9: This is my kitchen table and also my filing system over much of the past three decades. I've been an investor. The

19: highest quality got me in fine. I've often thought as private equity. And then I started interviewing. I watch your interview

25: interviews those I know how to do. I've learned in doing my interviews how leaders make it to the

30: top. I asked him how much he wanted. He said 250. I said fine I didn't negotiate with him. I did no due diligence. I have

36: something I'd like to sell and how they stay there. You don't feel inadequate now because the only the second wealthiest man

42: to rise out right. I'm in Chicago today at the headquarters of McDonald's and right

49: now I'm standing in their toy hall which has the toys from the most popular Happy Meals I interviewed today. Chris Kaczynski

56: who's the CEO of McDonald's. And I wanted to ask him why the French fries are so good why they're Coca-Cola tastes so good.

62: And why McDonald's has been able to succeed over more than 60 years and become the largest restaurant chain in the world.

70: McDonald's has more than 60 years old now. And many companies over the last 60 years have gotten in the fast food business.

77: Some have done OK some going out of business. But McDonald's is by far the biggest. You have a market capitalization about one

82: hundred and seventy five billion dollars. What is it that made McDonald's by far the biggest of the fast food companies. I

88: think it starts with the brand. I mean we have a brand that is one of the most valuable brands in the world. And you know how

95: did you get to that brand. It was a combination of things. I mean it started with Ray Kroc recognized the importance of

101: ubiquity. And so that was part of the genius or genesis of doing a franchise model because for the franchise model he could get

110: capital deployed get restaurants build more quickly than he could if he was trying to do this all on his own. So that was

116: one idea. I think the second was the production system the speedy production system. It guaranteed the quality of the

123: experience that people knew. No matter where you went you could get a consistent experience at McDonald's. And then it certainly

130: came from you know are attachment in the local community. One of the things that also Ray Kroc was very focused on was building

139: the brand at the local level. That's why he wanted the franchisees engaged in the restaurants. And so you saw getting

145: involved in schools getting involved with know birthday parties all of those things. Those were all part of building the brand

151: that ultimately now I get the benefit of protecting and hopefully further shining the arches. So you are the CEO of this

161: company for the last couple of years. And as you've been doing this. Have you had to deal with a coded problem in particular

167: Cove. It's been an issue that's impacted us and every country that we operated in 120 countries. And it's been kind of a

174: unique experience because we've dealt with regional issues before. We've dealt with SaaS and mergers and swine flu and

182: things like that. But we've never had an issue where it impacted literally every country all at about the same time. So

189: huge issue for us. It varied around the world. Some places went into complete shutdown in the US. We were able to keep the

196: restaurants open but drive through only. And that was I think part of where are the genius of our system came to light which

203: is you were trying to manage this situation everything from Chicago. It never would work. The fact that we're a locally

210: owned company with franchisees they're able to act much more nimbly than than we could from the center and somehow or another

217: knock on wood a year later we are in a very strong spot and it's hard to believe really. So

224: when cove it hit many people didn't go out anymore. They weren't buying McDonald's products other people's products as well. Did

232: you have to lay off people furlough people. How did you deal with your employees or did franchisees have to do that. Yeah. We

238: didn't lay anybody off certainly from the company's standpoint. And our franchisees went through quite a bit of effort to make

245: sure that either through government programs or through things that they could do on their own that they kept

252: attached to their staff that they kept the staff working and available to the restaurants. And so I think you

258: know while we have 40000 restaurants I don't know every particular situation. By and large we were able to retain our

265: workforce through all of that. What did you learn through Kogut about how to manage the company differently better or some other

272: ways that you would have not probably learned if you had not gone through code. I certainly think one of the things that we

278: saw was our ability to stay connected through technology. WebEx zoom on Amazon chime. I've learned all the different

288: teleconferencing tools and they've all worked reasonably well for us. So I think you know we learned things there that we have

295: the ability to stay connected. I think the other thing though that it highlighted for us is that we ultimately are an

