Steve Easterbrook, president and chief executive officer of McDonald’s Corp., walks the grounds after a morning session during the Allen & Co. Media and Technology conference in Sun Valley, Idaho, U.S., on Wednesday, July 12, 2017.
David Paul Morris | Bloomberg | Getty Images
Shares of McDonald’s fell after the fast-food giant announced Sunday evening it fired CEO Steve Easterbrook for having a relationship with an employee.
The stock, which has a market value of $149 billion, dropped 2% in premarket trading Monday. Shares of rival Wendy’s, valued at $4.8 billion, were up 1.8%.
After taking the helm of McDonald’s in 2015, Easterbrook led a turnaround of the company, leading the value of its stock to nearly double during his tenure. His successor Chris Kempczinski, in his prior role as head of McDonald’s U.S. business, worked closely with Easterbrook in efforts to turn around U.S. restaurants.
“Given Kempczinski’s role as President of McDonald’s USA, he was the obvious eventual successor to Easterbrook, but the timing is clearly much sooner than anticipated,” Bernstein analyst Sara Senatore wrote in a note.
Kempczinski told the Wall Street Journal on Sunday that there would not be a “radical, strategic shift.”
Under Easterbrook, McDonald’s increasingly turned its attention to technology. U.S. locations have been receiving tech-focused upgrades, like self-order kiosks and digital menu boards. It is trying to hit $4 billion in delivery sales by the end of 2019. The company also acquired two companies this year that are trying to use artificial intelligence in drive-thrus.
But pricey store renovations, delivery commission fees and value deals led to a fraying relationship between McDonald’s management and its U.S. franchisees, who formed an independent group a year ago to address their concerns. As a result of concessions made by McDonald’s, relations have improved in recent months.
“This balance of relations with franchisees and shareholders, that can sometimes have differing objectives, will be paramount as Mr. Kempczinski begins his new role,” Cowen analyst Andrew Charles wrote in a note.
While Kempczinski does not have any international experience at the global fast-food chain, before coming to McDonald’s, he served as the president of Kraft International.
“We are definitely surprised by the news and view Mr. Easterbrook’s departure as a loss but also believe the company’s strategy is on very solid footing and the McDonald’s system is much more than just one man,” BTIG analyst Peter Saleh wrote in a note.
Joe Erlinger, who will take over as president of McDonald’s USA, is currently president of its international operated markets, which includes countries like Australia and the United Kingdom. Before taking over that role in January, he served as president of high growth markets.
Piper Jaffray analyst Nicole Miller Regan downgraded McDonald’s stock following the announcement.
“Our experience leads us to take a more cautionary view noting the potential lack of momentum and time involved in formalizing a new team,” she said.
In late October, McDonald’s had its first quarterly earnings miss in two years after promotions struggled to lure U.S. customers away from the competition.
Easterbrook’s firing follows two other recent executive departures. McDonald’s global Chief Marketing Officer Silvia Lagnado and Chief Communications Officer Robert Gibbs both left the company in October.