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McDonald's decides to change its management recipe Chain to form five national divisions; Rensi retires as CEO; Fast food

OAK BROOK, ILL. — OAK BROOK, Ill. -- McDonald's Corp., faced with sagging U.S. sales and unhappy franchisees, announced sweeping changes in its U.S. management yesterday and said Edward Rensi, president and chief executive of McDonald's USA, was retiring.

The reorganization, which divides McDonald's U.S. business into five geographic divisions, each to be headed by its own president, addresses franchisee complaints that McDonald's headquarters was making too many decisions, including ill-advised ones such as its recent 55-cent sandwich promotion.

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The company said Rensi was retiring because of family commitments, but analysts suggested his departure was tied to the company's problems.

"I think Rensi is probably taking the fall a little bit for the slump in sales," said Damon Brundage, a NatWest Securities analyst.

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Rensi will be succeeded by Jack Greenberg, who in October became chairman of McDonald's USA with Rensi reporting to him instead of McDonald's Corp. Chairman and Chief Executive Michael Quinlan. A few days later, McDonald's reported that third-quarter net income rose less than expected, as competition ate into U.S. sales.

"But Greenberg's tenure has been less than an unmitigated success," Brundage said. Greenberg assumes his new posts immediately, the company said.

McDonald's shares closed down 68.75 cents to $48.0625 yesterday on trading of 5.4 million.

Brundage said the management restructuring, "from an investment standpoint, is a non-event" until McDonald's addresses questions about the desirability of the food it serves.

In some independent taste tests, consumers ranked McDonald's behind Wendy's International Inc. and Grand Metropolitan PLC's Burger King Corp., which analysts say have been gaining market share, partly because of menu innovations.

The world's largest fast-food franchiser has been in an increasingly difficult battle at home. The company's same-store sales for the first 21 days of June fell about 7.5 percent from the year-ago period.

McDonald's is expected to report second-quarter earnings next week.

The decline in June sales at U.S. stores open more than a year follows a drop of about 5 percent in May from the year-earlier month, analysts estimated.

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While McDonald's doesn't publicly disclose numbers for its same-store sales, they are sometimes released to franchise owners. The company did say sales were down in May and for much of June.

The restaurant chain was left without a significant promotional effort in June after it cut back its 55-cent sandwich promotion to breakfast-only fare, acknowledging that the ballyhooed campaign had failed.

Pub Date: 7/10/97


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