Hello and welcome to McDonald’s July 22, 2014 Investor Conference Call. At the request of McDonald’s Corporation this conference is being recorded. Following today’s presentation there will be a question-and-answer session for investors. (Operator Instructions). I would now like to turn the call over to Ms. Kathy Martin, Vice President of Investor Relations for McDonald’s Corporation. Ms. Martin, you may begin.

Thank you. Good morning everyone and thanks for joining us. With me on the call are our President and Chief Executive Officer, Don Thompson and our CFO, Pete Bensen. Today’s conference call is being webcast live and recorded for replay by phone, webcast, and podcast. And before I turn it over to Don I want to remind everyone that the forward-looking statements in our earnings release and 8-K filing also apply to our comments. And both documents are both available at www.investor.mcdonalds.com, as are reconciliations of any non-GAAP financial measures mentioned on today’s call with their corresponding GAAP measures. Now I’d like to turn it over to Don.

Thank you, Kathy and good morning everyone. Before I discuss our second quarter results I wanted to provide a brief perspective on our performance relative to our expectations. I also want to share with you how our strategies have evolved, to guide our actions going forward. As we shared with you at our Investor meeting last November and in the last couple of quarterly calls we entered 2014 well aware of the challenges we face for comparable sales and margins amid ongoing broad based challenges and cost pressures throughout our P&L. And we don't expect any material changes to this operating environment in the second half of the year. Our financial model is built on growing comparable sales, which in turn drive profitability. So when comparable sales are relatively flat as in second quarter our ability to grow income is significantly impacted. We've often said that there is no one silver bullet or single solution for driving sustained growth. In fact the key to our success over time has been that we've executed multiple initiatives simultaneously. Enduring success requires an ever stronger foundation. So we're pushing forward on a multiple fronts as we focus on those areas within our control to enhance our relevance and appeal to consumers. Earlier this year we evolved our Plan to Win Framework, refocusing our planning and actions on what matters most to our customers; relevant food choices, easier engagement with our brand through digital and greater transparency into the quality of our food and what we stand for as a brand. Serving good food through good people and being a good neighbor in the communities in which we operate is what McDonald’s stands for. In April we shared our updated global Plan to Win framework with the more than 15,000 franchises, suppliers and company…

Thanks, Don and hello everyone. The McDonald’s system and our financial model are built with the expectation of future sales growth. Yet we know from history that our top line growth overtime is neither consistent nor linear. In addition any growth is a product of the significant base off of which we operate which includes serving approximately 70 million customers every day and generating industry leading average unit volumes in virtually all of the countries in which we operate. Importantly this large base also provides financial resiliency during periods of softer performance. Though we did not meet our growth targets through the first six months McDonald’s still generated over $4.1 billion of operating income. Our strong financial foundation allows us to remain focused on the significant long term opportunities that we believe McDonald’s is uniquely positioned to seize, which is why we continue our disciplined approach to investing in targeted growth opportunities. We know that enduring success requires an ever stronger foundation. So we're pushing forward on multiple fronts guided by our evolved Plan to Win framework and the strategic growth priorities. As Don discussed it takes time to evaluate and align with franchises on the changes needed and then implement them in our restaurants, and time for customers to notice the changes and reward us with increased visits. I am confident that we're taking the right steps to strengthen our foundation and position the company for future growth. Our charge over the next 12 to 18 months is to accelerate the changes, effectively communicate the enhancements to our customers and execute at the highest standards in our restaurants. Now turning to the results, for the six months ended June system wide sales increased 3% in constant currencies primarily due to expansion. Combined operating margin declined 60 basis points to…

Great, thanks Pete. I am going to open the call for analysts and investor questions. (Operator Instructions). So we're going to start with Brian Bittner from Oppenheimer. Brian Bittner - Oppenheimer & Co.: Thank you very much and good morning. I guess my question here is, how much do you believe your ability to regrow same-store sales of the system is really completely under your control at this point and what I mean by that is you look at your business and your peak sales per unit, really without game changing platforms in the pipe, with competition that's I mean arguably more of a headwind than you've ever witnessed. And so I guess what I am trying to understand from your perspective is what is it really that you can tweak at this point given all these factors. There is really going to be some serious incremenality of this asset base, you talked about better service, improved marketing, getting better practice and I just wonder if that's enough to really continue to try to get incrementality out of a $2.6 million-$2.5 million as has been designed?

