1. Background to the Turnaround

Big Brand in Big Trouble

In February 1996, McDonald’s stock traded at 27 times earnings. But in July 1997, McDonald’s second quarter profit growth was just 4%, with a 2% decline in earnings from the US business.

When I joined McDonald’s in September 2002, the stock price was down to $17.66 from a high of $45.31 in March 1999. McDonald’s reported its first-ever quarterly loss of $344 million since it went public in 1965, with same-store sales down 1.9% in Europe, 6.1% in Asia-Pacific, and 1.4 % in the United States.1

In December 2002, after McDonald’s stock declined 60% over three years, the board of directors replaced Jack Greenberg with Jim Cantalupo as CEO, who they wooed out of retirement. Jim was ...

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