---
title: "How McDonald's recovered from its worst year"
url: https://modern-mba.com/case/mcdonalds
sector: "Food & beverage"
sector_url: https://modern-mba.com/sector/food-and-beverage
published: 2021-11-29
updated: 2026-09-03
reading_time_minutes: 10
charts: 4
video: https://www.youtube.com/watch?v=tOzDk704x98
publisher: Modern MBA
license: All rights reserved. Quote with attribution and a link.
---

# How McDonald's recovered from its worst year

In 2015 McDonald's posted the worst performance in its eighty-year history, and it did so while trying to sell $12 build-your-own burgers, kale salads and premium clubhouse sandwiches. The turnaround came from abandoning that entirely. This case study covers what Steve Easterbrook actually changed — delivery years before competitors took it seriously, limited-run celebrity meals that repackage existing menu items at almost no cost, and a shift to 90% franchising that turned a declining top line into a rising margin.

## Key figures

- **18% → 25%** — Net profit margin, while total income declined
- **$125,000** — Cost to a franchisee of installing the Create Your Taste kiosks
- **1.5–2×** — What a delivery customer spends against an in-store order

## The argument

2015 was the year McDonald’s had an identity crisis in public. It killed the snack wrap, then tried to replace it with $12 build-your-own burgers, premium clubhouse sandwiches and kale salads, and hired a Mythbuster to prove the beef was beef. All of it flopped. Customers were not going to McDonald’s for gourmet food, and a kiosk was not going to change what they already knew it was. The result was the worst performance in the company’s eighty-year history, in every market on earth.

What Steve Easterbrook understood is that the premise was wrong, not the execution. Habitual consumption was over — the same thing Coke and Pepsi were learning — and no advertising would convince anyone the food was healthy. So he lowered the standard deliberately: stop trying to make customers regulars, and do everything to get them in the door occasionally. That produced the real wins. Delivery, prioritized years before Burger King or Chipotle took it seriously, because the food had always been engineered to survive a car ride. And limited-run celebrity meals, which began with Rick & Morty Szechuan sauce.

The celebrity meals are the sharpest idea because they cost almost nothing. A kale salad meant new farms, new supply chain and kale rotting whether it sold or not. A Travis Scott meal is the existing menu in different packaging for a few weeks. Meanwhile the real transformation was financial: total income has fallen for years while net margin climbed from 18% to 25%, because McDonald’s is deliberately becoming what it always partly was — a landlord collecting rent and royalties, handing the upside to franchisees for a smaller, steadier cheque.

## Charts

### The quarter that ended the old strategy

First-quarter net income. Profit fell a third year over year in Q1 2015, and the CEO was replaced two months after this number was reported.

|  | US dollars |
| --- | --- |
| Q1 2014 | $1,200.0M |
| Q1 2015 | $811.5M |

Source: Modern MBA, “How McDonald's recovered from its worst year”, published November 2021. Chart: https://modern-mba.com/case/mcdonalds#chart-1 · Sources: https://modern-mba.com/case/mcdonalds#sources

### The estate kept growing through the worst year it ever had

Franchised restaurants worldwide. 2015 was the worst performance in the company's history and the store count did not notice — the franchisees carry that risk.

|  | Counts |
| --- | --- |
| 2013 | 28,691 |
| 2014 | 29,544 |
| 2015 | 30,081 |
| 2016 | 31,230 |
| 2017 | 34,108 |
| 2018 | 35,085 |
| 2019 | 36,059 |
| 2020 | 36,521 |

Source: Modern MBA, “How McDonald's recovered from its worst year”, published November 2021. Chart: https://modern-mba.com/case/mcdonalds#chart-2 · Sources: https://modern-mba.com/case/mcdonalds#sources

### The average restaurant is where the identity crisis shows

Annual gross sales of the average franchised McDonald's. Three straight years of decline to $2.2M in 2015, then a recovery under Easterbrook.

|  | US dollars |
| --- | --- |
| 2013 | $2,448,538 |
| 2014 | $2,356,384 |
| 2015 | $2,201,589 |
| 2016 | $2,232,053 |
| 2017 | $2,292,453 |
| 2018 | $2,455,009 |
| 2019 | $2,516,903 |
| 2020 | $2,332,302 |

Source: Modern MBA, “How McDonald's recovered from its worst year”, published November 2021. Chart: https://modern-mba.com/case/mcdonalds#chart-3 · Sources: https://modern-mba.com/case/mcdonalds#sources

### Across the system that is $90 billion the company does not book

Combined gross sales of every franchised McDonald's. This is the number the landlord takes rent and a royalty on, not the revenue McDonald's reports.

