Cantalupo, James Richard

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Cantalupo, James Richard

(b. 14 November 1943 in Oak Park, Illinois; d. 19 April 2004 in Orlando, Florida), business executive who orchestrated one of the biggest international expansions for the McDonald’s Corporation and later came out of retirement to revitalize the company’s sales.

Cantalupo was born to James Francis Cantalupo, an optometrist, and Eileen Patricia (Goggin) Cantalupo. He grew up in the working-class military housing projects on Chicago’s West Side and developed a strong work ethic, becoming a manager of a grocery store by the time he was twenty. He went on to attend the University of Illinois at Champaign, initially planning to study architecture. However, when he learned that the accounting field was full of opportunities, Cantalupo decided on a new career and graduated with a BS in accounting in 1966. That same year he became a certified public accountant and joined the Chicago accounting firm of Arthur Young and Company, where he worked for the next eight years. Cantalupo married Jo Ann Lucero on 16 June 1973; they had two children.

Among the companies Cantalupo audited in his accounting job was the McDonald’s Corporation. In 1974 McDonald’s offered Cantalupo an accounting position that came with a substantial pay raise. Cantalupo decided the offer was too good to refuse. He advanced rapidly in the company and was promoted to vice president in 1975. He was senior vice president and controller from 1981 to 1985, when he was appointed zone manager for the Northeast, one of several U.S. McDonald’s zones.

Cantalupo proved to be one of McDonald’s most capable managers and in 1987 was appointed president of McDonald’s International. In his new role Cantalupo felt that major opportunities existed for the fast-food corporation in Europe and Japan. He quickly sought to institute store expansions overseas, a tactic that McDonald’s had used to much success in the United States. With an accelerated overseas growth plan instituted by Cantalupo, McDonald’s International began an astonishing growth rate of 35 percent annually, increasing the company’s annual international sales from about $1.8 billion when Cantalupo took over in 1987 to $3.4 billion by 1994. During this time Cantalupo also developed a business outlook based on his “Cantalupo’s Theorem.” This mathematical equation estimated that, based on the entire world population, the largest possible number of McDonald’s stores could grow to approximately 42,000. The equation was developed from Cantalupo’s knowledge that there was one McDonald’s store or franchise for every 25,000 people in the United States in 1994. So Cantalupo first divided the population of a country by 25,000. He combined this figure, called the “people ratio,” with a second number called the “income ratio,” which he figured by dividing the per capita income of a country by $23,120, which represented the American per capita income at that time. Cantalupo’s overall estimates and follow-up plan for targeting countries that would fit his growth strategy was so successful that at one time the company was opening three stores a day internationally under Cantalupo’s guidance. From 1987 to 1994 the corporation’s international restaurants grew from 2,000 to 4,700, which represented 45 percent of the company’s worldwide operating income.

Cantalupo’s strategy, however, had a downside. A downturn in the global economy and a series of crises overseas—from a mad cow disease scare to financial crises in Japan and Russia—negatively impacted the corporation’s international operations. Furthermore, McDonald’s became a target for anti-American sentiments both in business and in the general public. This public relations problem developed despite efforts by Cantalupo to offset the negative effects of McDonald’s representing to many the Americanization of foreign cultures. Among his ideas was the use of local products and cultural items, such as kosher beef in Israel and mineral water in France. In addition, McDonald’s was beginning to experience problems in America with increased competition from other hamburger chains and fast-food franchises. Its commitment to investing in new stores resulted in many McDonald’s franchises competing against each other. According to some analysts, part of the reason the company did not address these issues and ended up suffering financially was because Cantalupo had been so successful overseas. The rationale was that his success in garnering huge overseas profits kept the corporation from seeing the necessity of addressing its problems at home.

At the end of 2001, after twenty-six years of service, Cantalupo retired from McDonald’s International and from his 1999 appointment as vice chairman of the company. His decision resulted partly from his disappointment at being passed over for the position of chief executive officer (CEO) in 1998. He had been considered among the top candidates for the job because of his phenomenal success overseas. Instead the board had chosen Jack Greenberg, who was considered an expert in finances but was not necessarily familiar with the overall restaurant or burger franchise business. In his position as CEO, Greenberg made a number of corporate decisions that did not pan out, such as seeking to expand McDonald’s into other businesses not related to the food and restaurant arenas. By the time Greenberg was forced out of his position at the end of 2002 (he officially retired), McDonald’s was plagued by less-than-stellar sales and falling stock prices, including a 40 percent drop in stock prices from the end of April 2002 to the beginning December 2002. McDonald’s turned to Cantalupo, who came out of retirement in January 2003 to become chairman and CEO of McDonald’s. In that same month the company announced that it had experienced its first quarterly loss, amounting to $344 million, since it had gone public in 1965.

