Hello and welcome to McDonald's April 25, 2017, 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. I would now like to turn the conference over to Mr. Mike Flores, Investor Relations Officer for McDonald's Corporation. Mr. Flores, you may begin.

Hello, everyone, and thank you for joining us. With me on the call are President and Chief Executive Officer, Steve Easterbrook; and Chief Financial Officer, Kevin Ozan. Today's conference call is being webcast live and recorded for replay by webcast. Now before I turn it over to Steve, I want to remind everyone that the forward-looking statements in our earnings release and 8-K filing also apply to our comments. Both documents are available on www.investor.McDonalds.com, as are the reconciliations of any non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures. And now, I'd like to turn it over to Steve. Steve?

Thanks, Mike. Good morning, everyone. We delivered a strong first quarter, with global comparable sales of 4%, marking our seventh consecutive quarter of positive global comparable sales. Globally, guest counts were up 0.6%, as customers visited McDonald's more in the first quarter of 2017 from the same period of 2016. And our bottom line performance was also strong. Diluted earnings per share increased 19% for the quarter in constant currencies. At our Investor Day, we talked about how we fortified our foundation and how we're now fit for purpose. Today, we're running better restaurants. We're keenly focused on operations excellence and on the fundamentals of quality, service, cleanliness and value. And it's making a difference for customers. Our greatest opportunities are at the core of our business. And we're continuing to gain momentum as we build a better McDonald's, one that delights customers with the taste and quality of our food, offers the highest level of convenience and provides great value. And as we shift from revitalizing the business to strengthening and growing it, we're going to talk about the moves we are making within the context of our Velocity Growth Plan. This will enable us to provide more texture on how the long-term plans we shared during our Investor Day in March are driving everything we're doing. So let's start by going deeper on our performance. And as we do that, we're going to change things up a little. Our leadership team has a great rapport and I'm especially grateful for the partnership of our Chief Financial Officer, Kevin Ozan. And with that said, I thought the two of us ought to partner on this call like we do on a daily basis. So I'm now going to toss it over to him.

Thanks, Steve. 2017 is off to a good start. We built upon strong prior-year results that benefited from the launch of All Day Breakfast in the U.S. and leap day, which created a 1% hurdle for this year's comparable sale across all segments. Our top line performance is also starting to reflect the emphasis that we're placing on growing guest counts, which continues to be our top priority. During the quarter, we saw varying degrees of success, with strong sales in guest count contributions from Japan, the UK, and Canada. Guest traffic is beginning to strengthen in other markets such as the U.S. and Germany, though their guest counts remained negative for the quarter. So before Steve walks through the steps we're taking to continue building momentum, let's take a look at first quarter sales highlights in each of our segments, starting in the U.S. We're in a stronger position in the U.S. today, a cumulative impact of the moves we've made the past couple of years. Comparable sales grew 1.7% for the quarter, fueled by ongoing customer enthusiasm for All Day Breakfast, the Big Mac promotion featuring the Grand Mac and Mac Jr, and our beverage value offerings. We also delivered a positive comp gap of 2.1% versus QSR sandwich competitors. In the International Lead segment, comparable sales increased 2.8% for the quarter, driven primarily by continued momentum in the UK and Canada's successful launch of All Day Breakfast. In the High Growth segment, comparable sales grew 3.8%, with positive results across all markets for the second consecutive quarter. China's continued momentum was the strongest driver of segment performance. And the Foundational Markets grew comparable sales 10.7% for the quarter, with solid results across the entire segment. Japan was the biggest contributor, with double-digit comparable sales on top of double-digit performance in the first quarter of 2016.

