McDonald's (NYSE: MCD) CEO Steve Easterbrook has succeeded in his efforts to turn his company's once-flagging fortunes around. After years of sales struggles, specifically in its home market of the United States, the chain has ridden all-day breakfast, focused promotions, and other changes to steadily improving sales.
In its most recent quarter, the company saw global sales increase by 3.5%, operating income rise by 7%, and earnings per share (EPS) increase by 9% in constant currencies. In his comments during the Oct. 21 earnings call, Easterbrook was excited about another strong period.
"I'm encouraged by the actions we've taken and the progress we have made as we execute our turnaround plan," he said during the call, which was transcribed by Seeking Alpha (registration required). "Customer perceptions of McDonald's have steadily improved over the past 18 months, and the third quarter marked five consecutive quarters of comparable sales growth across all business segments and many markets gaining share."
PHOTOS: The evolution of McDonald's restaurants:
McDonald's through the years
McDonald's through the years
The McDonald's Museum is a replica of the first corporate McDonald's restaurant, opened here April 15, 1955, after the franchise was acquired from founders Maurice and Richard McDonald.
circa 1955: Exterior view of the first McDonald's fast food restaurant with its neon arches illuminated at night, Des Plaines, Illinois. (Photo by Hulton Archive/Getty Images)
The exterior of a McDonald's fast food restaurant is shown in this August 1970 photo. The 'Speedee' McDonald's in Downey, California, named for the original chef logo, the third restaurant built by the McDonald brothers Dick and Maurice has been designated a national landmark and celebrated its 50-year anniversary on August 18, 2003 in Downey, California. (Photo by Hulton Archive/Getty Images)
Restaurants McDonald. March 23, 1974. (Photo by Arty Pomerantz/New York Post Archives / (c) NYP Holdings, Inc. via Getty Images)
An employee makes notes at the counter in McDonald's, Southfield, Michigan, USA, July 1978. (Photo by Barbara Alper/Getty Images)
A McDonald's restaurant in Vienna, Austria, July 1980. (Photo by Barbara Alper/Getty Images)
Fast food also known as the junk food phenomenon arrived in France, the country of gastronomy in the late seventies early eighties. Hamburgers, cheeseburgers, french fries, Coca Cola or Pepsi and milk shakes with the interior decoration and design of the premises in the same atmosphere as in the USA. The beginning of fast food in France started with such companies such as Whataburger, Love Burger, Manhattan Burger, Big Boy, Popeye Burger, Freetime, Burger King and Mcdonald's. Employees at Burger King. (Photo by John van Hasselt/Corbis via Getty Images)
Fast food also known as the junk food phenomenon arrived in France, the country of gastronomy in the late seventies early eighties. Hamburgers, cheeseburgers, french fries, Coca Cola or Pepsi and milk shakes with the interior decoration and design of the premises in the same atmosphere as in the USA. The beginning of fast food in France started with such companies such as Whataburger, Love Burger, Manhattan Burger, Big Boy, Popeye Burger, Freetime, Burger King and Mcdonald's. Employees at Whataburger. (Photo by John van Hasselt/Corbis via Getty Images)
Interior view of a McDonald's restaurant, showing an employee sweeping the floor and a group of patrons eating, Chicago, Illinois, circa 1987. (Photo by Antonio Perez/Chicago History Museum/Getty Images)
123241 05: A Worker Takes An Order From A Customer In China's First Mcdonald's Restaurant April 23, 1992 In Beijing, China. Mcdonald's Opened Its World's Largest Restaurant In The Busiest Shopping District Of The Capital. (Photo By Forrest Anderson/Getty Images)
(AUSTRALIA & NEW ZEALAND OUT) A casual staff member at a McDonald's restaurant, 21 May 1996. AFR Picture by LOUISE KENNERLEY (Photo by Fairfax Media via Getty Images)
388587 04: Workers try and organize counter space inside a new McDonald's McCafe coffee shop May 1, 2001 in Chicago, the first McCafe located in the United States. McCafe was first introduced in Australia in 1993 and there are now almost 300 of the coffee shops located in 17 countries. (Photo by Tim Boyle/Newsmakers)
NEW YORK - SEPTEMBER 3: A man walks out of a McDonald's restaurant on First Avenue September 3, 2002 in New York City. McDonald's announced plans to use a new cooking oil for its french fries that it says will cut in half the trans-fatty acid levels while increasing the amount of the more beneficial polyunsaturated fat. (Photo by Mario Tama/Gettty Images)
Marquee of a McDonald's restaurant in Times Square. (Photo by James Leynse/Corbis via Getty Images)
DOWNEY, CA - AUGUST 18: An employee serves up french fries at the world's oldest-operating McDonald's fast food restaurant on its 50-year anniversary on August 18, 2003 in Downey, California. This 'Speedee' McDonald's, so named for the original chef logo, was the third restaurant built by the McDonald brothers Dick and Maurice and is a national landmark. (Photo by David McNew/Getty Images)
