recovery since you'll get the royalty uptick either way? Thanks. All right. Keith, again, while we weren't giving specific targets by country, I think you're the way you did the math, you can assume that the U. S. Is also participating in the refranchising opportunity. As they've been over time, I mean the U. S. Has constantly refranchised and they look to be utilizing the screens that we kind of outlined, they're going to look to operate the most valuable portfolio of Macapkos if you will with the margin screens and cash flow screens. And like Japan, again we have as we've exhibited today, I think we're taking a fresh look at a of areas and when we talk about examining our ownership around the world, I think you can assume that analyzing our ownership percentage there is also a part of that. Next question will come from Paddle Huynh. Thank you. It's John Ivankoe from JPMorgan. I think we made an entire presentation from a personal perspective kind of identify with McDonald's and children from a number of different perspectives. So just kind of talk about that omission whether it was kind of I guess intentional and is the brand kind of in a place where you can focus on young adults and adults and just be the modern progressive burger company 10 years from now that doesn't necessarily require that younger person visitation in order to drive your economics? Thanks, John. No, it's still very, very pertinent to us. It's a really significant part of our business and remains so. It's probably just the nature of time available to get into the details at a market level. If you were to take a deeper look across, say, the 5 international lead markets, we have noticed there is a slight discrepancy in the significance of the Family business across those five. And when you start to go deeper into that, you start to look at the way we've reimaged the restaurants, and sometimes we've reimaged some of the kids' fun out of it in terms of sort of scaling up some of the environment. Sometimes we take a little unintentionally take a little bit of a fun out for it. So then you also go through to Happy Meal Innovation, menu innovation and the way we engage with moms in particular, but parents in general. And you would look at the markets such as France and the U. K. Where they've had a longer run at brand building, if you like, and the way we communicate brand trust and brand building with parents, there is a very strong correlation to the strength of the family business in those markets. So it's a fair question. Is there more we can do? Yes. Is it an important part of our business going forward? Absolutely, yes. You'll get to hear penny more. Next question is panel 3. Hi. Andrew Charles from Cowen and Company. Steve or I guess Mike can chime in as well. But as we think about the U. S. And you're doing the digital offers now, at what point or what factors do you need to see in order to move this to the next level as it comes to mobile order and pay? And similarly, this is obviously going to give you a lot of insight within mobile offers into incentivizing customers and what incentivizes their spending. To what point can that be levered or what do you need to see before you lever that into loyalty because obviously you can use that to help leverage some of your blockbuster partnerships with the Olympics, with FIFA, for instance? Yes. It's a good question. We've got so much headroom on it. It's such an exciting part of our business. If we look at our overall digital ambition, it's to bring a whole new everyday level of fun and convenience to the world. So it's pretty ambitious ambition. I don't know of another business in the world that's capable of doing that in the way that we are. Now we started from a pretty low base couple of years ago. What we're seeing now, and it's interesting having had some of the major markets in last week going through their plans and kind of the decomposition, we're beginning to see technology, digital, however you want to describe it, start to feature in the sales comp builds. Now it's early days, and it's not anything we're going to get carried away about. But we're beginning to see the investment begin to transfer focus on offers, loyalty, CRM. That's vital. Whatever we can do to bring the greatest benefit to the greatest number of customers in the shortest amount of time, clearly is vital in the turnaround, whether that's a digital activation or whether it's around food or operational improvement. There's a whole heap of upside on the funnel side, the engagement side. I mean, we have a convening power like very few companies, and we are excited about leveraging that, whether it's through film partnerships, sporting partnerships, some of the other sponsorship assets we have, all the way through to the tech partners that we've had fun with, engaged with, such as Apple when we launched Apple Pay as one of their launch partners. So there is fun, there's convenience. It can ease some of the tension out of the day to day experience for customers, if they can order ahead or if they can just use it to pay slightly easier, you can just make the experience easier. There's a lot of fun to be had as well, but we also want to commercialize this and get a return on the investment, which we're beginning to see next year. Next question is from Paddle 2. Hi. Thank you. Karen Holthouse from Goldman Sachs. Looking at the commentary about the filters about refranchising and in particular wanting high teens store margins. If you look really outside of the lead division, that would imply pretty substantially higher margins than what we've seen year to date. Is that is there really as that big of a margin opportunity as a result of refranchising? Or should we think of that high teens as a filter for what you think a sustainable margin is versus the current margin? Or would you be willing to accept a lower margin in a market like China where there is some trade offs in terms of the growth potential? Just sort of how hard and fast of a rule is that high teens margin? Yes, you should think about that as our screens to get into this. I mean we're talking about having a portfolio of restaurants around the world. So obviously in a portfolio you'll have the above and below averages, but as a group, it's