So thanks for that, Kevin. Those are the drivers of the of the top line momentum in the quarter. I'd now like to turn to our strategy and the actions we're taking to sustain that momentum for the long-term, which we shared at our March Investor Day. Our Velocity Growth Plan is designed to grow guest counts by retaining customers who visit us today, regaining lapsed customers, and converting casual customers to committed customers, giving each of them more reasons to visit McDonald's more often. At the same time, we're creating the best experience for customers, leveraging our size and scale. We're prioritizing three velocity accelerators designed to drive growth on top of everything else we're doing, and those three are digital, delivery and Experience of the Future, or as we call it EOTF. Taken together, these actions enable us to bring the biggest benefit to the most customers in the shortest possible time. So, today, I want to talk about the steps we're taking to regain customers by focusing on food quality, convenience and value. First, food quality; we know consumers place high value on taste. Serving delicious food is imperative. And as good taste and quality are so closely interrelated, we also continue to build on the moves we've made with cage-free eggs and sustainable beef to improve the quality of our food. Last month, we announced that we will serve fresh quarter pound beef patties prepared when ordered in U.S. restaurants by mid-2018. I had the chance to taste the burgers and talk with customers and franchisees in Dallas and Kevin did the same in Tulsa, and we both left convinced that customers will appreciate the improvement as we bring fresh beef around the U.S. As we expand our menu to offer premium burgers in markets around…

I talked about the strength of our top line results earlier. As Steve mentioned at the beginning of our call, our bottom line performance was also strong. Operating income grew by more than $250 million, or 16% in constant currencies. And earnings per share was up 19% in constant currencies. Let's dive into the performance drivers for the quarter and their impact on our financials. The increase in first quarter operating income reflects broad-based strength across all segments, a testament to our ongoing strategic initiatives. Over the last two years, we've enhanced the strength and stability of our business as we've evolved to a more heavily-franchised organization, with more restaurants now in the hands of our outstanding local Owner/Operators. This shift in our ownership structure also has reduced our capital and G&A needs going forward. And we are very focused on growing top line sales and profitable guest counts that directly support our critical revenue stream, as well as Owner/Operator cash flows. For first quarter, franchise revenues increased 7% in constant currencies, reflecting strong top line growth as well as the impact of expansion and re-franchising. Franchise margin dollars reached $1.8 billion for the quarter, a 7% increase in constant currencies, and contributed over 40% of the growth in consolidated operating income, led by results in the U.S. and the International Lead segment. Looking next to our company-operated margins, as we've said before, margins are a top line game. Positive comparable sales in the first quarter were a key contributor to our global company-operated margin growth. These margin results also reflect the benefit of lower depreciation expense of roughly $42 million, primarily in China and Hong Kong. As we indicated in our year-end report, in accordance with accounting rules, these markets were classified as Held for Sale, effective December 31.…

Thanks, Kevin. I want to build on what you shared by providing some additional context around why we've never been more sure of our ability to seize the potential that we see. My confidence stems from the success we've already achieved and the world-class management team we now have in place to build upon the success. We've talked about our intent to blend individuals with deep McDonald's experience with new executives who have valuable experience outside of McDonald's and bring fresh perspectives and innovative thinking. With that in mind, we have recently brought on Bob Rupczynski as Global VP of Customer Relationship Management. Bob joins us from Mondelēz International, where he was head of global media and digital. He previously led data-driven marketing strategies at Kraft. Linda VanGosen as head of U.S. Menu; most recently Linda was at Starbucks, where she was responsible for the overall vision and strategic growth plans for Starbucks Evenings. And Morgan Flatley as U.S. Chief Marketing Officer; she comes to us from PepsiCo, where she was CMO of Global Nutrition and previously returned Gatorade to growth as CMO of that brand. We're continuing to see great talent step into important roles. And I know that, together, we'll be successful in accelerating the growth of the business. The conversations I've had with franchisees, suppliers and, most importantly, customers have further bolstered my confidence. I visited with franchisees in the Middle East who have embraced the powerful potential Experience of the Future and seeing the impact it makes on the customer experience and their bottom lines. This is also an existing delivery market, so it was great to experience that first-hand. I've met with suppliers, including an Irish farmer participating in a national sustainability program. He's raising high-quality beef with a smaller carbon footprint and at a…

Thanks, Steve. We will now open the call for analysts and investor questions. Now, the first question is from David Palmer with RBC. David?

Thanks, good morning. Quick question on the non-U.S. business, particularly leadership markets, some of the informal eating out trends in those markets, you mentioned Germany, had some down traffic. But how does it look in markets like the UK? Some consumer companies have talked about weakness since Brexit there. And in some of these markets, what is the outlook that you see in terms of your ability to change trajectory, like in Germany where it seems like you've had an on and off again value message? Thanks.