Hi, Brian this is Don, thanks for the question. Brian I think there is two different things that are taking place. If I look at the longer term and you are asking kind of two questions, I think the short and the longer-term. If I look at the longer-term Brian I would tell you the strategic growth priorities that are set for the U.S. business and around the world are solid, very solid and they are really focused on -- let's take the U.S., menu customization and personalization and I mentioned starting with Burger leadership, accelerating digital engagement, actually both the engagement and the experience, so e-commerce is a part of that along with some other things that we're looking at, delivering to our customer base. And then enhancing the overall brand relevance and thrust particularly around our food quality and employment opportunity, images and the side of the business that people look to relative to that. So and those things are part of a much broader sustainability movement, if you would in McDonald’s than many people have seen, I feel really, really good about where those strategies are going. Those combined with some of the broader development strategies we've seen in markets like APMEA, those longer-term strategies are solid. In the shorter-term what we're looking forward is to fortify the base the foundation of McDonald’s today so that we're ready for those growth opportunities. So to your point as we look at the basic market is strengthening right now. Are we're making sure that the presence that we have, the awareness that we have and share of voice that we have are solid, strong and allocated to the appropriate media, that's being fortified. But look at the operational reset in the U.S., it is focused on the peak periods and our ability to deliver at those peak periods, which has something to do clearly with the productivity in the restaurants and the staffing levels in the restaurant and these are things that our leadership operators have discussed in United States with our U.S. team and they are moving forward on those things. So supported by breakfast, the food quality messaging the operations focused on the peak periods and staffing scheduling positioning and reasserting market leadership those are foundational pieces. But they have to be re-established Brian. Those to your point are probably more incremental. The other things that I mention are longer term growth strategies are stronger relative to how we look at growth into the future.

Next question is from Matt DiFrisco from Buckingham.

Thank you. I wonder if you could talk a little bit or give us an update on the, the back of the house prep tables in the United States and if we could expect what type of margin benefit at the store level have you seen there, were the benefits you can talk about that as well as any sort of new products that we could see as far as with the extended refrigeration life, what does this enable you to do maybe going down the line?

Thanks Matt. I'll talk a little bit about you know broader menu pipeline and Pete talk about back of house. Relative to the broader menu pipeline in the U.S. right now they are really focused on the balance between our core products, the core classic favorites, the Big Macs, the nuggets, et cetera and also the new products and new innovation. There are numerous products and ideas that are in the pipeline and in the global pipeline from around the world. Our U.S. team is currently testing some of those and looking at some of those. They are still in the areas that we've mentioned of chicken, beef breakfast and beverages. So if I look at the broader menu of that part is intact. The relative to the kitchen and the productivity and efficiency and issues in the kitchen, the high density kitchen was intended to give us more flexibility and allow refrigeration on the prep table which gives us a little bit stronger capability relative to products. You will see -- will have seen a couple of products which you will be seeing more products relative to that but I want everyone keep in mind this is going to be a balanced approach. It is not all new products and not taking care of the core classics and favorites because we need to see baseline improvements in all core products as well as a boost over the baseline based upon the new products that we implement.

Our next question is from Joe Buckley, Bank of America.

Hi. Thank you. Sort of about broad question you’ve been talking about the global operating environment and certainly operating environment in the U.S has been soft for a couple of years now. And the strategies you are implementing are very execution focused and really haven't changed but also don’t seem to be gaining traction. What sort of we thinking about the next 12 to 18 months from an incremental change that can drive sales? And then secondly does it make sense to keep opening stores at the pace, the current pace of expansion, I guess I'm asking the question globally but especially in the U.S., where I think you have couple of 100 next doors targeted if I'm not mistaken?

Hi, Joe thanks for the question. Last part first, if you look at the U.S. and you look at a couple of hundred stores keep in mind a large portion of those are relocation base restaurants that we have. So on a percentile basis the U.S. is not opening a lot of stores. We are opening an opportunity and there continues to be market opportunities for McDonald's. But there is not a lot of restaurants in the U.S., I think their number’s about 120 stores net in the U.S. business. So the broader development opportunities and growth opportunities across the Asia Pacific, Middle East, Africa region across markets like Russia, clearly Pete I and the team are looking at some of the markets like the Russias of the world given this the current economic environment and determining what we decide to do Russia, China, what their pace of growth looks like. We do that in an ongoing way. In the U.S. the focal point that we have to grow this business is as I mentioned secure the foundational elements of the business. We got to make sure that our restaurants both company-operated and franchise are operating at the right level. So this is not about one side or the other side, this is simply about making sure that the restaurants are running well and if they are staffed effectively. Clearly there has been some level of trepidation relative to staffing up our restaurant based upon some legislative impact of things that are coming down the pipe, such as whether it be healthcare reform or the potential of minimum wage from a federal perspective but even more broadly more state minimum wage increases. So there is a little trepidation relative to that but as I mentioned earlier the franchisees with our company team in the U.S. have really had some great discussions around what they call operations reset and are focused on building a business at those peak periods. We understand how profitable that is, across the day parts but we are also not giving up on the growth strategies. Those growth strategies around digital engagement, around what we are able to do with our ability to have a balanced menu and to afford customization for our customers then incorporate it with some of the things that we are looking at it doing relative to re-establishing a higher respective brand profile for McDonald's, all those things are going to be well intact and moving forward. So over the next you know 12 to 18 months expect to see focused us on both those parallel paths. In the near term you are going to see more on the foundational piece through rest of 2014 you will see more of the other aspects at some point in 2015.

