JIM SKINNER:

I think we like to say we took our eyes off our fries and actually in 2002 the company made $2 billion so we weren’t exactly reporting losses. We did have one quarter where we had a little slip there at the end of 2002 but the truth is we lost our focus on what was most important and that was the customers in the restaurants and as you know, at the beginning of 2003 because that’s when you talked to Jim Cantelupo, we had created a revitalisation plan on the financial side of the business and our operating plan, which was the plan to win, to refocus our efforts against the customers in the restaurants and the existing restaurants, as opposed to enormous growth around the world in terms of numbers of new restaurants.

JEFF RANDALL:

When you say you took your eyes off the fries and forgot about the company’s customers, just flesh that out a bit because I remember seeing a survey in which McDonald’s was rated lower than every other entity in that survey including the tax man.

JIM SKINNER:

If you look at the history of 2002, we were looking all over the place for growth as compared to where the growth was really going to come from in our business, which is at the core of McDonald’s restaurants. As you know, we own some other brands, we got involved in some other businesses and we really took our eyes off of the things that were most important to our customers and that’s the service at the front counter and drive through and the delivery of the McDonald’s promise, around quality, service, cleanliness and value, which is very, very important to our brand.

JEFF RANDALL:

A lot of people would be surprised that a company as professional as McDonald’s couldn’t run a sandwich chain, it couldn’t run a Mexican grill, why was that?

JIM SKINNER:

Well we could run those businesses, we didn’t get out of those businesses because we couldn’t run them, we did very, very well with those businesses because most importantly when we were involved with Pret A Manger and involved with Chipotle, those businesses were run by the leadership of those organisations at that time who were good at running their business. We did have involvement in those businesses and they were going concerns for us but we learned that a 1% same store sales growth on the McDonald’s brand was generating more than $600 million and $125 million on the bottom line, those businesses all combined were not going to be able to give that sort of benefit. So focusing on the McDonald’s brand and growing our existing business with our competitive advantage which are our franchisees was the best way for McDonald’s to be able to revitalise the company.

JEFF RANDALL:

The other theme that sticks in my mind, Jim, from those days is the attack upon the company by the obesity police, if I can put it that way, campaigners who believe and probably still believe that fast food has turned America into a nation of fatties. One lawyer in particular told me he was going to hollow out McDonald’s. What happened to those campaigners?

JIM SKINNER:

Well the people are still out there, the customers and people that visit Brand McDonald’s are smarter than that and understand that on McDonald’s menu we have choice on the menu that makes people feel good about their visit to McDonald’s. We have a lot of educational material communicating nutritional information for more than thirty something years at McDonald’s and we also weighed in on the obesity and energy debate on physical activity. So as much as people would like to demonise Brand McDonald’s, I think we proved through our business model and the choice on our menu that we have something for everybody at McDonald’s and we are not necessarily the problem. We have a responsibility to also be part of the solution on societal issues and I think we’ve stepped up to the plate in a big way around menu and choice, particularly in terms of choice on the menu.

JEFF RANDALL:

Have you really, because I read a piece on the Chicago Tribune website only last week which accused you of still targeting children, the whole Ronald McDonald paraphernalia is out there simply to lure in kids, what do you say to that?

JIM SKINNER:

People don’t have the facts, this is really the problem, Jeff, and that is that Ronald McDonald is a force for good. 75000 families tonight and every night will be staying in a Ronald McDonald House some place around the world, he is [a force] for good and when it comes to the menu, Ronald McDonald does not sell food, he does not advertise food and our choices on the menu have proliferated over time so that today our consumers have something for everybody, they feel good about their visit at McDonald’s so to continue to demonise McDonald’s around this, you have to right size the issue in the first place. When you get up in the morning here in America, or if you get up in the morning in the UK, in America you have 900,000 choices of where to eat, 85% of meals are still taken at home and the average customer comes to McDonald’s three and a half times a month so when you start to think about suggesting that McDonald’s is the singular problem for this kind of thing, it’s a misnomer and it is really wrongfully communicated.

JEFF RANDALL:

So are you saying, Jim, the problem really in America is a lack of personal responsibility?

JIM SKINNER:

Well I think what I’m really saying is that people have so many choices today of where to eat, so many choices in terms of what to eat, that they do have to take some responsibility but we have a responsibility to educate them around our menu. Everybody has a responsibility to educate the consumer about the menu and then let them make the choice, but you also have to provide them with choices that are meaningful and they make a decision around nutrition. So if you look at labelling, the UK just did menu board labelling, we are doing menu board labelling here in the United States as part of the Patient Care Act and informing our customers and then letting them choose, that’s the most important thing relative to this whole issue.