302: in-person business where in-person in the restaurant where in-person in the office. And so we you lose something from

309: culture you lose something from a connectedness by by being so remote. And so you know while it worked well for the time we're

317: committed to getting back into our offices getting back into the restaurants. And one of the problems I think some of the

322: franchisees are having not just McDonald's but getting people to come back to work either they don't want to come back to work or

327: they for health or other reasons or they want a higher compensation than they often would get to the kind of starting

332: job you might have. How hard is it been to get people to come back to work. It has been very challenging in the US. We have

339: not seen that issue as pronounced in Europe or elsewhere around the world but in the US at. Certainly has been a challenge. I

346: think it's a lot of different factors in it. Certainly the stimulus support had some element. But you know if I asked the

353: franchisees. OK so September is everything going to be good. Once the stimulus rolls off the we'll know there are other

359: things going on. So I think you know there's a variety of things at play but it has certainly been a challenge for us on staffing

366: at the restaurants. And it's putting pressure on wages which is what you see and you know any kind of capitalist system. So

373: employers like McDonald's are now having to pay more on wages. We announced in our company owned restaurants sort of an across

380: the board minimum 10 percent wage increase that has been carried forward by many of our franchisees. And I think we're just

387: having to get creative about how do we get people to come and interview for a job at McDonald's. And you're seeing our

395: franchisees do things like hey you know 50 dollars for an interview or free iPhone after 90 days. I mean that's sort of

404: all the things that we're having to come up with right now to make sure we can staff the restaurant. But most of the people

409: who are young who do work at McDonald's or they minimum wage people and they go up for minimum wage or are you above the

414: minimum wage the legal minimum wage now. Yeah we're above the legal minimum wage. So it's seven and a quarter. And there are

422: very few places these days that you can be competitive in the marketplace paying the federal minimum wage. I think from our

429: vantage point what we announced in our company owned restaurants is eleven dollars is the starting wage. And then you know as you

436: move up you would quickly progressed through that. If you are a restaurant manager someone who's baby has been there for a

442: couple of years you're earning anywhere from 15 to 20 dollars an hour. And I think that's been largely you're seeing a similar

449: type of thing with our franchisees. So while we don't collect information around what is you know the average wage paid by our

457: franchisees I would expect it's probably about 10 dollars that we're paying right now. Just because again the marketplace is

465: driving it. And I think that's always been one of the questions is you know is this something that you want to be legislated or

471: want it to be in the marketplace. Our view is we're going to do whatever we need to to be successful as a business but we also

479: don't oppose. If the federal minimum wage is addressed either. So during COBRA there were some problems you had as some

485: franchisees I guess where there were some strikes or something. Employees weren't happy. What was that all about. We always have

492: something going on at McDonald's around the world there certainly. I think what you're referencing there were some

498: protests about either were we doing enough to protect essential workers which is you know how we were deemed as a business. We

507: went to a lot of effort there to make sure that we provided PPE and did other things like social distancing the restaurant that

513: we had protests on that we'll get protests around wage rates that will crop up. So the thing about McDonald's is no matter

522: what is happening in society you can be certain it has some permutation that affects McDonald's. And it's both the challenge

529: of the job. But also what's interesting about.

553: Let's talk about the major things on your menu which I've sampled over the years of course. So the most popular thing that

560: you have on your menu is that the Big Mac or a Quarter Pounder or the French fries. Well I mean from a volume standpoint the

567: fries are by far the biggest within sandwiches is probably the Big Mac. It does vary a little bit around the world. But the Big

575: Mac is probably up there where the fries are intoxicating. Lee difficult to avoid eating. You start one. Can you tell us what's

584: the secret. What do you put in the in the batter or the cooking oil or whatever you do. That is the secret is with the potatoes.