Our next question is from David Tarantino from Baird. David Tarantino - Robert W. Baird & Co.: Hi. Good morning. I just wanted to piggy back on the last question and maybe ask from a big pictures perspective why do you think it's taking so long to stabilize the sales trends in places like the U.S. and Germany and I guess part two of the question would be is do you think a need to make more radical changes to the strategy than what you are talking about based on the trajectory of the recovery or maybe lack of recovery that you are seeing?

Hi, David. Thanks for the question. I'll speak about this in two different ways. One is I'll give a little update on the priority markets and the other one is really how do we look at, I‘ll call it turnaround time. The -- taking the turnaround time piece first, we are clearly moving with a sense of urgency and anyone inside the system knows that and it's quite an aggressive sense of urgency, toward the end of the first quarter, we had priority market business as we had talked about earlier on one of our calls, post that time the market themselves with the franchisees and company employees have been getting together to discuss the local action plans that it takes to drive the business. It just so happens in most of these markets those opportunities are around the three areas we've been talking about, around the value/affordability arena, around the strength and focus of our marketing and how we are marketing with a balance between core and new products and also making sure that as we look at our broader business that we are focused on bringing customers forward and they understand the transparency and food quality levels within McDonald's. So those things are things we’re moving forward aggressively on and markets are putting those plans together. In a franchised organization like ours, it does take some time. As I mentioned the strength of our system is our franchisees, there is no doubt about it. At the same time it takes time to get that alignment and in time to get these things in a restaurant, in time for them to move forward. So we understand that, we understand the timeline, we want to do it right. I don't want to continue to have implementations that are not consumer-based…

Next question is from David Palmer from RBC.

Thank you. It does not look like McDonald’s is descending traffic like it's done in similar periods of low industry growth like '09. You got price increases, I think you said 3% and obviously you are not pounding away on the dollar menu like you did back then. But I know traffic is important to you guys. So when McDonald’s does improve its traffic how do you -- and perhaps it's a '15 event, what do you think would be that driver, the key ingredients for that is -- will it lean on operations changes and digital engagement or perhaps could we see a return to more active food news or something else? Thanks.

David, I think you just hit them but again I'll say that there is parallel paths here. We have to make sure that the foundation is strong enough to accept the digital strategies and engagement that we're going to be putting into the restaurant. The operational foundation has to be strong enough for us to be able to move forward with customization and personalization at the level that we want to at McDonald’s. Back in 2000 -- if you look into 2008-‘09 time frame this was a slightly different time frame. Several things and I'll mention a couple of them. One of them the strength of the broader legislative impact on cash flow was not as aggressive. Having said that what that means is that clearly as a franchisee or a franchisor as we look at the margins there is as I mentioned earlier there has been some trepidation around if you step up then is this going to hurt cash flow even more. But I think that the strength of the U.S team with our franchisees is addressing that and beginning to address that appropriately relative to the need for us to do that to move into these growth strategies. So that part is a little bit different. The other thing that is different is that back then we made a modification to the dollar menu which was merely product based and we were able to do that with one product change or at the time we had two product changes over about a five year period. At this point we're looking at the overall pricing structure of our menu board because we've seen a bit of a split relative to the lower end of the menu and then the higher end. All of these things the U.S team is looking at as we look at the price tier. So there a couple of differences David nonetheless we're not giving up on value or affordability and I know it's one of the things being implemented in the U.S. business.

And David as you think about pricing for the rest of this year, we've said we're up above 3% trailing '12 June but in May we had about 90 basis points of pricing roll off from a year ago and we only replaced that with about 30 basis points pricing. And as we look to that broader food away from home that's projected to be up 2.5% to 3.5% but it's only up 2.2% through June. So we're keeping an eye on all those metrics too. So don't think we aren't conscious of what that consumer is feeling today and their ability to come into McDonald’s more often. And yet kind of walking that delicate balance between that aspect of the business as-well-as some of these additional cost pressures that Don mentioned that are coming down the pike.

Next question is from Jeff Bernstein from Barclays.