DALLAS, TX - MAY 6: The new Happy Meal for adults is seen at a McDonald's restaurant May 6, 2004 in Dallas, Texas. The meal, which features a salad, bottled water, a Stepometer and booklet for excercising tips, will be available nationwide this Tuesday. (Photo by Mike Fuentes/Getty Images)
UNITED STATES - APRIL 15: A line of customers stretches around the corner at the grand re-opening and 50th anniversary celebration of the opening of the first McDonalds's at the McDonald's Restaurant in downtown Chicago, Illinois Friday, April 15, 2005. The first McDonald's opened in Des Plaines Illinois on April 15, 1955. (Photo by Tannen Maury/Bloomberg via Getty Images)
Tokyo, JAPAN: McDonald's Japan employee Noriko Daigo (C) presents the company's new salad mac menu, 'Tomato Grill Chicken Sand', 'Mix Berry Yogurt' and 'Salad dish Grill Chicken' at its restaurant in Tokyo, 19 April 2006. McDonald's will serve the menu starting 13 May. AFP PHOTO / TOSHIFUMI KITA (Photo credit should read TOSHIFUMI KITAMURA/AFP/Getty Images)
MELBOURNE, AUSTRALIA - AUGUST 29: A sign for the new Happy Meal is displayed at the McDonald's restaurant in Collingwood on August 29, 2006 in Melbourne, Australia. The new Happy Meal is a low fat alternative to the fast food chain's traditional Happy Meal. Childhood obesity is a major health issue in Australia and has tripled in the last 20 years with one in six Australian children classed as obese. (Photo by Kristian Dowling/Getty Images)
AUSTRALIA - OCTOBER 18: A McDonald's restaurant sign is cast in light at sunset on a road between Canberra and Sydney, Australia, Wednesday, October 18, 2006. (Photo by Jack Atley/Bloomberg via Getty Images)
Munich, GERMANY: A McDonald?s Big Mac and chips are pictured at a McDonald?s restaurant beside their headquarters in Munich, southern Germany 27 February 2007. Bane Knezevic (not in picture), president of the western division of McDonald's Europe and chairman of McDonald's Germany reported at a press conference that Mcdonald's turnover had increased by 6,2 percent in 2006. AFP PHOTO DDP/JOERG KOCH GERMANY OUT (Photo credit should read JOERG KOCH/AFP/Getty Images)
UNITED STATES - APRIL 22: People enter a McDonald?s restaurant in Brooklyn, New York, U.S., on Tuesday, April 22, 2008. McDonald's Corp., the world's largest restaurant company, said first-quarter profit rose more than analysts estimated after record European revenue gains outweighed the first drop in U.S. comparable-store sales in five years. (Photo by Tom Starkweather/Bloomberg via Getty Images)
NEW YORK - JULY 18: A McDonald's restaurant sign lists calorie counts July 18, 2008 in New York City. New York is now the first city in the country to implement a law forcing chain restaurants to post the calorie count of each food next to the items on their menus. (Photo by Chris Hondros/Getty Images)
A McDonald's employee serves a burger and a carton of french fries at one of the company's restaurants in London, U.K., on Monday, Feb. 1, 2010. McDonald's Corp., the world's largest restaurant company, plans to increase its number of Russian outlets by 20 percent this year to capitalize on its fastest growing market in Europe. Photographer: Jason Alden/Bloomberg via Getty Images
The world's biggest McDonald's in the Olympic Park during the London 2012 Olympics. or the past 40 years McDonalds has been the Official Restaurant Olympic Games. All official sponsors they have paid $957 million to the IOC for the 19 days competition. Hundreds of food outlets at Olympic venues have been forced to take chips off the menu, because of a demand from sponsor McDonald's. Olympic chiefs banned all 800 food retailers at the 40 Games venues across Britain from dishing up chips because (Photo by In Pictures Ltd./Corbis via Getty Images)
SAN RAFAEL, CA - MARCH 12: Customers order food at a McDonald's restaurant drive thru on March 12, 2013 in San Rafael, California. McDonald's has retained its number one ranking in both global and domestic sales and continues to be the largest single restaurant brand in the world with company-store sales last year of $4.53 billion and franchise-store sales of $31.063 billion for a domestic total of $35.59 billion. (Photo by Justin Sullivan/Getty Images)
A customer walks into a McDonald's Corp. restaurant in Hong Kong, China, on Tuesday, July 16, 2013. McDonald's Corp. is scheduled to release earnings data on July 22. Photographer: David Paul Morris/Bloomberg via Getty Images
DES PLAINES, IL - OCTOBER 24: In this photo illustration, items from a McDonald's restaurant are shown on October 24, 2013 in Des Plaines, Illinois. McDonald's has announced it will make changes to its low-priced Dollar Menu, which includes items like coffee, small fries, hamburgers and apple pies. The new menu, dubbed the Dollar Menu and More, will offer some higher priced options such as the grilled Onion Cheddar Burger and a McChicken sandwich. (Photo Illustration by Scott Olson/Getty Images)
This photo made on April 8, 2014 in Guantanamo Bay naval base and Joint Detention Facility, shows the McDonald's fast-food restaurant chain sign outside their first and only restaurant on Cuban soil. The restaurant was open in 1986 with a purpose to support morale, welfare and recreation activities for service personnel and their families. AFP PHOTO/MLADEN ANTONOV (Photo credit should read MLADEN ANTONOV/AFP/Getty Images)