Hi, David. That's a good question. I'll do a quick run around all five markets in the Lead markets just to give you a flavor. Certainly, from what we've seen in the UK, our business has not missed a beat since Brexit. Now, that's not to say that as the process works its way through over a couple of years, that may translate to a consumer confidence, but certainly for now, we have not seen the business miss a beat. And, frankly, whilst others are slightly more hesitant, our Owner/Operators in the company are investing very aggressively in Experience of the Future and getting extremely strong performance, I've got to say, so feel really good about where the UK is at. France, very different situation; the macroeconomic situation there has been challenging for a while. We've struggled to get like-for-like sales growth. What I would say is green shoots of encouragement and credit to the team there. They have grown guest count in the last couple of quarters. So they're in a bit of a market share fight. The consumer is nervous, given some unfortunate and terrible terrorist activity, and now we're going through the presidential elections there. So there's a little bit of uncertainty there, but we're fighting hard to stand still at the moment, but I feel really good about where the business is at as the tailwinds return. Australia is a market where we've been very aggressive the last two or three years, with great results. The competition has woken up a little bit, so they're competing a little more, competing a little harder in the near term, so we're having just to adjust a little to that. But we're still getting solid growth. First of all, the alignment between a very aggressive positive-minded Owner/Operator group and…

Our next question comes from Matt DiFrisco with Guggenheim.

Thank you. I just have two bookkeeping questions and then a question. So the D&A, you said that it was going to continue at this level for Q2. Is that going to be also sort of for the full year? Should we look at this as a proxy?

Matt, that depreciation benefit keeps occurring until the transaction closes, until that China, Hong Kong transaction closes. So we don't know exactly when it'll close. That's why we say at least through the second quarter. Depending on when it closes, you know, you may see some or all of that benefit in the third quarter also, depending on the actual close date of the China, Hong Kong transaction.

Understood. Okay. And then the gap you said within the U.S. with your QSR peers, that was 2.1%. I'm assuming you are outpacing the peers by 2.1%? Or are you lagging the peers by 2.1%?

No, we're outpacing the peers by 2.1%. Thanks for clarifying. Sorry if that wasn't clear. Yes, we definitely outpaced in the first quarter the QSR sandwich peers by 2.1%.

Thanks, Matt. Next question is from Brian Bittner with Oppenheimer. Brian Bittner - Oppenheimer & Co., Inc.: Thanks. Thanks for the question. With the Experience of the Future, you've talked about the mid-single-digit comp lifts based on the markets that you've already implemented this in. And as the store transforms and you install the kiosk, I guess the question is how quickly do these benefits materialize on the sales side? And when you do look at Canada, you actually mention that kiosk usage doubled year-over-year in the Canadian market. Is that like the dynamic at play here with the EOTF that drives the most incrementality? Is it mostly within the kiosk usage? Thanks.

Hey, Brian, that's a fantastic question. And I'm trying to do a better job of painting the picture of why we feel so confident and excited about Experience of the Future. And I'll give you a comparison. If we have a new menu item launch or something like an All Day Breakfast, our history will tell us that you end up with a good surge initially the first handful of months, and then it settles down to a steady run rate. And we've seen that with All Day Breakfast and we're happy. With the three accelerators that we've identified, delivery, the digital and the technology side, and Experience of the Future, these start well, but have year upon year upon year upon growth. And let me give you an example. If we take kiosks – and that's why I really wanted to call it out in the comments earlier – first of all, it takes time for consumers' behaviors to change. So we need to get our hospitality programs very well established in a restaurant and customers have got to see a benefit. So initially, is it easier to order? Can it be easier to pay? Can you move away from the stress of the front counter? But now think one year's time, two year's time, when we've got mobile order pay. You can go in, they can scan their favorites. We'll have a better developed CRM, customer relationship management program with some form of loyalty and reward that comes with that. You'll be able to call up your personal profile on the kiosk. You can redeem points or redeem offers, for example. So to me, the basic functionality already helps customers. They appreciate it. It's a much more modern and less stressful experience. But actually, there is incremental improvement year upon year upon year. And, again, the best reference we have for this is what we've already got out there in the system. Self-order kiosks, for example, have been in the French market. I remember going there when I was back in the UK seven or eight years ago. They're now seeing way over half of the in-restaurant transactions go through the self-order kiosk. And at peak hours, it's almost all the transactions because people move away from the hustle-bustle front counter. So I think your point is very, very appropriate. And as we build out, this is why all these things are so important collectively. So as we build out our digital platform, build out the functionality of the mobile app, introduce mobile order and pay, then that interacts with the kiosk, which then interacts with our kitchens. It's actually a pretty complex program that seem to be working through the last couple of years. But to me, out of the traps, it grows transactions. It grows average check, but actually the beauty of this is it will keep on providing a platform of growth. So thanks for the question.