Great. Thank you very much. Don maybe a follow-up, you talked a lot about the franchise system and how it takes little bit of time to move that system relative to if you owned it yourself. At the same time I think you noted earlier this year the franchisees, based on your meetings with them, your discussions and what not, they are still engaged and supportive of the corporate initiative and I guess you had your convention recently but perhaps that's driven by the fact that profitability is still close to peak levels. But what are the complaints or rumblings you are hearing if any of late, don’t know if any things that management feels the need that we need to prioritize this to address whether it's the new product news, the promotional activity, pricing, remodels. I am just kind of wondering how that sentiment, how those relationships just over the past couple of years the struggles are trending?

Thanks, Jeff. Anytime there is softness in cash flow we will have -- we have to have even more effective discussions even more planning together as to how we move the business and there will always be concerns when we see softness in cash flow. This is a for profit business and so that's going to occur. And our franchisees have those concerns as-well-as we do in company operated restaurants. So just to set that stage, we will always have -- when there is a softness in cash flow the conversations we're having now. And the franchisees are not -- they are not at all time highs, they have seen higher levels of cash flow. And so they want to get back to some of those levels clearly and we want them back at those levels so they can have personal cash flow but invest in the business and invest in the communities the way that they do. So we have engaged in clearly a lot more conversations and communications around where we take this business. The other thing I’ll say though there is a realization that the franchises have they are not seeking and searching for silver bullet either. They understand what they’ve executed in the past to grow the business has been a group of initiatives that have had an impact on multiple fronts. So as we look forward into the future the fact that we’re talking about food and the food experience, the fact that we’re talking about the in-restaurant experience with digital engagement experiences, the fact that we’re talking about how this brand is perceived by consumers and the local communities all of those things fit very well together and I think the franchisees are excited about that. Clearly in the current situation and environment there are concerns that the franchisees have. And that is what we’re working through with them but I will say that our leadership groups have been at the table and have been solid relative to the way that they are given input cost and guidance and certainly as they’d like to see us move-in and we’re moving in many of those areas.

Next question is from Jeff Farmer from Wells Fargo.

Thank you and just shifting gears a little bit, as you guys think about your plan to refranchise I think you said at least 1,500 restaurants by the end of 2016 how should we view that as potential impact on not only that consolidated operating income margin but also your ROIC number and again I just ask that in the context of -- I think we’re all pretty familiar with the margin tailwind that you saw going back to the mid to late 2000s with developmental licensing and things like that in Latin America big margin tailwind, big ROIC tailwind as you look at these group of 1,500 restaurants, how should we think about them?

Jeff yeah good question thanks. First of all in terms of the -- just the set expectations in terms of the timing, we’ve done about 200 refranchises through this year. When we think about it the next two years ’15 and ’16 will probably carry the bulk of that refranchising activity, in part because there are some markets that we really need to build that franchising infrastructure around to get that going in a more significant way. That being said, directionally while we haven’t quantified some of those benefits that you’re calling out directionally those are benefits that we would expect to see to the P&L. So we expect franchising does have a favorable impact to our overall combined operating margins. It does have a favorable impact to the G&A levels that we need to support the business. It does have a favorable impact to the ROIIC. So those are all directionally consistent with where we plan to go with this franchising.

Our next question is from John Glass from Morgan Stanley.

Don, I see moving with a urgency but around that you must have a set of deadlines internally and some goals and it seems like you’ve pushed this out originally maybe you’re talking about the first half of this year being a reset and then maybe some benefits in the second half now it seems like it’s really going to be pushed off in to ’15, so what are the milestones specifically that you hope to achieve this year or even next quarter towards those goals? And specifically when are we going to see tangible benefits from both the customization and the digital strategy either it’s this year or it’s ’15 what is the timeframe for those things?

Thanks John, the last part, customization and digital strategies we’re seeing certain things in some markets already. So we’ve got, clearly as I’ve mentioned there are some things that we’ve been doing in France, there are some things that we’re already doing in Australia from a test perspective. You’ll see some limited testing in the U.S. the latter part of the year, 2015 again you’ll see more robustness in terms of some of the things that will come to market in 2015. That is not saying that will be January 1st, that is saying that it will be in 2015. The aspects around what we’re doing on customization and personalization clearly there are some things that we’re looking at getting going this year relative to testing. It’s a big system getting the operators engaged and I think the U.S. system has begun to do that. So I would say that you’ll see more of that in 2015. That probably is as specific as I would get on that one. I think that we also have if I look across Europe some very similar initiatives, some of the markets as I mentioned UK, Sweden are doing some testing on digital and again we just mentioned France where they are, Australia will be a little sooner on the digital lane, however that's 2015 as we look at that, latter part of '14 you will see some. So that kind of gives you the digital perspective. The menu piece and reestablishing our leadership from a menu and marketing perspective, when we talk about milestones, the milestones I have for the priority market, so in Germany we had to reestablish our marketing function, we had to reestablish a more solid and balanced marketing plan and that is what the German team is working through…

Next question is from Jason West from Deutsche Bank.

