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Sad day at McDonald’s

Fast-food chain names Bell as CEO after Cantalupo dies of an apparent heart attack.
April 19, 2004: 2:14 PM EDT
By Parija Bhatnagar, CNN/Money Staff Writer

NEW YORK (CNN/Money) – The board of McDonald’s Corp. named Charlie Bell chief executive after Jim Cantalupo, the leader of the recent turnaround at the world’s biggest fast-food chain, died of an apparent heart attack Monday.

McDonald’s chairman and CEO Jim Cantalupo, 60, died of a heart attack Monday morning.
Bell, 43, will continue as president; he had been chief operating officer.

“Charlie Bell has worked side by side with Jim during these past 16 months to revitalize McDonald’s all over the world. He is ideally suited and prepared to continue Jim’s remarkable focus and discipline on our business,” the company said in a statement.

Cantalupo, 60, was at a McDonald’s convention in Orlando, Fla., when he was suddenly stricken.

“Jim was a brilliant man who brought tremendous leadership, energy and passion to his job. He made an indelible mark on McDonald’s system,” Andrew McKenna, the board’s presiding director, said in a statement. McKenna, 74, was named nonexecutive chairman.

Cantalupo had served as chairman and chief executive of the No. 1 fast-food restaurant chain since Jan. 1, 2003, and was widely credited with spearheading McDonald’s turnaround in service, quality and sales.

The company started to post double-digit percentage sales gains during Cantalupo’s tenure and McDonald’s stock has more than doubled in price since early 2003.

“Jim came in with a backdrop of sluggish sales, reduced earnings over several years and heavy price discounting,” said Dennis Milton, an analyst at S&P. “He focused on product development with the salads, all-white chicken products and other relevant food innovations such as the ‘adult happy meals’ with yogurt and fruit.”

A 30-year veteran of the company, Cantalupo joined McDonald’s as controller. He was named a regional manager for the Northeast in 1985, president of McDonald’s International in 1987, and president and chief executive officer in 1991.

Cantalupo also served on the board of directors of Sears, Roebuck & Co. (S: Research, Estimates) and on the Chicago Council on Foreign Relations. (For more on Cantalupo, click here).

Bell started young
Bell began his career with the fast-food chain at age 15 as a part-time crew member at a McDonald’s restaurant in Sydney, Australia.

He became the company’s youngest store manager in Australia at 19, a vice president at 27 and a member of the McDonald’s Australia board of directors by the time was 29 years old. (For more on Bell, click here).

Charlie Bell was named Cantalupo’s successor as CEO.
“This is an absolutely right choice,” said S&P’s Milton. “Cantalupo relied on Bell a lot for crafting the turnaround. This is someone who has been with the company for a significant period of time.”

Bell’s name was the first one discussed by analysts when asked about who will succeed Cantalupo.

“The company has been grooming Bell for that role and he’s certainly become more of a public face of the company recently,” said John Glass, analyst at CIBC World Markets.

Matthew DiFrisco, analyst with Harris Nesbitt Gerard, agreed.

“Cantalupo was the leader of the turnaround, but Bell was also deep into it,” DiFrisco said. “From an investment and corporate point of view, I think there’s enough depth in top management to sustain McDonald’s turnaround momentum, but certainly Jim’s leadership skills will be missed.”

Money manager Robert Olstein, who owns 1.5 million shares of McDonald’s in the Olstein Financial Alert Fund, wrote a letter to Cantalupo just a few days after he took over as CEO.

In it, he expressed concern that the company’s strategic direction of spending money on opening new restaurants while cannibalizing existing restaurants was a wrong move and that “the cash flow can be more profitably employed at a higher return under a stock buyback program.”

“Jim wrote back to me in August thanking me for the letter, and we’ve seen the changes he initiated,” said Olstein. “Cantalupo was a visionary who took the money and invested it into fixing the older restaurants and diversifying the menu. The company is running on all cylinders now. He turned this company around very quickly.”

Even so, S&P ‘s Milton sees some challenges ahead for the company. (For key facts about McDonald’s, click here).

“McDonald’s has set a reasonable growth target of 6 to 7 percent. That’s not very high for a company this size. With 31,000 stores worldwide, and about 58 percent franchise restaurants, there not much room to grow,” said Milton, who has a “hold” rating on the stock.

“The focus has to still be on improving existing stores and improving customer service.”

Shares of Oakbrook, Ill.-based McDonald’s (MCD: Research, Estimates) fell about 2 percent in afternoon trading.