Our next question is from Brett Levy with Deutsche Bank.

Good morning. How should we be thinking about the U.S. menu and the changes and the progression as you look to refine the value messaging? You talked about the rollout of Signature Crafted, and you've also recently discussed innovation. How should we be thinking about that from a modeling standpoint and from just your implementation as you run through net simplification? Thank you.

Yes. Thanks, Brett. I won't try to help you think about it from a modeling perspective. I'll leave that to you guys. But the one thing we know, we have to be competitive on value, so Chris Kempczinski and the Owner/Operators fully embracing that. It doesn't mean you have to win on it, but be competitive certainly at the entry level. So if you've only got a buck or two in your pocket, there's something good for you at McDonald's. So that is always important. Then we want to reinforce and support the core menu. And don't underestimate the value of the core menu to us. We've got half a dozen multi-billion dollar brands within just the core menu. And most recently, we've seen the success we can have by supporting a Big Mac, having some extensions of that to create some fun. We had some fun with the Big Mac sauce, for example, and that creates familiarity with kind of our traditional menu. Then as we get better as a business, as the brands resonate increasingly with customers, we can explore more at the premium end and our credibility grows with that. So we feel good about Signature Crafted. This gives a variety of taste, different flavor profiles, more premium ingredients or unusual ingredients, in choosing guacamole, for example. And customers, we know, are willing to pay a premium for that at certain times. Then you also want to think about what is the role that the local Co-op plays versus national. So, that's another dynamic in the U.S. that's different to any other market around the world. So, we may want to compete with more local flavors and tastes in certain areas of the country. The Southwest will have a different flavor profile for promotional items than the Pacific Northwest, for example, or the Northeast. So that gives you a little bit of opportunity to create variety and just stay interesting to customers at a more local level. So, to me, this is all about balance. Yes, we want to have a strong value program. Yes, we want to play strong in the premium ends, but also our heartland is where us and our Owner/Operators earn most of their cash flow. So I'm feeling good that we will have menu innovation, but it won't be reckless. We cannot have too many items too often because that gets to your final point, which is simplification. And one of the things I have really enjoyed – well, hopefully, it's contributing to, but just witnessing across the U.S. team is they're getting increasingly confident about making fewer, bigger decisions. And that really helps the restaurant managers run restaurants better because there is less complexity. So all these dynamics play with each other, but menu, clearly, fundamentally, is a big part of our future.

Our next question comes from Will Slabaugh with Stephens.

Yeah, thank you, wonder if you can talk about the shift within your U.S. comp of traffic and average ticket over the past couple of quarters. I know you pushed $1 coffee and then the Mac Jr seemed to resonate pretty well among the guests here in the U.S. So I'm curious if you saw that transaction ever pick up quite a bit and if you feel that is something that's sustainable throughout the year?

I'll kick off and then maybe Kevin wants to talk about the pricing piece versus food away from home. I mean the one thing there's been really part of the honest conversations we have around the business, and you would have probably seen that at the Investor Day, was let's acknowledge the level of guest counts or transactions that we've lost because, frankly, we want those back. And an element of that is on the value side, but also an element of that is on the broader experience. We just make ourselves more inviting. So I would say we have fought harder on the value side the last three to four months. And I know the U.S. team and our Owner/Operators are embracing some aggressive value programs going forward, as well. And that has helped to narrow the gap between sales and guest counts. We didn't quite squeeze a positive guest count in the U.S. in the quarter. That said, we were up against a 1% hurdle, but, frankly, ultimately, our measure of success is full percentage points of guest count growth. So I'm not really worried about the tenths here and the tenths there, because that will underpin the long-term sustaining growth. So we have a very honest appreciation of what it is that we're looking to achieve here. And competing on value and broadening and enhancing our experience, we know will drive customer behavior.