Yeah, thanks. I guess just following up on lot of the other lines of questioning. You guys have obviously not been sitting on your hands in the last couple of years and you are seeing some progress in certain markets but overall some of these trends just seem to be getting worse. So I am just wondering if you feel you like have identified, why the traffic numbers are declining and you have much a better sense of that now than maybe you did a year ago. And yes the learning lab that you mentioned on the West Coast to help understand what customers want, kind of talk about how that's going to help you understand where the traffic is going and how to get people back in the stores?

Thanks for the question, Jason. When we talk about our learning lab, we have a learning lab in U.S. [inaudible], we have a digital function over in Europe and France, we had the architecture décor studio also over in France. So we've looked at -- and we have a lot of data on consumers and what consumers are looking for from a trend perspective. When we look at our base trend lines and why they move, where they move, why they would be [right] in these priority markets, we do today have a much better understanding of exactly why. We've had a bit of an understanding in the past, however our actions have not coincided with the actual, I would say the data themselves. So when we put actions in place and we've heard some of the actions, what we're doing now is looking at what those consumer expectations are and putting together plans that are directly linked and related to those consumer expectations. That is what we're attempting to do. So this is not chasing short-term sales or short-term guest counts, we're looking to continue to have a sustainability to grew guest count sales and profitability. So clearly there are things that we're looking at as we move forward and those are some of the initiatives as I've mentioned as we said on the problem.

Great. The next question is from Sara Senatore from Sanford Bernstein.

Hi. Thank you very much. I want to jump over to maybe another part of world, just ask about China because I know you have called it out as a point of strength. It looked like maybe June slowed in China maybe pretty meaningfully. I wanted to ask about that trend and I assume it's unrelated to some of the negatives press we've seen but if you could just comment on both of those dynamics. As-well-as, I think Pete mentioned maybe some there is still a drag on margins from that kind of the lower margin and the mix there. Is that in anyway a function, I think of you having gone after more of a value message or is it just the sort of continued need to kind of scale up to see the margins kind of hit more system wide averages?

Sara, it's Pete. I'll start on the margin in the APNEA and Don will talk more broadly about the trends in China. You know our APNEA margins over the next couple of quarters are going to be a little bit misleading because while we are seeing growth in individual countries so, the quarter and end year-to-date we’ve seen growth in the margin in Australia, in China, in Hong Kong our three capital markets in APNEA, the fact that we have refranchised in Australia which is our highest from a capital margin percentage is changing the mix to a lower margin percentage in total and the fact that the Australian dollar is weaker when you translate that in to U.S. dollars that’s giving even less weighting to Australia’s high margins overall. So that the segment, virtually all of the segment decline was as a result of these weighting and refranchising combinations. China itself grew margins in the quarter and year-to-date and the drag from the new stores was down significantly from a year ago. Now positive comps are clearly a driver of that but the team you may heard Dave Hoffmann and the team over there talk about the go-to-market strategy which is a very concentrated effort not only in China but in some of our other emerging markets to really look at the cost of opening the new restaurants and challenging the level of investment that we need today or can we build the restaurant with a little less cost today but build in such a way that we can expand it easily in the future when you know sales volumes dictate versus building the restaurant today for a sales volume that we might not achieve until five years from now. So a much smarter approach, I would say to the development and we are starting to see some of those benefits already in our margins in China and Don can talk a little bit more broadly about the market.

Thanks Sara and thanks Pete. Actually in China Sara, our market, the market is performing solidly, quite solidly and I’ll give you a little bit of background, little back drop on China relative to the economy and in our performance which actually if you look at our performance excluding the benefits of Avian influenza for the second quarter it still would have been positive. And over a two year perspective we are growing our business in China, we are growing market share in China, top ten markets, we’re outpacing the competition in terms of growing market share. So we are growing solidly in China. The macro-environment is still a challenge, there is fluctuating consumer sentiment and it’s expected to carry over in the quarter. So IO visits are starting to recover a bit but it’s a little bit lower then it was a year ago. I would tell you that despite that some of things we have talked about in some of the other markets actually bode true for China and we made those adjustments. So all day value we went from just a lunch time value to all day value platform, that continues to perform well. Again relative to Avian influenza we are comping on top of what the impact of that was, brand extensions are helping us to move forward. We focus on breakfast in China for the last several years, that continuing to be a positive contributor. Some of these things are even in the face of other initiatives that we implemented, some of the things we focused on with the night business last year. So China is actually moving in a positive direction and we feel -- we feel solid about the performance in China. It is still a challenging economy however and everyone should realize that GDP is below 8% and we know what that means. There is still some acceleration in some of the operating related cost leverage of the labor as they look to normalize if you would or redistribute to some of the wealth across China. So everyone grows a bit. But they are still growing on [mobile], we are still growing dry fruits, our sites at the peak points are solid in terms of new sites that we’re opening. We culled some of the sites last year because we thought they may have been too early. I think [Kenneth] and the team has done a great job with that. So relative to China we are feeling again that the performance in China is solid.