at least high teens margins and significant incremental free cash flow are the financial screens. Next question is from Paddle IV. Jake Harlett from SunTrust. The question about the reimaging and the G and A targets you've laid out. I feel like I have an understanding for 2016 and 2017 of what your expectations are, but not what you expect to achieve in 2015 in terms of G and A cost cuts and the refranchising plan? I'll cover G and A. On the G and A side, I think what I mentioned was by the end of 'sixteen we would have about $150,000,000 of savings, about a third of that will be actually realized in 2015. So incrementally obviously we'll have an additional $100,000,000 ish in 2016. And Jake, we'll get into the you said reimaging and refranchising, I think you meant refranchising? I meant refranchising, sorry. Yes. So we'll at the end of the year, we'll give you a greater visibility into how we finish the year in that and start to give some perspective as we move into '16. What I would say just to support that as well was, when we sat down in May and shared the initial steps of the turnaround plan and the accelerated franchising, it means we got to work straight away. So whilst we're already, what, 2nd week of November now, we're not starting from scratch here. So there's momentum in this at a market level. So markets are getting after it at a good pace because they also want to give themselves a head start heading into 2016 to meet some of the targets to deliver the company operating margins that we expect of them. So it will be fairly seamless. It doesn't stop and start because it happens to be the 1st January. They are head down and pushing ahead at the market by market level. Next question is from Paddle 2. Bob Schweig of Burnham. I wanted to ask this question to the last group, but you can deal with this. Taking a longer view, China is so darn important in terms of its potential. And I can recall 20, 30 years ago when other countries, which are now really enormously successful had terrific problems. And I can recall also 2 years ago being told that you were taking a point of view on your locations of your Chinese stores that were more suburban located to get the benefit of drive thru when it would come to fruition and these stores would not necessarily perform as well as if you were more centrally located. I'd like you to discuss your strategies in greater detail on your Tier 1 and Tier 2 and a little bit more on Tier 3 and 4 and take a very long view as to what China is going to be to you looking out 5, 10 years? I have an entirely separate question once you deal with that one. Is that also for people not selling upfront, honestly? China is a growth story. I mean, we clearly, we're all familiar with the trajectory of the market and the opportunity for us. The questions the discussions we have amongst the management team and discussions we have with the Board is how can we best capitalize on the growth opportunity? It's not whether there is one. How do we best get after it and get after it at the speed with which the opportunity arises. So we certainly have a greater density and a greater maturity in Tier 1 and Tier 2. There is greater wealth in those markets. And actually, as they embrace Western brands and become increasingly sophisticated, we can see the McDonald's experience of the future in those Tier 1 and 2 cities is slightly more sophisticated than it would be in, say, Tier 3 and Tier 4. There's also a huge geography. It's a complex supply chain. And what we are doing and the discussions we have is how can we best find the right partners, whether it's from the franchise partners and also supply chain partners, to take full advantage in the time we have, knowing also that we're trying to be appropriate with our capital and our G and A because we have other places to invest that where we can actually get a stronger return tomorrow than China. But we also recognize that we're running business for the long term, and that we're custodians of the current. But the decisions we make today will actually set up the long term as well. So there's not really a lot more to say about it, apart from we recognize it. We're going at 2 50 openings a year. So it's not as if we're just ticking along. I mean, that's a steady rate. And we see a lot of upside and it's just how do we best capture the growth. Two tangible things just to add and borrow some of the things that were in Dave's remarks. 1, to help seize that opportunity, the market has done significant work on taking costs out of the buildings. So as we look at those Tier 3 and 4 Cities, the ability to generate good margins on those lower volumes, we feel a lot more confident over the last couple of years based on the work that's been done. And separately, Dave mentioned franchising, they're going to be a part of the global refranchising, so growing through franchisees as well. The second issue was some in this room may feel as I do that you've made a very smart decision related to the not to create an REIT, but rather to use debt and increase the amount being paid back to shareholders. But maybe you'd be interested in getting a survey of the room to see what the reaction after all we're all involved in the stock market and we're all involved in making influencing the group. Well, the issuing of surveys is way above my pay grade. That's for Chris to sort out. But what I would say is any of the combination decisions we've announced today, whether it's on the real estate side or our capital structure, whether it's on G and A, whether it's on refranchising, they are all to support the operating turnaround. And that is ultimately the message I would love to deliver most powerfully today, which is acute attention to detail on all aspects of the business, but nothing that's going to be the detriment of growing the operating business because that's where the greatest value is, the greatest number of stakeholders and clearly shareholders as well. Next question is Paddle III. Jeff Farmer, Wells Fargo again, somewhat in the ballpark of that last question. But your new shareholder return target points to greater than $10,000,000,000 in share repurchase over the next, let's call it, 15 months or so. That's an enormous number. So I'm just curious