591: What is it. We have a room here that I haven't taken you to that has all the secrets on that. But I would just say there is there

597: is a lot of things that go into it. It's starting with you know where we get the potatoes from and we have proprietary

605: relationships with that how those potatoes are then processed what we will put on those potatoes and then ultimately how

612: they're cooked in the restaurant the cooking oil that we use the amount of salt that we use. So there is a lot of things that go

620: into the secret recipe. Some people might say the French fries might not be that healthy. Some people might say that. I don't

626: know if you would say that. What would you say about that. I'd say you know what we try to

630: do on our menu is to have a choice. So we have a variety of things on our menu from more indulgent items to healthier items.

638: And you know it's no different than if you go to the grocery store you can go to the salad bar or you can go to the ice cream

644: section. And that's how we approach our restaurant which is about choice. The other thing though you know I get asked a lot

651: of times why don't you have more of this when you have more of that or why did you get rid of this.

656: It all comes down to did it sell. So our restaurant and what goes on the menu is all based on what moves gets on the menu

664: what doesn't move comes off the menu. And so ultimately we're letting the customer decide what we do or don't carry on the

670: menu. Since McDonald's was started some 60 plus years ago or so there's been a greater interest the United States and maybe

676: around the world and healthier eating. Yeah. Have you tried to reflect that in your menu. We've tried. And I would say you know

684: it gets back to again what what sells gets on the menu and stays on the menu.

690: What we have seen consistently is as we've tried to broaden more of what people might say are better for you items. There's just

699: not as strong a demand for them as there are for some of our iconic classics. And so you know we're not in the business of

706: telling people what they should or shouldn't eat. Our view is our obligation is to provide them with total transparency and

712: nutritional information to make sure that we afford them choice. But ultimately what the consumer buys is up to them. Suppose I'm

718: a vegetarian or a vegan and I want to go to McDonald's. Is there anything there for me there. So you could certainly have right

725: now a salad in a restaurant depending on if you're a vegetarian or vegan vegetarian there are gonna be other offerings that you

732: have if you're in India for example. We have quite a broad sample of vegetarian menu items less so if you're in Lubbock

741: Texas for example. So again it depends on the customer what the customer wants. But we've also talked about launching that

749: plant. And plant for us is a plant based burger that is available in some countries already. It's something that we're

757: going to be testing later in the US. So maybe we'll get you a mic plant another product. I don't want to overlook as you're

764: famous Coca-Cola. Now you used to work at Pepsi. I know. So to Pepsi people ever call you and to remind you that you have Coke

771: and maybe you should be linked to Pepsi. Had a few dialog over that over the years. And you know my my short answer is the way

778: to get Pepsi into McDonald's is get people to prefer Pepsi over Coke back to the point of we're going to sell whatever the

785: customer wants. So yes my my Pepsi friends periodically check it. But some people say that you're Coca-Cola is made in a

793: certain way that's better than the Coca-Cola goodbye in the bottle. So what is it that you do that's different when you're

797: Coca-Cola. So I would agree. I think it's better. One of the things that we have as an advantage is because of the volumes

804: that we do in our restaurant. Our volumes tend to be higher than than anybody else out there.

809: It allows us to buy equipment that is able to be tight traded or calibrated more precisely than maybe some of our competitors.

819: And so what we're able to do because of the equipment that we're able to buy which is more expensive equipment is we're able to

825: deliver what Coke would describe as their gold standard product on a more consistent basis than somebody who maybe has inferior

833: equipment in their restaurant. So I should disclose that I am an investor in McDonald's in effect because my firm bought a piece

841: of the China business with a Chinese partner and with McDonald's. Yep. And in China as I understand that chicken is

849: very popular maybe more so than beef. Is that unusual where chicken is more popular than beef in a given market. You know

857: China is largely a chicken market. I think this is one of those things. It does vary depending on which part of the world you're

863: in. Brazil tends to be more of a beef market. U.S. is about 50/50 between chicken and beef. So you know we do see the trends

872: evolving but chicken globally is growing faster than beef. And certainly our expectation over the next five years is that

880: chicken more so than beef will be the dominant protein in our restaurants. So there are four ways you can buy things at

885: McDonald's as I understand each begin with a D. So let's go go through that one is a drive through. Yep. Is that a big business

892: these days. Drive through. Drive through. It's a huge business for us particularly in the US. It's about 70 percent of the

898: business in the US in Europe. You would see it the inverse. You would see dining and being a much bigger part of the business in

904: Europe. But through the pandemic we did see drive through also become a pretty significant part of the business. All right.