|  | US dollars |
| --- | --- |
| 2013 | $70,251M |
| 2014 | $69,617M |
| 2015 | $66,226M |
| 2016 | $69,707M |
| 2017 | $78,191M |
| 2018 | $86,134M |
| 2019 | $90,757M |
| 2020 | $85,178M |

Source: Modern MBA, “How McDonald's recovered from its worst year”, published November 2021. Chart: https://modern-mba.com/case/mcdonalds#chart-4 · Sources: https://modern-mba.com/case/mcdonalds#sources


## Takeaways

1. 2015 was the worst year in the company's **80-year** history, and it was global — Europe, Asia and the West all declined at once. **Shake Shack** and **Five Guys** were beating the golden arches on quality, and **Chipotle** was proving people would pay a few dollars more for something more wholesome.
2. McDonald's response was to try to be a different restaurant. **Create Your Taste** sold **$12** build-your-own burgers with guacamole, mushrooms and brioche buns; the Bacon Clubhouse, Premium Crispy Chicken Clubhouse and Premium Grilled Chicken Bacon Clubhouse went on permanently; even the Dollar Menu got a premium addition. **All of it flopped.**
3. It was expensive for the wrong people. **The touchscreen kiosks rolled out for Create Your Taste cost franchise operators $125,000 each to install** — during the worst sales year in company history, sold to operators who already believed corporate was out of touch.
4. **Steve Easterbrook** took over in mid-2015 after 22 years at the company and did not soften the diagnosis on day one: *"The reality is our recent performance has been poor. The numbers don't lie."*
5. And he set the company on the path away from operating restaurants at all, targeting **90% of all stores franchised within three years** — continuing the long move out of the burger business and into the real estate business.
6. The business has always had two customers, and 2015 was a failure with both. The end consumer buys the food; **the franchise operator buys everything else** — wrappers, buns, fries, napkins, the stove, the fryer, the heat lamps, the ice cream machine — exclusively from McDonald's, on land McDonald's owns.
7. **Delivery was the biggest genuine bet and he made it years early.** While Burger King, Taco Bell and Chipotle hesitated, Easterbrook treated delivery as a first-class channel — correctly, because McDonald's food had been designed for decades to be transportable, packageable, sturdy enough for a car ride, reheatable and edible lukewarm.
8. The early numbers justified it immediately. By **2017** McDonald's was the global leader in fast food delivery at over **20%** of restaurants, and delivery customers were spending **1.5 to 2 times** what they spent in store. Over **60%** of McDonald's orders worldwide happen in the evening and late night.
9. It scaled fast from there: **$3 billion and 14% of revenue by 2019** at over **50%** of restaurants, then **$13 billion by 2021** at over **70%** of restaurants worldwide. McDonald's also helped normalize delivery for everyone else by promoting free delivery early.
10. **All-day breakfast was overrated as a business.** Launched to real consumer hype in 2015, the 2016 and 2017 figures show it did not significantly move sales. It improved the company's image and its connection with millennials — the earnings leap came later, in **2018 and 2019**, from the new Dollar Menu, the McDonald's Worldwide campaign and extending delivery to **DoorDash** and **Grubhub**.
11. **Rick & Morty Szechuan sauce in 2017** was the accident that became the strategy. The promotion was short-lived and the sauce did not stick, but the millennial demand it generated put McDonald's at the front of the internet. Rivals tried the same show and **none of them came close.**
12. The insight was to stop chasing regulars. Easterbrook accepted that habitual consumption was over — the same lesson **Coke** and **Pepsi** were learning — and **lowered the standard deliberately**: stop trying to convince people to eat McDonald's several times a week, and do everything to get them in the door once in a while.
13. So the menu was streamlined to the icons — **McNuggets, Filet-O-Fish, Big Macs, McFlurries** — items nobody pretends are healthy and everybody associates with McDonald's. No more salads, no more gourmet sandwiches.
14. **Celebrity meals are almost free to run, and that is the whole point.** A permanent item like the kale salad meant new suppliers, new farms, and reworked supply chain, storage and transport — with kale arriving daily and spoiling regardless of how it sold. **A Travis Scott meal is existing menu items in new packaging.** Asking suppliers for one limited run of a sauce, t-shirt or wrapper is cheap and easy at this scale.
15. The financial result is the part most people miss. **The stock rose 110% across five years and net margin went from 18% to 25% — while total income declined.** McDonald's is intentionally operating fewer restaurants and handing the highest-potential locations to franchisees, giving up earnings upside for a smaller but stable cash flow of royalties and rent.
16. **And the average franchised store is genuinely selling more**, not just multiplying. Total franchised sales rise partly because there are more franchised stores every year — but average annual sales per franchised restaurant have grown too, which is the number that says the food is actually moving.