Investors enthusiastically greeted Cantalupo’s return by immediately buying up shares and sending the stock up 2 percent on the day the corporation announced his appointment. Nevertheless, some industry analysts wondered whether Cantalupo’s long history with the company might indicate that this insider did not have the bright new ideas that would be needed to turn the company around. As one analyst commented, the new CEO was perceived as being “as fresh as a week-old hamburger bun.” Cantalupo, however, was confident that he could set the company right, noting that the corporation had changed in the past and would change again to meet consumer demands. The basis of his plan was to cut capital expenditures, raise the dividend and lower growth targets, and rein in the global expansion he had once overseen.

Cantalupo immediately revamped the company’s management structure at its headquarters, cancelled several projects that his predecessor had begun, and turned to improving services throughout the company’s more than 13,000 restaurants in the United States. Realizing that Americans’ diet habits were changing, he began to implement new, “healthier” products, such as salads with healthy dressing and sandwiches other than burgers, such as the Grilled Chicken Flatbread. Perhaps his biggest move was to redirect the company’s longtime strategy of store expansion to get customers in the door. Instead he set the company on a new course of growth by reducing the number of new store openings in the United States and abroad and focusing on getting more people to come into the already existing McDonald’s stores and franchises. Cantalupo’s plan included emphasizing the company’s restaurant-grading system on a national standard, which McDonald’s had quit doing in 1993, thus allowing franchise owners to police themselves concerning the quality of their food and service. Under this plan, which included “mystery shoppers” going into franchises to report on them, Cantalupo set out to discover what restaurants were underperforming in service and then either improve or eliminate them.

Despite the many naysayers, Cantalupo proved good on his promise to revive the corporation. Within months of taking over, Cantalupo guided the company into dramatic monthly sales increases. By the third quarter of 2003 sales had risen 12 percent. At the beginning of 2004 the corporation announced that it had rewarded Cantalupo for surpassing the company’s initial financial targets with a $2.1 million bonus for 2003. Cantalupo had high hopes for 2004, as the company announced that its expected first-quarter earnings per share would be up 38 percent compared to the same quarter a year earlier. The good news kept coming as the company declared that it expected same-store sales in the United States to rise 14 percent and sales in Europe to rise 3.5 percent.

In April 2004 Cantalupo went to Orlando, Florida, to address a gathering of franchisees attending a McDonald’s owner-operator conference. Spirits were high because of the new momentum in company sales directed by Cantalupo. However, just a few hours before he was scheduled to address 12,000 attendees with a speech that may well have been the highlight of career, Cantalupo suffered a heart attack and died after only sixteen months at the helm of McDonald’s.

Cantalupo was a strong and talented leader who could be tough and demanding but who was also known for his people skills. Among his colleagues at McDonald’s and the restaurant business at large, he was well respected for his passion, his forthrightness, and his willingness to work hard, all reflections of his modest midwestern approach to business and people. His most lasting achievement at the company where he worked for so many years may be that he helped reshape McDonald’s management philosophy to accept the reality that it was no longer a fast-expanding concern but rather a mature company that had to take new business approaches to succeed.

For a good account of Cantalupo’s leadership of the company’s overseas efforts, see John F. Love, McDonald’s: Behind the Arches (1986). The “Cantalupo Theorem” in relation to the globalization of business is discussed in Thomas L. Friedman, The Lexus and the Olive Tree: Understanding Globalization (1999). Articles concerning Cantalupo’s life and career at McDonald’s include Nick Pachetti, “Back in the Kitchen: McDonald’s New Management Team Admits That the Company Is All Grown Up,” Money 32, no. 7 (July 2003): 44, and Grainger David, “Can McDonald’s Cook Again? The Great American Icon Ain’t What It Used to Be,” Fortune 147, no. 7 (14 Apr. 2003): 120–129. Obituaries are in the New York Times (20 Apr. 2004) and Nation’s Restaurant News (26 Apr. 2004).

David Petechuk