Great. So we have six folks still in the queue. I know we are just about out of time. But we are going to take those six. So for those of you who can stay over for few minutes you know we will carry on. So next question is from Bryan Elliott from Raymond James.

Good afternoon and thanks. Just as you look at the news this week out of China, are we at a tipping point, are you considering potentially backwardly integrating to protect your brand and what really are the solutions to the situation there, from a suppliers standpoint.

Hi Bryan. You know we have some very solid suppliers across the McDonald’s system and they as we are committed to the highest standards of food safety for our customer. And that's always the number one priority. As we look at some of the alleged issues that are taking place now. If those things, clearly are confirmed at a level that we would think it is a higher level decision that has caused us to have a breach relative to consumer trust we would deal with that effectively, swiftly and appropriately. We are no longer serving a product from the primary facility there, that has the challenges and the issues. I know that there is a couple of other facilities that they had, that have been cleared now by the Chinese government, the management thoroughly investigated. We are cooperating fully with the authorities. As you know we do have audits of our suppliers. In this case we do feel that we were a bit deceived relative to one of these plaints. So we are clearly looking at that. What does it mean from a broader perspective relative to integration of the supply chain; we enjoy and have benefitted from what we call the three-legged stool which is the supply chain as a separate entity, just as our franchisees are a separate entity other than McDonalds Corporation. They bring us great innovation. They have grown with us in multiple countries around the world, they understand our expectations, they understand where we value consumer safety and our standards and they understand the fact that they would be under scrutiny if there is ever a challenge relative to our consumers. So we continue to make those points and we continue to drive forward to make sure that we protect our customers and protect the broader brand interest as we move forward on issues like this one.

Next question is from John Ivankoe from JPMorgan.

Hi great, thank you. Just some related U.S. topics if I may, I remember back in 2002 again I think actually using some franchise consultants, you really drove some QSC in the franchisees and either showed them a path to measurable improvement at the store level or showed them a path to exiting the system. So at what point are you kind of like in another phase in terms of kind of getting a 20 year commitment out of franchisees and making sure you have the right people on board with you? And the second kind of I think related topic is around the effectiveness and the efficiency of our advertising and your product development. It does seem to be lagging your peers even a fraction of the size. So I was wondering if there was a structural opportunity to change the effectiveness and the speed to market of that advertising and product development in the U.S. or whether it's just I think as I’ve heard that it’s just about improving executional tactics. Thanks.

Right, John thanks for the question. Relative to the franchises and John we have a lot of collaboration and committees that are shared between the franchises and the company and our suppliers. So as we engage and address the business we move forward, we are -- we have a lot of communication with each other. One of those points of communications clearly every year is around operating standards of McDonald and what we call growth criteria and also the restaurant operation improvement process which is really focused on quality, food quality, service and cleanliness in the restaurants and we've had a clearly a lot of conversations about how and when and where, and what the processes are for abiding by that. We still have those processes in place. Those processes started back to your point in 2001-‘2 timeframe. They are in place everything from a process for improvement for those restaurants that are not performing at the appropriate levels to how we look at franchise engagement, how we look at our own company operated restaurant performance. So we don't need to have a separate initiative and I think as you talked about it was almost I got a sense of an upper out kind of a conversation. We have ongoing conversation with each other relative to the performance of our restaurants and clearly are we having those now? Yes we are, we have them all the time. But what's important is that we focus on the standards and adherence to the standard not some kind of a process to move franchises out of the business. We have a process and frankly based on our improvement processes we tend to be able to improve the business in a different way. We are no more or less aggressive than we were in 2002 at this point in time. It is very similar. Relative to marketing, there is a focus on marketing effectiveness. You are absolutely right as we look at shareholder voice, as we look at the impact that our creative has, as we look at the reach that, that creative has and we look at the distribution outlets and our media allocation. Having said that, there is also a focus on how our marketing messages are conveying the emotional quotient if you would of the brand and that means there has to be changes. So when I mentioned leadership changes in marketing or agency changes those are not incremental effectiveness changes John, those are changes based upon the fact that we may not be getting the content or the reach or the awareness that we desire and demand as a McDonald’s brand. And when we make those changes we don’t do it lightly. Those are the kind of changes that we need to drive the business and those changes are occurring in several of our critical markets around the world.