910: Another deal is delivery. You have the ability to deliver. Do you deliver it yourself. You use one of the services that

916: deliver people's wallets at home. We do both. It started for us in Asia where we were doing our own delivery particularly in

923: China in the Middle East. We also have a pretty sizable delivery

928: business where we do the delivery ourselves. And then in other parts of the world like in the US we have partnered with third

934: party operators like Newbury to reduce Dash. So right now we do about six billion dollars of sales a year through delivery which

943: is growing you know high teens globally. It's been pretty remarkable. Another D is digital. You can buy things digitally.

951: How do you do that. So the app for us everything is moving to the app. I think for us it's been it's been an interesting

958: evolution to see where you know for years and years the center of the relationship that we had with the customer was in the

964: physical restaurant. And what we're seeing particularly with Gen Z and millennials as it's moving to a much more of a digital

971: relationship through the app. So yes today in almost every single one of our countries the US being a prime

979: example of that you can download the McDonald's app you can order your products through the app. And an exciting thing we're

986: doing right now this month is we're rolling out loyalty. So when you buy with the app you also get loyalty points you can redeem

993: later for food and other benefit this year frequent flyer version. You got it. And the last day is dying in which used to

1000: be the thing that people did but now is at a smaller and smaller part of your business. And you need all those spaces anymore in

1006: your restaurants. It's I think still a really important part of our business because a lot of the interaction and the memories

1015: that people form about McDonald's comes from the dining experience. But I think you're right in recognizing that it is

1022: certainly through the pandemic a less prevalent part of the business. I mean our view is that it is going to come back. I

1029: think dining and eating is such a social experience. There's always going to be an element of it that is in person. Now how

1036: much of it comes back. Time will tell. And if at some point you know maybe we need to

1041: reduce the space for dining seating that we have in our restaurants we can always calibrate and do that. But for now

1047: we're kind of on a watch and see mode. I assume you have a lot of people saying the food isn't as healthy as they might want it

1053: to be. Is that the biggest challenge for just growing the company. Ray Kroc had a famous line that gets quoted around here

1059: fairly often even today which is if you're not green and growing you're red and rotten.

1073: Let's talk about your background where did you grow up. So I was born in Boston grew up on the East Coast until we started moving

1080: around. Went to high school in Cincinnati and then ultimately went to college down in North Carolina. Well you can say the

1087: name. I went to Duke. Yes. We shared that right. Yep. And if you graduated what did you do. I went to Procter and Gamble. I went

1094: into their band brain management program at the headquarters in Cincinnati. And after that. So after that I went to Harvard

1101: Business School and got my MBA. And after that I went into consulting for a few years. But you spent a lot of time in the

1108: food world because you were before Pepsi. You were at your after after Pepsi were cramped. That's right. So do something about

1116: food that you really appealed to you. I'd say what I love is being in consumer industries. For me what I really find sort of

1124: energizing is having a tangible product that I can see touch feel etc. And also one that you know people can relate to. When

1132: I say you know I work at Pepsi or I work at Kraft or I work at McDonald's

1138: immediately you can always have a conversation with people and kind of a fun thing for me in my current job you know no matter

1144: where I am in the world. People have an opinion about McDonald's and want to talk to you

1150: about McDonald's and it just it makes the job fun. So you came here in what year. I was here in 2015. And then you rose up

1158: pretty quickly becoming the head of America's. That's right. And then in 2019 you became the CEO. That's right. And the stock is

1164: up and the market cap is up about 20 percent since then. Sighs from your board is happy. So far so good. Yeah but some of your