how you guys plan to execute on that in that relatively short timeframe ASR open market, what is the plan? Yes. So your timeframe is about right. Obviously, over the next 15 months, the plan is to repurchase in the neighborhood of an additional 10,000,000 10,000,000,000 shares dollars 10,000,000,000 I'll say. We'll maintain flexibility because we have a history and track record of, I'll say, buying opportunistically. Right way That could be through just open market purchases. That could be through an ASR. It could be through a lot of things. But at this point, there isn't a need to kind of exactly peg the way we'll do it because we'll look at the market and do it kind of opportunistically the way we have a track record of doing. Next question is from Paddle 1. Yes, it's Jason West at Credit Suisse. I'm here in the middle. So Jeff just took my question, but I guess I'll ask a different one. So Steve, you talked about the system sales target for next year. Just over half of that, we should think about same store sales. Is that a number that you're happy with? This is a brand that's generated mid single digit comps for many years prior to the recent years. And is that a level that you'd be satisfied with? And how do you think about pricing sort of within the key markets as part of that comp? Thanks. Yes. If you remember when I started off earlier this session, talked about the phases from a corporate level of revitalize, strengthen, lead. I would consider 2016 just broadly as being a strengthened year. If we can finish this year with the momentum that I believe we will, that'll be a couple of quarters of growth. That's all it is. And you don't turn around a business in 2 quarters. So we want to strengthen performance through next year. We have done a market by market build, and we had very deep visibility into certainly the top 9 or 10 markets planned last week, and literally got into the guest count build, sales build, pricing strategies by market. It will dip pricing will differ by market depending on the economic conditions. I mean, some had very minimal pricing expectations. They didn't think it was the right time or the right environment. Others were a little bit more confident and bullish depending on how the economy performing and food away from home, some of the other metrics we look at. But if you just look at the collective, which is always dangerous, because that's always the average tends to blur the attention to detail, we believe that 3% to 5% systemwide sales is something that would deliver what I would call a strength and give us the platform to take our leadership position and reassess our leadership position going forward. Next question is from Paddle 4. Jeff Bernstein from Barclays here in the center. So 2 part question on the U. S, I guess. Would seem like this meeting is very well timed. I'm not sure you necessarily would have planned that. But obviously, the past number of weeks have seen significant improvement, it would seem like in the U. S. Business relative to earlier this year. So I'm just wondering, you mentioned gaining traction. Just want to make sure the easy compares obviously help and the breakfast all day over the past number of weeks helps. So it seems like really focused on just the pre all day breakfast, which you're talking about days weeks, not much longer than that. So I'm just wondering how you don't get a full sense of confidence there, whether I think you mentioned there are some leading indicators. Maybe there are other things besides the comps we see that you get to see and say that's a perfect sign of what we're going to see over the next 6 months. And then the other related question was just on that exact topic, which is your closest 2 burger competitors in the U. S. Happen also be doing very well right now. So not necessarily you're looking to opine on your peers, but how do you see the category as a whole continuing at this pace? It would seem like that would be very difficult to do. No, it's a really fair question. And Mike addressed it actually in one of the questions he took was all day breakfast has proven to be like an inflection point in momentum, but it's not that's masking the work that's gone in to get there. And I would say, if you ask me what's the one thing I'm most excited about in the U. S, and that's the customers are telling us we're running better restaurants than we were a year ago. There is value in that beyond anything else we're doing because ultimately 27,000,000, 28,000,000 customers a day are recognizing a difference and if we can run those restaurants a little bit better next week, we have done this week, that's another tens of millions of consumers who are noticing our businesses on the uptick. And then the food starts to taste better, the service is a little friendlier, the dining area is a little cleaner and the value, whole value equation starts to change. So the basics of just running good restaurants, QS and C, as we talk about, is really important. In terms of the broader market, I mean, the reality is given our scale, when we do well, that puts pressure on market share for others. We believe the overall market will grow, but we would anticipate to grow above the market. We want to be taking share. We've given up a little too much share for our liking the last 2 or 3 years. We have every intention of getting that back and then getting into a stronger, more dominant But some so there will always be a market share fight. It's competitive out there, just not just the U. S, across most of the mature markets and they're common across international lead markets and well into the high growth markets, it's a market share fight. And that's why you've got to keep nimble, fast decision making, excellent execution at restaurant level, and consumers will reward you with a visit. So, but it's not about a strategy of all day breakfast. There are so many components that have got us here and we just got a catalyst which acts as a little inflection point and the important thing to do is now build upon that. Next question is panel 2. Thank you. Howard Penney with Hedge I Risk Management. Steve, to be the 1st CEO in the history of this company to serve all day breakfast and to change the real estate structure of the company