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McDonald’s promises better food and a ‘modern, progressive burger company’

Posted at 9:46 AM, May 04, 2015
and last updated 2015-05-04 09:46:49-04

NEW YORK (CNNMoney) — New McDonald’s CEO Steve Easterbrook unveiled a turnaround plan for the struggling fast good giant Monday morning. And he did not mince words when discussing the company’s problems.

Sales have fallen recently and the stock has lagged the broader market.

Easterbrook said in a video presentation that the recent performance was “poor” and that “the numbers don’t lie.”

To tackle this problem, McDonald’s is reorganizing its international operations and plans to franchise more of its restaurants. It wants to have 90% of its locations franchised by 2018, up from 81% currently.

McDonald’s hopes to save $300 million annually by the end of 2017 thanks to all the restructuring and plans to be more disciplined about spending.

But what Easterbrook really wants to change is the quality of the food and stale brand image. Get ready for more new offerings like its recent sirloin burger and artisan grilled chicken sandwich.

McDonald’s faces tough competition from rapidly growing burger chains like Shake Shack, Five Guys and Smashburger that are increasingly popular with younger customers.

Many consumers feel that burgers from these and other chains, despite being more expensive, taste better and are made from higher quality ingredients.

Consumers are also embracing so-called fast casual food from Chipotle (which McDonald’s used to own a stake in) and Panera.

And there is a full blown breakfast war in fast food as well. Yum Brands-owned Taco Bell is gunning for the Egg McMuffin crowd.

Stock market flop: Investors don’t seem convinced. The stock was down in pre-market trading Monday as analysts digested the report.

Easterbrook stressed that McDonald’s has to innovate more.

He promised that the company would return “excitement” to the brand and used the phrase “modern, progressive burger company” several times to describe the image McDonald’s wants to convey.

But at the end of the day, it all comes down to the food. No amount of restructuring can help if the company doesn’t make tasty burgers and fries.

“It is customers that decide if we succeed. The message is clear. We are not on our game,” he said.