Yes, the only thing I'd add is, certainly, our intent is to grow both traffic and check. What you would have seen in the first quarter is average check grew partly from price, as I mentioned. We grew price less than food away from home, which is our long-term goal to make sure that we're kind of in that range in order to help drive guest counts. But the other benefit we also had in the first quarter was from a mix perspective. Certainly, things like the Big Mac promotion drove a better product mix than the year before, which helped drive that average check also. Thanks.

Our next question comes from Andrew Charles with Cowen. Andrew Charles - Cowen & Co. LLC: Great. Thanks. Steve, you mentioned that the franchisees are making the rounds through Chicago to take the Experience of the Future tour after we did in early March. And that the overall feedback is very positive, with a 90% approval around the plan. Just curious, though, for the franchisees who need further convincing, what reasons are they citing besides the cost of the program?

Well, it's a good question, Andrew, because this gets to the core dynamics of what makes us different and we believe differentiates us in a positive way. Our Owner/Operator, remember, these are 20 year commitments. So the vast majority of Owner/Operators all have a long-term perspective. And that gives them the confidence and the encouragement to reinvest two to three times around that cycle to keep their business contemporary and in line. So I guess clearly and totally understandably, whenever you build bold confident plans that require some investment, that comes with an element of nervousness. I get that. And we all do. So, therefore, we try and demonstrate that we have the business case to support it. And also given we've got company-owned restaurants, we have skin in the game and we see that as well. I guess, to give you an example, there may be someone who is at year 16 or 17 of their term who will be wondering if they put that money in now, will they see that back in the remaining years or will they get that back if they're to sell all their restaurants. So each and every individual has a slightly different perspective on it, but I would say as an overall basis, significant enthusiasm. They love the idea of the U.S. going together on this, because the one thing that makes us powerful is whilst we respect and really cultivate the local Owner/Operator in their local markets and communities, and that resonates strongly, we know the brand McDonald's is strongest when 14,000 restaurants go together. And I think the confidence and the boldness of the plans that are being drawn up – yes, a little bit of nervousness, but that's just a normal human reaction. I think the excitement exceeds the nervousness by quite some way. So we feel we're at a really interesting and fun place at the moment.

Our next question comes from Jeff Bernstein with Barclays.

Great. Thank you very much. The question centers around the U.S. comps and one particular driver, but just on the comp in general, it seems like a lot of investors use the two and three year trends as a gauge to try and forecast. And I know there's a lot of concern going into the fourth quarter and first quarter of lapping the All Day Breakfast. But with the compares now easing, seemingly meaningfully, in coming quarters, just wondering is it not reasonable to assume a nice acceleration in the U.S. comp from that 1.7% level in the first quarter? Is there something we're missing, maybe to temper that enthusiasm just to try and kind of manage expectations as those compares ease? And separately, I'm just wondering if you can give any color on the delivery as an aside. I know you gave a lot of color on the mobile order and pay with digital and the Experience of the Future, but I don't think we have much in the way of the timing of the ramp of delivery and the potential contribution on that front. Thank you.

