The speaker welcomes the audience to McDonald's Third Quarter 2023 Investor Conference Call and introduces the company's President, CEO, and CFO. He reminds the audience of the forward-looking statements and non-GAAP financial measures mentioned on the call. He also mentions an upcoming investor update and asks for questions to focus on the current year's results. The CEO then speaks about the company's strong performance in the past quarter despite challenges.

In the third quarter, McDonald's achieved strong global sales and continues to outperform competitors thanks to its Accelerating the Arches strategy. The company's marketing efforts, including the recent As Featured In campaign, have been successful in staying relevant to customers. This approach, known as One McDonald's Way, has also been implemented in Australia and New Zealand, resulting in operational improvements and a better customer experience.

McDonald's has had great success with their Best Burger launch in Australia, leading to an increase in beef burger share. The company is now expanding this concept to over 70 markets worldwide and plans to continue growing in Australia through new restaurant openings and enhancements to existing ones. Despite economic challenges, McDonald's continues to connect with customers through their reliable and affordable offerings. The company's focus on value has also been successful in markets like Germany, where the launch of the McSmart menu has been well-received by customers.

The German team at McDonald's has successfully made their menu more accessible to customers, leading to outperformance and value perceptions compared to the rest of the industry. This has contributed to 10 consecutive quarters of double-digit sales growth in Germany. McDonald's continues to innovate and reinvent themselves, with a strong focus on customer needs and a modernized estate. Despite uncertain macro conditions, McDonald's believes they are well positioned to maintain their industry leadership through their strong brand, physical advantages, and digital presence. The company remains confident in their strategy and the enduring strength of the McDonald's brand.

In the third quarter, McDonald's saw strong restaurant-level execution and increased customer satisfaction. Despite challenging macro dynamics and consumer spending pressures, the company remains a leader in value and affordability perception. Germany saw its highest-ever monthly sales performance by focusing on evolving customer needs and offering personalized, affordable options through their app. This approach was first successful in Germany and the U.K. earlier this year.

McDonald's has successfully adapted its value offerings in different markets, such as offering affordable breakfast options in Canada and a value menu in the US. These value offerings have remained consistent over time, providing customers with familiar favorites and establishing McDonald's as the affordability leader. In China, a campaign featuring small price-pointed bundles increased demand and beef share. Additionally, McDonald's is using its digital app to drive engagement and loyalty through exclusive activations, such as recent MONOPOLY campaigns.

The use of MONOPOLY in promotions has led to record digital sales in Australia, the UK, and Spain. Digital sales represent a significant portion of overall sales in the top six markets, and McDonald's is using this data to better understand and connect with their customers. The brand also had a successful marketing campaign during the FIFA Women's World Cup, showcasing their commitment to creative excellence.

The company successfully utilized global activations and a social media strategy to promote their restaurant teams and celebrate the FIFA Women's World Cup. They also focused on their chicken menu offerings, specifically the McCrispy Chicken Sandwich, which has become a $1 billion brand in multiple markets. The company's playbook for growth is working, thanks to strong execution and staying relevant to customers.

McDonald's had a strong third quarter, with a 16% increase in adjusted earnings per share. However, their company-operated margins were still under pressure due to cost inflation. Franchise sales were strong, but franchisees in Europe needed temporary assistance due to high costs. Total restaurant margin dollars grew by 10% for the quarter. G&A increased by 1% and the adjusted effective tax rate was 21%. The adjusted operating margin for the year is expected to be 47%, including a property gain in the fourth quarter. Foreign currency translation had a positive impact on results and a dividend increase of 10% was approved by the Board of Directors. This marks the 47th consecutive dividend increase for McDonald's.

Chris Kempczinski, CEO of McDonald's, looks forward to sharing more about the company's progress at their investor update in December. He emphasizes their commitment to creating a thriving environment for the entire McDonald's system, as seen through their digital loyalty base, retention of top talent, and high-performing restaurant teams. Despite challenges, they remain focused on protecting franchisee decision-making and advocating for policies that benefit local communities. McDonald's also recently hosted a global volunteer month and was recognized for their commitment to their purpose and values. As their customers' expectations continue to evolve, McDonald's is prepared to adapt and change with the times.

The speaker discusses the importance of value and the upcoming investor update. They express excitement for the future of McDonald's and their plans to reimagine the brand. The speaker also mentions the focus on value and the balance between pricing increases and maintaining average ticket prices. They emphasize that McDonald's is a business built on value and convenience.

The speaker discusses the company's approach to price increases in light of market inflation and emphasizes their continued focus on affordability and value for money. They mention that each market varies in how they deliver value, but overall the teams are doing a great job. The speaker then addresses a question about trends in the company's top five international markets post-COVID, specifically in regards to back-to-school season. They mention that they are pleased with the performance of their international business and hand it over to another speaker for more details.

The business is performing well overall, with customer satisfaction scores increasing and positive growth in the IOM segment. There has been some inflation in Europe, but the team is focused on delivering value. There has been consistency and momentum in the segment, with positive traffic growth and market share gains. There may be some moderation in top line growth due to decreasing inflation, but the company's strategic plan is resonating with consumers.

