McDonald’s is hosting an investor day event today and the company plans to unveil a near-term development plan that is ambitious even by McDonald’s standards – a 50,000-unit footprint by 2027.
If the company is to achieve this – about 10,000 more units than it has today – it would mark the fastest period of growth in its 68-year history. For competitive context, quick-service peer Yum Brands – parent of KFC, Taco Bell, and Pizza Hut – is the largest restaurant company in the world with more than 55,000 restaurants in over 155 countries and territories. Starbucks currently has more than 38,000 locations, while Subway has nearly 37,000 global locations.
“The McDonald’s system has demonstrated exceptional execution of our Accelerating the Arches strategy and is delivering tremendous results across our key growth pillars,” President/CEO Chris Kempczinski said in a statement. “We have a clear trajectory for future growth as we continue to build on the brand strength, global footprint and digital ecosystem that have resulted in unparalleled competitive advantages and cemented McDonald’s as one of the world’s leading consumer-facing brands.”
That Accelerating the Arches strategy was first introduced in 2019 and refined into a 2.0 version earlier this year. The initial strategy was designed around three pillars – M (maximizing marketing), C (committing to the core), and D (delivery, digital, drive-thru). A fourth D – development – was added earlier this year, driven by strong sales through the pandemic that have continued this year, including a 14% revenue increase in Q3 and a 17% increase in net income. Notably, 2023 marked the first time the company added new units in the U.S. in eight years.
Other highlights coming from the company today, with more information to follow, include:
- Doubling down on the core menu
McDonald’s will continue to focus on its core menu, which generates 65% of its sales. These items, including the Big Mac, Quarter Pounder, Chicken McNuggets and World-Famous Fries, are among the 17 items that are each $1 billion brands on their own. McDonald’s announced in April it is rolling out upgraded burgers across the U.S. system after a successful rollout in Australia, Canada and Belgium. The burgers include new, softer buns, more Big Mac sauce, and some tweaks to the cooking process, and will be introduced to nearly all markets by 2026.
The company also plans to “aggressively expand” its chicken business – which is now on par with its beef business – including a plan to offer the McCrispy in nearly all markets by the end of 2025 and expand the platform into wraps and tenders. The company’s social media fans will no doubt be happy about the wraps plan.
- Digital growth
McDonald’s currently has 150 million 90-day active users on its loyalty program generating over $20 billion in systemwide sales. The target is to reach 250 million 90-day active users delivering $45 billion by 2027. To support this goal, the company will expand its U.S. pilot of “Ready On Arrival” across its top six markets by 2025. This initiative enables employees to begin assembling a customer’s mobile order prior to their arrival at the restaurant.
Additionally, McDonald’s said it has the industry’s largest delivery program globally. Customers can order delivery within the McDonald’s mobile app in five of its top markets and the company expects 30% of delivery orders to originate in its mobile app by 2027.
- McDonald’s partners with Google Cloud to support growth
To support the company’s continued global growth, McDonald’s and Google Cloud today announced a partnership to connect Google’s cloud technology and apply generative AI solutions across McDonald’s restaurants worldwide. The company said this partnership will help accelerate automation innovation from equipment manufacturers and allow restaurant general managers to reduce business disruptions.
“We’re focused on making AI more helpful for everyone, with the potential to unlock many new opportunities for innovation,” Sundar Pichai, CEO of Google and Alphabet, said in a statement. “The restaurant industry is already benefiting from these advances, and we’re excited to see how McDonald’s will use our generative AI, cloud, and edge computing tools to improve their iconic dining experience for their employees and their customers all over the world.”
Beginning in 2024, McDonald’s will also start deploying new, universal software that all customer and restaurant digital platforms will run on – from the mobile app to loyalty to kiosks. The bespoke operating system will enable restaurants to roll out innovation even faster and reduce complexity, the company said.
- Financial guidance
Finally, CFO Ian Borden expects preliminary 2024 guidance to include operating margin in the mid-to-high 40% range, net new unit growth over 4%, CapEx around $2.5 billion, and free cash flow conversion in the 90% range.
“Over the past decade, we’ve evolved our business model significantly, enabling us to allocate the majority of our resources to the areas of the business with the greatest stability, returns and opportunity for growth,” Borden said in a statement. “This has resulted in a more durable business model that yields a consistently strong (total shareholder return) algorithm that is expected to grow.”
Contact Alicia Kelso at [email protected]