Yeah, thanks, Jeff. In all honesty, I'm not going to give any forward-looking reassurance. That's not the way we tend to do things. I don't want to break that now. What we have tried to do is give you visibility into our plans. And that's what March 1 was all about, to demonstrate to you why we are confident in the long-term growth of the business. So we're doing a good job on the fundamentals. Let me give you another piece of texture around the U.S. and what I believe is helping to underpin some of our performance. Along with building exciting plans becomes a greater accountability for all of us who run restaurants, whether it's Owner/Operators or the company. We have been much more mindful. The U.S. team has been much more mindful about addressing the bottom quartile of performance, of operational performance. We're helping support, encourage and expect them to improve performance, but that has meant that some have left the system and those restaurants have moved into the hands of better Owner/Operators. So as you can imagine, that then helps underpin just core baseline momentum as well. So I just wanted to get that piece in there about accountability, day-to-day running great restaurants. And whilst we have great relationships, we're not scared of the honest conversations either. So that's important to stress. With delivery, we are in an interesting stage. As you know, we featured it at the Investor Day, so that was very mindfully done because it's one of our accelerators. We've had 200-plus restaurants in Florida now for a while, and we're encouraged about the start we've had. I would say similar to the Experience of the Future, it will start slightly lower and grow over time as we get better at it, as awareness grows and we put more marketing muscle behind it and customers begin to respond and change their behaviors. But that said, also, it would be fair to say we are not in test mode. We're expanding. And we're going to be expanding to a number of U.S. cities this quarter. But we're learning as we go. We're learning on delivery radius, on the in-store dynamic, on how we can capture the order better and prepare an order fresher, et cetera. So we are continuously learning. But, yes, we feel good about the way we're interacting with UberEATS. They've proven to be a good partner for us and, hopefully, we are for them. So we'll be expanding into a number of U.S. cities with UberEATS this quarter and demonstrating why we believe this is a velocity accelerator.

Next question is from David Tarantino with Baird. David E. Tarantino - Robert W. Baird & Co., Inc.: Hi. Good morning. Just one quick clarification on the U.S. traffic, I know you mentioned it was negative, but I was wondering if it was negative if you adjust for that leap day drag. And then, my real question is on the initiative to roll out fresh beef in the Quarter Pounder in the U.S. And I understand the consumer proposition, but can you talk a bit about the operational complexity or risk that that might add from a service speed, or however you think about executing that initiative? And then secondly, do you think this is a precursor for rolling out fresh proteins across the menu longer-term?

Yeah, I'll take the quick U.S. guest count clarification, and then Steve can talk about the fresh beef. As we mentioned, the U.S. was negative in the first quarter. To your point, if you adjust for the leap day effect from last year, it'd be relatively flat.

And then on fresh beef, David, so we'd been in the market, particularly in Dallas, for a little over a year before we made the decision. We made the decision maybe three, maybe four weeks ago to say yes and to go with this. So we entered this with a very, I would say, a very open mind. We were excited about the opportunities from a customer perspective, but mindful of the complexity, cost, operational impacts, et cetera. So I would say we've been very well supported by the Owner/Operator groups, in particularly Tulsa and Dallas. We have worked through a lot of the kinks in this, so we believe this is very little incremental from a cost perspective. We did initially, in the early restaurants, see service slow down a little in the drive-thru, but we have found ways to get around some of those operational complications and brought that right back down to a negligible impact. There's a different food handling required, clearly, when you're dealing with fresh product than with frozen, but, again, with help from our suppliers, we've made the packaging very simple, the storage very simple, the food handling very simple. So there was an overriding call – I was getting letters from the Owner/Operators pleading for us to go with this. They believe they've overcome any in-restaurant issues that them and their teams had, but they were getting such an encouraging response from customers, because it tastes juicier. It's just hotter and juicier. It's a great-tasting product. So we feel good that we have vested that time, that one year, well to overcome any of the potential – and I think this is a good indication of the change of mindset that we have around McDonald's. There's plenty of yes-but conversations about how you could've, nice idea-buts. But we've gone to yes-and. How can we overcome it? And how can we make a difference? As to whether this signals a future, absolutely no idea. At the moment, we feel good about where we're at with Quarter Pounder. Given the volumes of Quarter Pounders we handle and the fact that that is our biggest patty, therefore, the biggest benefit transfers to the customer because that's where the juiciness and the heat really comes from. We feel good about that. We're going to roll the Quarter Pounder out over the next year or so, and we just look forward to seeing the results.