Next question is from [RJ Hardwe] from Morningstar.

Thanks for taking my question. Wanted to dive down into Europe a little bit more. Looks like the June results the negative 3.4% comp, little bit softer than what we’ve seen, Europe had recently been a point of relative outperformance. Just wanted to make sure there wasn’t anything more than this just the things you mentioned in Germany between the marketing changes there as well as the Russia situation going on, whether are you seeing competition intensify or seeing less impact from reimagining or some of the menu innovations there, just kind of want to get a better sense of your perspective on Europe.

Thanks RJ. I think you hit it pretty well. Germany still remains weak and showed further deceleration in the second quarter. As I mentioned our teams and the franchisees and the changes we’ve made in terms of leadership and process those things are moving forward. It’s going to take a while in Germany. We have lost share in that market. If I look at France and the UK those markets are gaining share and our performance has been solid and we had similar conversations about France several years, could we make the turn and some of the things that we put in place in France has proved [inaudible] on the affordability and we’ve added great balance across the menu in terms of the core product. We’ve has new innovations, we’ve added digital strategies that have been implemented. So those things are even in a very-very tough environment our business in France is still providing and so I think it goes to show all the things that we’re talking about are not just things that we dream up but they are the things that we have implemented in the markets around the world. So France is still performing, UK is performing as we mentioned they just last lapped on top of the blended ice rollout but we still have a solid performance there, a very balanced approach to the business and we’re still moving forward and growing. There has been one thing we’ve seen a little bit of decline in retail footfall traffic but aside from that, RJ nothing I would say was much broader than that point. Russia slowdown in comp sales there, the economy has recently entered a recession. It’s taking a hit based upon the geopolitical issues, they are paired there. There is lower consumer confidence. We have seen some new competitors enter the market but as you know that is a market that we have been in a market that we’re growing in and growing with the right crews and we feel very good about our positioning there and the opportunities in front of us in Russia but at this point there is -- we are seeing some softness in Russia. I think largely due to some of the geopolitical concerns and consumer confidence.

Next question is from [Howard Penny from Hagi].

Hi thank you very much. Don the last time you’ve gone through an extended period of declining same store sales it took a much bigger event and a major sort of restructuring to get, to realign the organization. I know you put forth the plans to improve sales and you believe I honestly believe that you think you believe you’ve got the right plans but the fact of matter is you might not have the right plan and there could be some give and take and it might not work as you’ve laid it out. Do you have a contingency plan or back-up plan to what might not work or what you put forth today and what are the chances do you think that an extended period of sales will lead to a bigger sort of effort to improve your top line sales? Thanks very much.

Thanks for the question, Howard. I know you and I talked recently when we were together at the investor meeting last year, some of the basic fundamental things that we talked about are things that we’re focused on now, to shore up the business clearly. Relative to contingencies, it is the great thing about the McDonald’s system is we are in 119 countries. We have a very diverse portfolio of [witnesses], so we have the opportunity to test multiple things in parts of initiatives in different areas of the world. So when I talk about the digital strategy part of the test was taken place in France. What we’re implementing as a result of those learnings in Australia, what subsets of that are being tested in the Sweden, and the U.S. and the UKs of the world, really as we formulate these strategies we’re constantly, I guess you’d say iterating around the improvements in the data that we’ve seen in several markets. So relative to the contingencies I guess I would say it’s almost a live in contingency as to the way that we implement major initiatives. So the digital initiative being one, the customization and personalization efforts being another, even on those it maybe based upon a different product complement. So in the U.S it's going to be about Burger leadership, many markets across Europe it will be about that initially. There are other areas where it would be the chicken platforms and portfolios. So we're learning as we go. Outside of focusing -- the things that we're focused on are we know we have to get much better at and they are also areas that we believe great opportunity for us. So the whole notion of the respected brand and our sustainability based efforts and how things play…

Next question is from Keith Siegner from UBS.

Thank you very much. I'd like to circle back to a question on the consumer insights from earlier and maybe just ask you in a different way especially given how much attention this got at the November Analyst Day last year. Forgetting the plan for a second, just looking at that data that you are collecting which I understand is pretty robust. The customers who aren't coming as much or maybe aren't coming these days, why are they saying that's the case. I mean what are they highlighting and kind of how has that evolved as the year progress. Is it a lack of compelling new news, is helpfulness or quality in general coming up more often, is it the -- what are the folks not coming actually saying in the data? Thanks.

Well, Keith that's a big question for a global brand.

