In an attempt to freshen its business, McDonald's Corp. said on Thursday that it is switching to a high-tech kitchen system that will eliminate warmed-over burgers and fries.
The world's largest fast-food operator also said it planned to stream-line operations at its headquarters in Oak Brook, Ill., likely resulting in layoffs."We are focused on increasing shareholder value," said Michael R. Quinlan, the company's chairman and chief executive. He said McDonald's was seeking to increase sales and profits and would use some of the proceeds to repurchase stock.
McDonald's was short on details about some of the initiatives and said little that investors had not already heard. But management was ex-pected to more thoroughly explain its strategy during a conference call with financial analysts on Friday.
Investors apparently liked what they heard. The company's shares rose $2.375 on Thursday, or 4.5 percent, to close at $55.375.
The company said it will take a $170 million to $190 million charge in the second quarter to pay for half the cost to franchisees of introducing the new food preparation system in all U.S. restaurants. The average investment to install the system, which for the most part covers replacing obsolete equipment, will be $25,000 a store.
The new kitchens will replace McDonald's old method of frying burgers in bulk with a made-to-order system that the company says will allow restaurants to provide hotter and fresher food.
The change will result in cost savings of up to 1.4 percent of sales, according to the company. McDonald's has been testing the system since last summer and formally unveiled it at a franchise convention in Florida last week. All of its domestic restaurants are expected to be using it by the end of next year.
"Food quality and taste has been an issue at McDonald's, so this goes a long way toward bringing them up to the competitors' levels," said Mitchell B. Pinheiro, a food industry analyst who follows the company for Janny Montgomery Scott. "It doesn't take a master chef to figure out that this is probably one of the first things they should do. It is significant from that standpoint, it's just not new news."