LONDON, ENGLAND - SEPTEMBER 9: The interior of a McDonald's fast food restaurant, located near Westminster Bridge under the London Eye, is viewed on September 9, 2016, in London, England. The collapse of Great Britain appears to have been greatly exaggerated given the late summer crowds visiting city museums, hotels, and other important tourist attractions. (Photo by George Rose/Getty Images)
McDonald's Corp. chicken nuggets are arranged for a photograph in Tiskilwa, Illinois, U.S., on Friday, April 15, 2016. McDonald's Corp. is expected to report quarterly earnings on April 22. Photographer: Daniel Acker/Bloomberg via Getty Images
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Those are great numbers and encouraging results, but the CEO made a point that even if the ship has been righted, it will still need to be steered in different directions.
"We are at a point where we've begun to transition from a focus on revitalization to a mindset that's concentrated on strengthening the business to drive sustainable growth over the long term," he said, noting that his thinking has moved from short-term fixes to building a long-term future. "We are not managing the business quarter-by-quarter. In fact, our commitment to investing in the business is stronger now than ever."
McDonald's plans to improve its food and change its ordering process. Image source: McDonald's.
What is McDonald's doing now?
In a broad sense, Easterbook talked about placing an emphasis on food quality and value -- two areas that are often difficult to balance. He also mentioned that the chain plans to focus more on improving customer experience.
He pointed out that the company has already taken some big steps toward improving its food. In the U.S., that has included completely transitioning to chicken that has not been treated with antibiotics important to human medicine. In addition, it has introduced new buns that do not contain high-fructose corn syrup and it has removed artificial preservatives from its Chicken McNuggets.
McDonald's has also focused more on doing a better job of running its restaurants, which has produced noticeable results.
"Our commitment to raising the bar with an emphasis on underperforming restaurants is making a difference," said Easterbrook. "Customer satisfaction scores have improved the most for our bottom quintile restaurants. And we've cut the customer satisfaction score gap between the top and bottom quintile performance nearly in half through our efforts provide a better, more consistent experience for customers in every restaurant, every time they visit."
What is McDonald's future?
Aside from the continued evolution of its food toward using healthier, more natural ingredients, McDonald's plans to change its in-store experience. This effort, called "Experience of the Future" has been developed largely outside of the U.S., letting the company get things right before rolling it out in its home market.
"We're also modernizing the customer experience in markets around the world as we evolve to the Experience of the Future," Easterbrook said. "In Canada, we're engaging with customers in simpler, less stressful ways, offering them more choices in how they order or pay."
Check out the McDonald's of the future:
McDonald's has unveiled its restaurant of the future
McDonald's has unveiled its restaurant of the future
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What happens when you force a health-conscious, fast food cynic to scoff down a juicy burger? An epiphany, that’s what. #createyourtaste #iheartmcdonalds
Those changes, which have also been tested in parts of Europe, involve using dual-point service and self-order kiosks. These two efforts change the traditional McDonald's experience. Dual-point service means that customers order in one place while picking up their food in a second location. That, along with the use of kiosks featuring tablets/touchscreen computers for ordering, lets the company do more with fewer people.
Is this going to work?
Moving toward healthier (or at least healthier-seeming) ingredients follows industry trends and it's something McDonald's has to do. In many cases, more natural products cost more money, making it a challenge to offer the improved food along with the value people expect from McDonald's.
That's where Experience of the Future may be essential. Ordering kiosks (and eventually other automation) can lessen the need for employees. The cost savings can then offset higher food costs while having the advantage of removing the possibility of human error in the ordering process (a tablet won't mishear "no pickles" as "more pickles").
All of this is a bit of a tightrope for the company. Food costs must still be kept in check while automation savings have to be balanced against customer experience. Easterbrook has a solid plan and shareholders have every reason to believe in his vision, but getting from stability to Experience of the Future almost certainly contains problems as yet unseen.
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