## Common questions

### What happened to McDonald's in 2015?

It posted the worst performance in its eighty-year history, and the decline was global rather than American. The company had spent the year trying to be a different restaurant — $12 Create Your Taste burgers, premium clubhouse sandwiches, kale salads — while killing fan favorites like the snack wrap. Customers were not interested in gourmet food from McDonald's, and franchise operators were furious about spending $125,000 per store on kiosks for a program that flopped. The CEO left shortly afterward.

### What did Steve Easterbrook do to turn McDonald's around?

He stopped trying to convince people McDonald's was something it wasn't. He cut Create Your Taste, streamlined the menu back to icons like the Big Mac and McNuggets, reorganized the company from geographic regions into four market stages, targeted 90% franchising, and cleared out the executive bench — an estimated $300 million in annual savings. The two moves that mattered most were prioritizing delivery years before competitors and turning the Rick & Morty Szechuan sauce phenomenon into a permanent celebrity meal campaign.

### Why are McDonald's celebrity meals so profitable?

Because they are repackaging, not product development. A Travis Scott or BTS meal is burgers, fries and sauces already on the menu with new packaging and maybe one new sauce or a t-shirt — and asking suppliers for a single limited run of those is cheap at McDonald's scale. Compare that to the kale salad, which required finding new farms and suppliers and reworking storage and transport, with fresh kale arriving daily whether it sold or not. The celebrity meals also expire, which creates urgency, and they sell on starpower rather than on any change to the food.

### Was all-day breakfast actually successful for McDonald's?

Less than its reputation suggests. The 2016 and 2017 numbers show it did not significantly drive sales despite the consumer hype. What it did do was improve McDonald's image and its connection with millennials. The real sales leap came in 2018 and 2019 from a different set of moves: the new Dollar Menu, the McDonald's Worldwide campaign, and extending delivery to DoorDash and Grubhub.

### How big is McDonald's delivery business?

It went from a pilot to the largest in fast food in a few years. By 2017 McDonald's led globally with delivery in over 20% of restaurants; by 2019 it was a $3 billion business at 14% of revenue and over 50% of restaurants; by 2021 it was $13 billion and available in over 70% of restaurants worldwide. Delivery customers spend 1.5 to 2 times what in-store customers spend, and over 60% of McDonald's orders globally happen in the evening and late night.

### Why is McDonald's income declining if the stock is up?

Because the company is deliberately becoming a landlord instead of a restaurant operator. It has been handing its highest-potential locations to franchisees rather than running them, trading the earnings upside for a smaller but far more stable cash flow of royalties and rent. Total income has fallen for years while net profit margin climbed from 18% to 25% — and at McDonald's scale, seven points of margin is enormous. The stock rose 110% across five years on exactly that shift.

### Why did delivery work so well for McDonald's specifically?

Because the food had already been engineered for it, decades before delivery existed as a channel. McDonald's items are designed to be transportable, packageable, sturdy enough to survive a bumpy car ride, reheatable and edible lukewarm. Easterbrook recognized that the product was accidentally perfect for delivery while Burger King, Taco Bell and Chipotle were still hesitating — and arguably also recognized that nothing was going to save the dine-in experience.

### Who are McDonald's two customers?

The person eating the food, and the franchise operator running the restaurant. The second is where the money is. Operators buy everything from McDonald's exclusively — the buns, fries, wrappers and napkins, but also the stove, the fryer, the heat lamps and the ice cream machine — and rent the land and building from the company, which is the largest owner of real estate on earth. When operators revolted in 2015 over $125,000 kiosks and failing premium items, that was half the business turning on management.

## Discussion

- McDonald's spent 2015 trying to sell $12 burgers, kale salads and premium sandwiches, and the turnaround began by abandoning all of it. When is repositioning upmarket the right answer, and what should have told them it wasn't here?
- Easterbrook deliberately lowered the goal — stop chasing regulars, just get people in occasionally. Is accepting a worse version of your customer relationship a strategy or a surrender?
- A celebrity meal is existing menu items in new packaging; a kale salad rebuilds the supply chain. Where else does repackaging what you already have beat building something new, and when does that stop working?
- Total income has been falling for years while net margin climbed from 18% to 25%, because McDonald's keeps handing its best locations to franchisees. Whose interests does that trade serve, and over what time horizon?
- Delivery worked because the food was already engineered to survive transport — a decision made decades earlier for other reasons. What else is your business accidentally well-positioned for, and how would you find out?

## Sources

Systemwide and franchised sales, average sales per franchised restaurant, net profit margin, revenue mix and franchising ratios from McDonald's Corporation annual reports and 10-K filings; delivery penetration, delivery sales and order-size figures, the four-segment reorganization and estimated annual savings from company earnings calls and investor communications; kiosk installation cost and menu changes as reported at the time

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/mcdonalds](https://modern-mba.com/case/mcdonalds), or watch the episode at https://www.youtube.com/watch?v=tOzDk704x98.