Our next question comes from Sara Senatore with Bernstein. Sara Harkavy Senatore - Sanford C. Bernstein & Co. LLC: Hi. Thank you very much. I just wanted to follow up on the food away from home and pricing topic, which is to say, historically, I think when we've seen inflation, McDonald's has actually done better at this, about widening this gap. And I guess I'm trying to anticipate if we look forward and we do see a bit more inflation, could you anticipate having maybe even, relative to the market, maybe again a little bit wider gap than even what you've already seen this quarter, in a good way? And have you thought a little bit about, you know, what the implications might be for traffic versus margin with respect to your franchisees' businesses? So that's my first question. And then, just quick follow-up, could you give the comp for China, please? Thank you.

All right. Let me start with the pricing. As you mentioned, there are several things we keep an eye on as we think and look at pricing. Food away from home is one of the metrics we look at over the longer term to generally try and be below that metric. But as you know, we also look at food at home. And most recently, there's been a pretty big gap between food at home, food away from home. I think that gap is starting to narrow a little bit from the highs that we saw in 2016. But our philosophy on pricing really is to make sure that we're focused on pricing that will help drive traffic, as well as margins and Operator cash flow. So, you know, the Operators certainly are concerned about increasing profitability, as are we, but we also want to make sure that we're not taking too much pricing that discourages guests from coming in. We have a lot of models that look at the dynamics of this pricing, both within our menu and against competitors, and I think we're getting better with our analytics at looking at some of those metrics. But historically, as you mentioned, I think we have done fairly well with what I'll call some reasonable inflation, whether that's 1% to 2%. We've certainly shown an ability to adjust our cost base to address inflationary pressures. But I feel pretty good about where we are right now from the pricing standpoint. We were a little bit ahead last year of food away from home, and I think now we have adjusted appropriately. Regarding China, you know, I guess what I would say is while we're in the midst of this pending transaction with our strategic partners, I think out of respect to them and the process, we won't talk about a specific number. What I would say is our comparable sales were clearly higher than our near-in competitor in China, and I'll leave it at that.

Our next question comes from John Glass with Morgan Stanley. John Glass - Morgan Stanley & Co. LLC: Steve, my question has to do with just complexity around Experience of the Future as we walk through all the different elements of it. It seemed like this is a great consumer proposition, but it's a significantly more complex operation for the employees, meaning they've got to do delivery out to the curb, they've got to take orders from multiple points. What has been your experience early on in rolling that out? Do you have to add additional labor to the restaurants in order to – or training to the restaurants to get people over that hump of, sort of dealing with these different aspects? And do you have to think about who you recruit and how you recruit employees? It's a tight labor market, but maybe you need a different employee to interact with the consumer, given all the complexities.

Okay. Great question, actually, John. So scripting down to two or three different areas, I think you've kind of hit the areas that are important. So, yes, as we deploy Experience of the Future, there's a comprehensive training program that goes with that. And that's one of the things I think we're typically pretty good at. When we get into rollout mode, with the talent we have in the field, the operations experience, we do roll out these programs pretty well. But, yes, there's absolutely a training element to this. Additional labor, no, we're not seeing additional labor. What we are seeing is a reallocating of labor positions in the restaurants, and we need less people behind the front counter taking orders. And, you know, part of the significant benefit, both for us and for the customer on this, is we can repurpose them into the dining area. Now, that doesn't necessarily mean the same people can do both roles. So what we're also seeing – and we've learned a whole heap from Canada, in particular, Australia, UK more recently – is there is a new role in McDonald's, and that's kind of the hospitality service person. So we have a dedicated job description for that. We hire specifically for that. Because it does require a different skill set. Those social interactions are different. And clearly, they will end up being busier, not just helping customers in and around the kiosk, but actually as we roll out table service as well. They will actually be delivering to food to customers' tables as well, so not additional labor, but repurposed. Is there training on rollout? Absolutely, yes, because that gives us the best shot of landing this well and making it smooth.

Our next question comes from Jeff Farmer with Wells Fargo.

Thanks. I heard your response to Jeff's earlier question, and I recognized that mobile order and pay has been in test for only something like five to six weeks, but what is the plan for sharing performance updates on these test markets in coming quarters, meaning when this is a little bit more on its feet? At least from my perspective, I do think investors are very focused on this, and I'm curious how much information you guys will provide as we move through 2017.