1171: predecessors had problems. They didn't last that long. And for health or other reasons. So is your bad karma you feel to being

1177: CEO or you think you can outlive the bad karma. Yeah I hope not. I try not to think about it too much actually. But you know I

1184: think when you're in these jobs you know your you're just very grateful for the time that you're in the role. And I don't spend

1192: a whole lot of time thinking about you know sort of. You know the future and all that stuff. It's about you know so

1200: long as I keep delivering for the company so long as we keep performing. I certainly feel really fortunate to be in the role

1207: that I'm in. So it's a global company. Now that cove it is not behind us but certainly receding a bit. Are you traveling the

1215: world or you expect to travel the world more. I do expect to travel starting next month and between now and the end of the

1223: year I've got five international trips lined up. When you travel international you're trying to tell the local franchisees to do

1230: more do a better job or what are you trying to do when you travel or are you recruiting franchisees or are you telling them

1235: why your new food products are going to be good or why out there. There's a variety of things I'm trying to get done when

1240: when I'm out there. The biggest thing is listening. So you know hearing what it what's on the mind of our franchisees hearing

1247: what's on the mind of our people that's one thing I'm looking at. The second is making sure that the strategies that we're

1253: talking about at a corporate level are they cascading down and we're seeing those in the restaurants a lot of times. What can

1259: happen is you think you've got clarity around what the strategy is and then it doesn't actually end up getting executed. So I'm

1266: looking at the connection between our strategy and is it showing up in the execution the restaurant. I also will just spend time

1273: being a little bit of a cheerleader when I go into the restaurant as you would imagine in the role. It's it's about

1280: creating excitement and appreciation for the crew working in that restaurant. So I try to do some of that. And then I also

1286: make time when I'm traveling to meet our young up and coming employees kind of our high potential. So there's a variety of

1292: things I'm doing. So when you meet with your local franchisees anywhere in the world do you have lunch at McDonald's or do you

1297: say let's go somewhere else. We will always eat in the restaurant. Dinner. We typically will go somewhere other than

1304: McDonald's but breakfast and lunch will always be in a McDonald's. And do you ever go to your competitors stores and

1310: kind of see what they're doing to get some new information. We do. We do usually don't stay there too long. Usually the service

1317: isn't as good and the food isn't as good either. But we will go in there just check. And so McDonald's is always coming up with

1323: new products here. Everybody's coming up with new products and every line of business. But you're always coming up with new

1328: food products that people will presumably like. But do you taste them all yourself. And do you have to approve a new product or

1335: you just say I've got to let people that do the food tasting. Yeah we have a great menu team. It's their job to work typically

1343: with franchisees and ultimately customers to develop the new food items. Occasionally I might just say hey I'd be interested

1350: in trying that. The team will usually humor me on those types of things.

1356: But if you don't like it what happens. Nothing. Ordinarily other than just it's interesting that you didn't like it. Where

1364: I will where I do exercise as CEO. Authorities around our core menu. So you can't touch the Big Mac. You can't touch the

1371: Quarter Pounder. You can't touch the fries. You can't touch a hamburger cheeseburger and make any changes to those without my

1379: approval. But outside of the core menu you have a lot of latitude and certainly new items. So what do you think is the

1384: biggest challenge of being the CEO of McDonald's. Just keep growing the company. Or I assume you have a lot of people saying

1391: the food isn't as healthy as they might want it to be. Is that the biggest challenge or just growing the company. I mean I

1398: think it's about as a business we have to be growing. And Ray Kroc had a famous line that gets quoted around here fairly often

1407: even today which is if you're not green and growing you're red and rotten. And I think that philosophy is part of our business

1415: which is we are a growth business. So how do we grow is a big part of it. But where it'll come up is and things like you were

1423: talking about for example the menu items if we're perceived as not meeting the needs of customers we're

1430: not going to grow. So if customers are seeking healthier food options and we're slow on delivering those it's going to impact

1437: our growth. So that's what I view my job is all about.