JEFF RANDALL:

Since those dark days you have had a terrific run in business terms, 100 months I think of like for like …

JIM SKINNER:

In September it was 100 months of same store sales growth.

JEFF RANDALL:

That’s a fantastic performance but even giant redwood trees don’t grow to the sky, they stop at a point, what’s the limit to your growth? This can’t go on forever.

JIM SKINNER:

Well you have to define forever. I think in the medium term and the long term view for McDonald’s our business model is performing very, very well around the world because of the alignment around what we call our Plan To Win, our operating plan, led by our franchisees. A perfect example of this sustained growth is in the United Kingdom. At one time you probably know the United Kingdom was all wholly owned, all company owned restaurants. Today 65% of the restaurants are franchised. We know that our business model operates better in the hands of franchisees. Not all of the stores, we’ll always have company owned stores, but they lead the charge in investing in their business, delivering everyday affordability in their restaurants and they’re local in their communities. That business model, around our Plan to Win, the expectation of modernising the customer experience, optimising the menu and then increasing and improving accessibility to our restaurants, is a model that can be sustained for a long time.

JEFF RANDALL:

So where for you is the most exciting market in the world right now?

JIM SKINNER:

Well China is a big play for everybody right now.

JEFF RANDALL:

How many stores do you have?

JIM SKINNER:

1400, we’ll have that by the end of this year, we’ll have 2000 by 2013 I think it is and we’re going to be opening almost 200 stores this year and we are on a good pace there but we have a lot of exciting markets around the world. We are growing everywhere but predominantly, if you look at Europe, Spain, Italy, Poland, Russia, our markets for the UK, France and Germany continue to generate about 60% of the operating income coming out of Europe so we still have growth there and so we are growing everywhere.

JEFF RANDALL:

I think a lot of people would listen to that answer and say hang on a minute, this is all very, very odd. Here is McDonald’s the poster child of American capitalism and your very best market is in a country run by the Chinese communist party, how does that work?

JIM SKINNER:

Well I think I would like to say that I think the Chinese are very good in terms of economic responsibility both on behalf of their people and on behalf of their country, they know a good thing …

JEFF RANDALL:

Do you think the Americans could learn from the Chinese?

JIM SKINNER:

Well I don't know if I’d say that, I can only speak in terms of what the Chinese have done and the Chinese know a good thing when they see it, so being involved in a company like McDonald’s has been good for their economy, good for their consumer and good for them.

JEFF RANDALL:

Now over the last ten, twelve years you have had some product disasters, one that sticks in my mind was the McLean, a sort of veggie burger with seaweed in it. What did you learn from those lessons?

JIM SKINNER:

Well first of all the most important thing we learned is, you can’t build it and they will come. You have to have consumer insights in understanding what it is that customers really want and I would guess that many customers would have said yes, we’d like to have a vegetable burger, we’d like to have this on the menu but if it doesn’t taste good they won’t buy it and the McLean was a great idea but customers hated it and so today we have more consumer insight than at any time in our history, we do much more robust testing and test cells before we rolls something out on a national basis.

JEFF RANDALL:

Jim, I’ve read many times your thoughts on company succession, you say it is one of the most important jobs that a good manager can do. Our viewers will be surprised to learn that you are a man now in his late 60s, you are no longer a spring chicken, you must be coming to the end, what’s your succession plan for you?

JIM SKINNER:

Right, well I have a succession plan for me, I am obligated to do so, I obligate all the senior leaders of the organisation to have a couple of ready now candidates. I certainly wouldn’t tell you exactly what my plan was because I’m not ready to go yet but when I am I will have a candidate who is more than capable of continuing to lead our company …

JEFF RANDALL:

So you do have somebody in mind?

JIM SKINNER:

Of course.

JEFF RANDALL:

I read in the press it’s Don Thomson.

JIM SKINNER:

Well Don Thomson is certainly a key player in our organisation today but we have a very deep bench at McDonald’s, we have a number of people as we’ve proven when a guy like Steve Easterbrook steps away from Europe, steps away from the UK, very talented individual, Denny Henigan who steps away after a very long illustrious career at McDonald’s, when you look at what people like that have done for our brand but their talent is a very, very important thing in the industry and in the world at large and so they are very much sought after.

JEFF RANDALL:

So you’re 67, what have you got, another two or three years?

JIM SKINNER:

Perhaps, I’m taking it a year at a time, a day at a time. I serve at the pleasure of the board of directors, they are seeming to be fairly happy with me right now and I am happy with the job, I’m having fun and as long as that continues, I’m in.