Actually, that's a fair question, Jeff. At the moment, we haven't thought about sharing. This is early stages, but it is an accelerator for us, and we will want to give you some visibility, both in terms, say, the number of restaurants and the types of customer behaviors. Whether we give a precise number each and every time, I doubt that's where we'd head, but we want to give you an indication of whether this is enough to get excited about, but, you know, we have identified three accelerators. We do see them as changing the momentum of our business. So these aren't fringe things. These are platforms that we believe will grow and then grow year-on-year. So I think you will be getting more disclosure as we build up some critical mass, and we can start to help you interpret the numbers better and project forward.

Our next question comes from Matt McGinley with Evercore.

Yeah, thank you. I have a question. At the March Investor Day, you outlined a plan in the U.S. to regain, retain, and convert customers, and that was built around quality, value, and convenience message that I think you already discussed on this call, but as you look at that inflection in the trend that you have, and I know it may not be very easy to quantify, I'm curious who you think you're actually bringing back, or who you've brought back this year in this inflection trend you've seen in the past few months, or even few quarters.

If we're just talking about the U.S. specific, and I'm guessing that may be where the question is...

Yes. Yes, U.S.

I think the regain is really largely around value. I mean, we saw that we were losing customers in the value end of our menu for a period of time. Retaining our stronghold is something that clearly we'll do through core menu and ongoing value, and experience, and convenience. We certainly saw some seepage of guest counts, if you like, at the value end. And I think the more competitive position we've taken, and our Owner/Operators have taken and embraced, has helped us recover some of that as well. Early days, very difficult to diagnose precisely, but as we saw the market share gains that Kevin outlined, and the 2.1% outperformance of our QSR peers, we know the combination of core menu, Big Mac extensions, $1 coffee, and then, as we exited the quarter, begun to move to $1 any size drinks. We know that combination resonated well.

We have time for one more question, and that will be John Ivankoe with JPMorgan.

I was just hoping we could get just a view of the current labor market in the United States as it stands. Obviously, we're seven-plus years into an economic recovery. And this far in, sometimes the restaurant industry begins to see stress in terms of quality and availability and cost of employees, especially as turnover goes up. So how is the system kind of faring with that? Are there any plans, specifically in 2017 and 2018, for you to become even more of an employer of choice for this type of worker than you've been in the past, and just how are you feeling about things overall?

Yeah, John, it's a really astute point. I would say compared to three, four, five years ago, the general labor market is tightening a little bit, and, clearly, that is something we are mindful of. It hasn't really taken us by surprise, because we've seen economic cycles before. We know what that means to us. What you may have seen, for example, and part of our response to this, as well as we modernize our restaurants, as we introduce technology, we've become a more appealing place for people to work. And we believe that people in the service sector are more tempted to a modern McDonald's today than perhaps they would have done to a type of McDonald's of yesterday, but the other piece you may have seen is we've worked hard above the line on employer reputation, on jobs, on training, on skills, on education. So we talk about here in the U.S., in particular, being America's best first job. And that's something that we believe we can substantiate through opportunity, flexibility, pay and rewards, but also under the archways for opportunity programs you would have heard us talk about where we can help with high school diplomas and get our people into further education, where not only are we a job and not only do we help them pay the bills, but actually we help them progress in life and go to the next stage and build careers, either within or beyond McDonald's. So I think you're going to see the labor market further tighten. That's an expectation we certainly have. And you will also see us going increasingly hard and even if it's as recently as just this last week, when you've seen about the new uniforms we're rolling out. We're looking at every aspect of the employment proposition here, because we do see it getting tighter. And we just believe the more attractive we can make ourselves, that put us in a better chance of being a winner in this marketplace.

All right, we're near the top of the hour. So with that, I will turn it over to Steve, who has a few closing remarks.

Thanks very much, Mike. And hopefully, we got across we believe today we're fit for purpose and that we're building a better McDonald's. The Velocity Growth Plan is guiding our focus and execution on the opportunities that will improve the experience of our customers. I am fully confident in our ability to harness our unmatched competitive advantages to satisfy customers, drive profitable growth and deliver value to our shareholders. So with that said, thanks to all of you for dialing in and have a great day.

This concludes McDonald's Corporation Investor Conference Call.