Just the U.S.

If you look into U.S., there are several things that we see in the U.S. You all know that the QSR industry as a whole is soft in the U.S. There are a lot of things that are out there in the U.S. right now ranging from as I've mentioned some of the legislative matters that are on the board relative to impact of healthcare next year, potential minimal wage changes, what happens relative to the immigration reform cost particularly around [inaudible]. There are challenges and changes relative to legislation in terms of whether or not there will be re-ups on some of the tax credits, tax benefits. So there are a lot of things that our franchisees are looking at relative to cash flow. That is one of the things that then flows through relative to execution in the restaurant. When we first began operations reset we were hearing some customers at the restaurants were getting too complicated, it was a little confusing on the menu boards. We needed to get some level of simplification. I would say at the same time we're saying and customers are saying we want a little more customization or personalization but we want some different taste. We want some different condiments, the U.S. is moving forward with the high density kitchen and prep for that. We're also hearing that there are some consumer confidence related concerns around discretionary spending. In the U.S. we see a bifurcation based upon what's taking place in markets that are greater than $75,000 from an overall income perspective and those that are less than say $45,000. These are two different worlds today. Those markets at the higher end discretionary spending are still flowing fairly well, markets at the lower end it's a little bit tighter. The geographic positioning of McDonald’s around the U.S. is broad and so we're in both of those sub markets and pretty good distribution. That's a little different than some of our competitor set. So clearly the economy is a bit of a concern and we're hopeful that the economy will continue to improve and that improvement will be across all segments. But we also have to make sure that we're thriving in this environment, so having the right affordability messaging which maybe slightly different in some of these markets than it is in others.

All right. Our last question is from Paul Westra from Stifel. Paul Westra - Stifel Nicolaus & Co.: Great. Thanks. Very similar question to Keith's about the U.S business. Maybe talk a little bit about more if you could about the weakness perhaps in the overall U.S. QSR category and specifically do you sense any incremental competitive challenges coming from the convenient store business which you mentioned before and the low end perhaps and perhaps quick casual on the high end. I know this year emphasis is on the increasing frequency of the base business and perhaps base consumer, the ones have stabilized perhaps talk a little bit about the more intermediate term opportunity or product line expansions maybe -- or maybe regain some share from these lower end and higher end categories?

Yeah, Paul. I would tell you that several years ago we began to have conversations just around broader market segments and sets and what we were seeing. I would tell anyplace a person can stop we view as a competitor whether it’s a petrol station or it’s a convenience store, it’s a grocery store, ready to eat food or take home food we view the whole set a competitor. As we look at our business when you got that many places that you can view as a competitor what you have to focus on is what you are good at and what you know you can excel at and differentiate. We know that the speed of service at McDonald's, the accuracy of the service, the food quality even in our segment which is a quick service restaurant segment are critically important. The transparency of our food and the fact that we know that we have very high quality food at McDonald's is one of the messages that I think we have to get out even stronger and it’s one of the things that the overall quick service industry has struggled with for years and years and years. And so we believe that some of things that we have talked about from many personalization, customization high density kitchens, highlighting some of the condiments on the prep table those things also help us, but it also had to be spread throughout our marketing and our awareness campaigns, those are the things that we are focused on and make sure that those things take place. You know as you look at food away from home right now we know that the food away from home industry is one of that is still increasing albeit about a two percentile rate, interestingly enough food at home is 2.4% increase. So they’re all in the ball park of normalization I guess I call it normal inflation at this point in time. If one of those shoots up or down we have to take note of it relative to what that meets to our affordability platforms. If the economy gets better or worse we have note of that relative to what impact it may have on our breakfast business. So, there is a lot of things we look at. I couldn’t give you Paul you know super specifics on any one item but there is a lot of things we have to look as we mentioned in the business particularly in the U.S. and go forward.

Okay, thanks. And we are going to go right into Don’s closing comments.

Thank you all very much. We wanted to take a little extra time because we know you have questions, interest relative to the McDonald's business. I want to thank all of you for joining us this morning. We remain committed as you can tell to the Plan on Win and our strategic growth priorities as we work to strengthen the key foundational elements of our business and I have mentioned how critical those are. We know that we can drive our business through the growth initiatives that will enhance our customers relative to the field. We are seeing that in some of the markets around the world. Those initiatives and implementations will be broader as we move forward. Our defensible competitive advantages, our resilient business model, the communications and alignment that we strive for and have with owner operators, our suppliers and company teams, those things give me confidence that as we execute our plans to drive profitable growth for our system we will be successful and our shareholders will reap the benefits of that over the long-term. So thanks again for joining us this morning. Have a great day everyone.

This does conclude today’s call and at this time you may disconnect.