JEFF RANDALL:

Jim, stay with us, we’ll be right back with this for more of your views on McDonalds and the global economy after the break

JEFF RANDALL:

Welcome back to my interview with Jim Skinner here at a McDonald’s restaurant just outside Chicago. Jim, you have an enormous business in the eurozone, it’s a really troubled area right now, what’s your take on what’s going on inside the eurozone and the EU?

JIM SKINNER:

Well Jeff, I always take a look at consumer confidence which is the biggest measure and then the traffic relative to McDonald’s which is the barometer that I look at in terms of our business model and we’ve been doing very well in the eurozone, very well in Europe, really led by the UK if you will over the last couple of years. The truth is, we continue to operate well, our business model operates well in spite of the fact that the economic situation there is a bit of a mess, isn’t it?

JEFF RANDALL:

To say the least. I think if the eurozone were a business, it would be out of business. Are you not concerned about the prospect of the whole thing just unravelling and falling apart?

JIM SKINNER:

Not really, I don't think so. The eurozone really was created in the European Union and the euro on my watch when I was President of Europe and I think it’s a concept that serves Europe well, I think it will continue to be successful. I think the Greek people have decided that they don’t want to be out of the euro so I think that is going to keep them in the best shape with all alternatives.

JEFF RANDALL:

Of course the UK, a very important market for you also, that’s outside the eurozone, how does the UK rate as far as you’re concerned in terms of overall management? I don’t mean McDonald’s management, I mean political management.

JIM SKINNER:

I think the UK rates very highly, they are involved in Maastricht and are still part of the European Union but they are not in the currency and that’s served them well and it continues to serve us well certainly as a business in the UK and in that leadership of course, being one of the big three countries in Europe, if you consider the UK to be part of Europe, I think you do. They certainly play an enormous role there from a leadership standpoint.

JEFF RANDALL:

What’s your management in the UK telling you about what they’re braced for because we are about to go through a wave of public sector cuts, are you expecting a downturn in your business?

JIM SKINNER:

We’re not expecting a downturn in the business. As you know, the UK increased the VAT by 2.5%, we took an immediate price increase to stave off some of that impact in our restaurants and we’ve not really seen a big impact on our business, as a matter of fact our business continues to do very well. 2011, 2012, all these upcoming months I think are going to be tough for everybody but our business model operates very well in all academies. We have to adapt a little bit here and there but they are optimistic.

JEFF RANDALL:

Let’s go back to China, I’m fascinated by the McDonald’s experience there. What’s it like dealing with the upper echelons of the communist party because as I understand it, in order to operate there you do have to have their licence?

JIM SKINNER:

Yes, well you do have to have that and our relationship has been very good with the government there. We are very effective around the world dealing with local governments, we are very transparent relative to our business model and in China in particular we have gotten along very, very well.

JEFF RANDALL:

Are they easy to deal with?

JIM SKINNER:

I would say easy to deal with would be the way I would phrase it but it is mostly because of our business model and our transparency and the way we go about developing our marketplaces there. We are smart enough to understand that we have to have local leadership, local management and we are really a local company in every country that we operate in.

JEFF RANDALL:

Jim, I’ve been coming to America now for more than thirty years, I cannot remember it being ever in a more distressing state economically, national debt up to 100% of GDP, credit down rated, unemployment up to 10%, what the hell is going on in the United States, what’s gone wrong?

JIM SKINNER:

Well I think first of all everybody saw the financial collapse in 2008 which was a run up that was eventually going to happen because people were over-borrowing, all led by the housing market problem, living a life that they desired versus a life they could afford, with easy credit. So we all know how it happened. The question is, how can we get out of this, get the ox out of the ditch and get moving along and so the biggest issue for us in America is job creation. When you have a normalised unemployment rate which is 4-5% and now it’s over 9%, consumer confidence and spending is at an all-time low because people don’t have confidence in the future, they are not able to food on the table at home, they don’t have any security around future jobs and we need some bipartisan work together in the Congress and the leadership of the country to be able to get jobs moving again.

JEFF RANDALL:

What does that mean, what does that entail because the government has borrowed money, it’s printed money, it’s spent money and as you said, unemployment is still above 9%?

JIM SKINNER:

Well again, I’m not an economist, I can’t speak to it specifically except to say just from a practical standpoint, in order to create jobs in America you are going to have to do something with the tax code, you are going to have to do something with spending …

JEFF RANDALL:

Do you mean cut taxes?

JIM SKINNER:

Yes, I think you have to cut taxes in some environments, particularly in the business community, we pay some of the highest taxes around the world relative to business corporate tax and there needs to be some levelling of the playing field there. Some will have to pay more, some will have to pay less but you have to have a commercial code and a change in the tax code. You also have to have less spending, the government has to spend less. They have a lot of work going on right now to reduce the deficit and to bring cuts about.