would have been quite a legacy to leave. When you think about that legacy and there have been those CEOs in the past who couldn't push the reset button for one reason or another and those that did and really took the company to the next level. If I ask you the question, have you pushed the reset button hard enough, I think I know what the answer is going to be. But have you pushed the reset button hard enough relative to the past? And when you think about your legacy, what would that be? How would that unfold? Okay. I don't really think about my legacy. I think about what we get done as a team. And I would say from 28th, 29th January when the Board made their decision from the 1st March, we're assuming the position and the team we're building around us. I would say that the progress we've made has probably been greater, quicker and of a higher magnitude than most people would have expected. Externally but also internally, it's been a significant feat for the broader team to drive the change through at the pace we have through a big, big organization that is typically used to working in a certain way. So and we have tried to lead by example by challenging all the paradigms and the legacies, not the heritage, because it's something we're all incredibly proud of, and we've all got plenty of muck ears in us. But we also realized that the biggest pride button is being successful, and we weren't going to be successful the way we were operating as a business. So I think we have challenged ourselves. I think we demonstrated the challenge on every major decision or area of the business that we could interrogate, we have done in a real short space amount of time. The intensity has been very high. I believe we've done it with quality thought and we've looked to share that with internally and also externally when we've been in a position to actually have something meaningful to say. So I feel very gratifying the way the organization has reacted and the speed it has. I feel pretty good about where we're at. Next question is from Paddle 1. Yes, Steve, Bob Derrington, Telsey Advisory. A question on back to China for a second, if I could. China recently changed their national policy to allow 2 children per family from 1. I'm just wondering, did you give some consideration to that? Does that change your color about did your team consider that or any kind of color? Well, we didn't change the policy, Bob. But I mean, we have a certain amount of influence on that. But actually, it's a really good question. I'll tell you why because I asked the same thing last week when we had our Managing Director from China in, Phyllis Chung. And he said, how does that resonate in the marketplace? Because I'm intrigued because I always remember our leaders in China talking about the inverted pyramid of the child, the 2 parents and the 4 grandparents, and that being the family unit and how installed that is in the psyche and how that single child becomes just a focal point. And her response, I know it's very early days, but her response was, it has been seen as a really positive thing within the market in terms of just freeing up opportunity and choice. The one counterpoint, which will just be interesting to watch, will be certainly younger parents are a little more watchful about what it will cost if they were to have a second child because normally the single child gets everything. And there's one of the things that will play out over time will be how that impacts the psyche in the manner that which parents treat 2 children, for example, if they choose to have 2 children. But so some of it is around the emotion and the psyche now. This is going to take a few years for that renewed generation to work its way through to potential customers. So we haven't put it into our sales bill for next year. That concludes our final Q and A session. I'd like to invite Steve to share some closing remarks. Thank you. Right. Okay. These will be brief. So thank you again for joining us today. And I and we all appreciate the opportunity to provide this comprehensive view into the actions we've taken this year as we've challenged all aspects of our business and tried to make McDonald's better and to demonstrate why we're confident in our turnaround and the long term. McDonald's remains a solid investment. Our turnaround is operationally led. It's grounded in the simple truth that we must run great restaurants each and every day. That's why we've moved urgently to reset the business, refocusing our system of franchisees, company employees and suppliers on our customers and what matters most to them. Hot fresh food, fast friendly service, a contemporary restaurant experience at the value of McDonald's. We are returning critical markets to sustainable revenue and income growth and working with operators to grow cash flows while making smart investments to profitably drive future growth and capitalizing on the efficiencies that enable us to drive the top line and optimize the bottom lines as we prepare McDonald's for the next chapter. The proactive financial moves we've shared with you today further highlight our willingness to challenge legacy thinking and make appropriate and prudent adjustments where warranted. I am inspired by the dedication and resilience displayed around the world. Our optimism is grounded in the real opportunity that exists in the informal eating out category. And the fact that we're built for growth as we're evolving alongside our customers, investing to build demand and enhancing our focus on execution and operations excellence. Our competitive strengths and iconic menu, our unique franchising model, size, scale and a well diversified geographic footprint create the foundation on which we will continue to be successful. We remain committed to managing the business for the long term, and I'm confident the investments we're making will generate enduring, profitable growth. Thank you for your continued investment in McDonald's. And for those on the webcast, that concludes the meeting. And for those attendees who are present, you're welcome to join us for a reception in the lobby. And just so you can plan your travel, the reception will close promptly at 7 pm. Thank you.

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