David Tarantino from Baird asks about the change in outlook for SG&A costs. Ian Borden, speaking on behalf of the company, explains that the slight decrease in the projected percentage of sales is due to strong top line results and timing of spending. He also mentions the company's continued investments in technology and digital, as well as their global business service organization, which has been a focus for the past six months.

The speaker discusses how the company has identified areas for operational efficiency and is investing in them. They also mention focusing on organizational changes in the first half of the year. When asked about changes in consumer behavior, they mention that the lower-income consumer has been negatively impacted by price pressures and interest rates. However, the company has still seen overall traffic growth compared to the industry.

In the quarter, the company maintained its market share in QSR traffic, with strong gains in beef and chicken categories. They also saw gains with middle- and higher-income consumers, but held share with lower-income consumers. Overall, their comparable traffic was marginally down due to the industry's decline in traffic. However, their top line performance remains strong, thanks to their modernized estate and digital platform that allows for personalized interactions with consumers. The company will continue to monitor the $45,000 and under consumer segment and ensure they are offering value to them.

The speaker discusses their company's marketing execution and how it has become more culturally relevant. They also mention their strong performance in the U.S. market, with a better customer experience and leading position on value for money. When asked about pricing, they state that they expect it to be in the double-digits for the full year, but the rate of increase has started to come down in the third quarter. They believe this is due to inflation starting to decrease.

The company expects pricing to decrease along with inflation. They have been disciplined in their pricing strategy and have been able to maintain their leadership position in value and affordability. They credit this success to their data and analytical capabilities and the support of their third-party advisers. They anticipate that pricing will moderate as inflation decreases. The company plans to maintain their momentum and share gains in the U.S. through operational execution and initiatives such as Ready on Arrival and Best Burger. They are focused on driving traffic and sales in the future.

The speaker is looking forward to discussing the company's outlook for next year on December 6. They believe that their strategy, "Accelerating the Arches," still has room for growth, particularly in the areas of marketing, core menu, and 4Ds. The company's strong physical and digital presence, along with great execution, puts them in a strong position for continued growth. The speaker also mentions the importance of their fully modernized estate and digital platform, which gives them an advantage over competitors.

The speaker discusses the importance of recent investments and franchisee cash flow in maintaining a strong position in the face of macro headwinds and volatility. They also mention the competitive environment and the need to stay competitive with value offerings for the low-income consumer. Traffic was down in the quarter for this demographic.

The company is aware of increased promotional activity from competitors but is not concerned. They are focused on maintaining their value leadership through factors such as customer experience and modernized stores. All dayparts are performing well, with some pressure in the breakfast daypart due to competitors returning to the market.

The speaker discusses the international perspective on value and mentions the adjustments made in Canada, such as offering a breakfast pairing deal. They also mention the importance of listening to customers and adapting to their needs. The next question is about the expansion of U.S. company-owned restaurant margins and the speaker explains that they expect them to be in line with the previous quarter's performance, which was driven by strong sales and easing food cost inflation.

The speaker discusses the company's strategy for sustaining growth and improving margins in the face of higher inflation. They mention the importance of strong top line sales and express confidence in their ability to achieve this. They also mention the positive impact of decreased turnover and increased roster sizes on franchisees' performance. The speaker also notes a positive turn in the labor market.

The speaker addresses a question about the impact of recent legislation on wages in California and the potential for higher prices. They mention potential strategies for mitigating the impact and gaining market share. Another speaker then addresses questions about same-store sales and traffic within IOM and IDL.

The speaker is providing an update on the performance of IOM and IDL, stating that the headline comp numbers for the quarter were strong and consistent. They mention that there may be a couple of markets dealing with more headwinds, such as France, due to factors like high inflation and social unrest. However, overall, the performance has been consistently strong. The speaker is then asked about the potential range of the property gain in the fourth quarter.

The speaker, Ian Borden, addresses two topics: the expected property gain of $60 million and the recent NLRB ruling. Borden explains that the property gain is a result of high-value individual properties that have a different best use than what the company is currently using them for. He then hands over the discussion of the NLRB ruling to Chris Kempczinski, who strongly opposes it and believes it will undermine small business ownership in the US. McDonald's plans to contest the ruling in court and in Congress, and it is expected to have a widespread impact.

The speaker is confident that McDonald's will continue to be successful, even in the face of potential challenges such as the NLRB ruling. They also address questions about their IOM segment, stating that they are on track with their subsidies and are focused on maintaining strong margins through disciplined pricing and data analysis.

The speaker discusses the company's industry-leading momentum and investments in structural advantages, such as a modernized estate and digital platforms, which they believe will give them an advantage over competitors and lead to increased margins. They also mention a test in Texas for a takeaway-only location and the potential for smaller format restaurants, but state that the majority of their development opportunities are for traditional restaurants. They will provide more information on this at their upcoming Investor Day.

This summary was generated with AI and may contain some inaccuracies.