JEFF RANDALL:

Do you have any faith in that because I think a lot of people beyond this country would be shocked to learn that America’s debt, it’s national debt, is now 100% of GDP?

JIM SKINNER:

Well I have confidence in the fact that we will ultimately get there but it is going to take longer in my view to get the stability in the economy back to where we can all have some comfort in the future and so it is not going to be a short term fix but I have confidence in America, I have confidence in the Congress, in the leadership of the country that they will ultimately get there.

JEFF RANDALL:

Do you?

JIM SKINNER:

The leadership of the country will ultimately …

JEFF RANDALL:

Do you have confidence in the leadership because after all the leadership…

JIM SKINNER:

Not the specific leadership but the leadership of America, whoever that might be, will ultimately get this fixed and get us on the right track.

JEFF RANDALL:

You have millions of blue collar workers coming into your restaurants every day, what are they telling you about their state of mind?

JIM SKINNER:

Well their state of mind is very fragile right now. They have no confidence really so if you look at job creation, there is a lot of money on the sidelines, you just have to look at the earnings of for profit companies in America and that’s a very good story being told right now but it is not all leading to job creation. Now it’s leading to job creation in McDonald’s, we’ve created a lot of jobs at McDonald’s because our business is doing very well. Other businesses, until they have some certainty around what taxation is going to look like, what regulation is going to look like, how healthcare is going to play out which affects all of these blue collar people in their attitude about the future. Until that’s all defined and certain in terms of what the future looks like, we are going to continue to have a fragile environment for consumer confidence and consumer attitude.

JEFF RANDALL:

The Federal Government’s borrowing, 40c for every dollar it spends, that’s not going to go down in an election year next year is it?

JIM SKINNER:

Well I don't know how it will impact the election next year, it’s not a good story that’s for sure. That has to be fixed and everybody knows that. You have to be able to grow the economy, grow the GDP and you have to do that with fiscal responsibility and you have to be able to do it in an organic way and not through borrowings and increasing debt.

JEFF RANDALL:

Just look back over the last seven or eight years, the revival of McDonald’s, what does that story tell you about the American people?

JIM SKINNER:

I think the story of McDonald’s is an American story, if you will. The revitalisation started here, the sustainable growth of the organisation continues here in the United States and of course we are a United States company, we were founded here, but the story plays out in 119 countries, in 33,000 restaurants around the world. Focusing on what is important to the consumer, everyday affordability, great choice on the menu that makes them feel good about their visit to McDonald’s, great tasting food and doing that in a responsible way and as you continue to solve and be contributive to the solutions, to the environment, to the carbon footprint, to everyday value in the proposition that you’re offering, I think that plays well everywhere and particularly in America.

JEFF RANDALL:

You seem to be a lot better at meat and potatoes than you are at financial services, do you feel that Wall Street let down Main Street?

JIM SKINNER:

I don’t know that Wall Street let down Main Street, I think Main Street was really part of the problem. I think people when they are making personal decisions as you said, pursuing a lifestyle that they desire versus a lifestyle that they can afford, I think people know the difference so if you are talking about easy credit and people offering people money that they knew that they couldn’t necessarily pay back and convincing them that that was okay, I suppose that that would be what you could consider to be Wall Street or the banking system or the mortgage systems letting down the people in terms of what their lifestyle should be like. They should be playing within themselves or within their means so I think there were culprits all the way around.

JEFF RANDALL:

Have a look in the Jim Skinner crystal ball, where will this company be in ten years’ time?

JIM SKINNER:

Well I don't know. They asked Ray Kroc that many, many years ago and he said I don't know what will be selling in the year 2000 but I know that we’ll be selling more of it than anybody else and I think that rings true for McDonald’s. I think our footprint today and our business model and the way we go about looking at the future and in continuing to improve on the business model will serve us well ten years from now.

JEFF RANDALL:

More and more global expansion?

JIM SKINNER:

More and more global expansion. We have opportunity in virtually every country that we operate in today.

JEFF RANDALL:

Finally Jim, you’ve been at this company pretty much man and boy, you started at 16 so you have been here on and off for 50 years, when they write your epitaph what would you like to see on it?

JIM SKINNER:

Well first of all I had a little break in there, I worked as a crew person in Davenport, Iowa at 16, I went in the navy for ten years and I worked for McDonald’s the remaining 40 years after that, so two great brands …

JEFF RANDALL:

The US navy and McDonald’s!

JIM SKINNER:

I learned a lot about my life and I learned a lot about who I was in the US Navy and I learned a lot about that at McDonald’s. I think what I would like to have people say is that it was about the development of the people and the leadership of the organisation that took us into the 21st century that Jim was mainly accountable for.

END