The massively popular international fast food chain is going through yet another massive expansion. This year the company is reportedly primed to open another 1,900 brand new locations.
Over 400 of them will be in the United States, or other Western nations such as Canada, the United Kingdom, France, Germany, Australia, and more. The other 1,500 or so will be in developmental licensee and affiliate markets, including 900 in China.
Yahoo! Finance says that the franchise is poised to spend $2.2 billion to $2.4 billion on capital expenditures, “half of which will be dedicated to new net openings,” Ian Borden, CFO and EVP, said during a call with investors after the company’s Q4 earnings report was released.
Overall, we anticipate over 4% unit growth from about 1,500 net restaurant additions in 2023. We expect this will contribute, along with restaurants opened in 2022, nearly 1.5% to systemwide sales growth.
He said
Yahoo notes that this expansion marks the largest in the U.S. since 2014. However, BTIG Managing Director Peter Saleh believes that these U.S. store openings will be a ‘very small portion’ of the new locations.
The growth in the U.S. is still going to be rather nominal. At best, I think they’re going to open about 100 stores, [then, those] that are closed, maybe another 80 get to about a net number of about 20.
From our conversations with franchisees, they’ve been telling us, ‘Yes … We need more stores, because the volumes in the stores that we have, has grown so much that we need to offset it with with additional units.’
Saleh said, adding that the chain’s growth strategy is welcome news to U.S. franchisee owners, who make up approximately 95% of McDonald’s total portfolio.
Yahoo added that ‘in Q4 2022, U.S. same-store sales were up 10.3%, compared to 7.5% in the same quarter of 2021.’
With global sales up over 12%, CEO Chris Kempczinski believes now is the right time to to vastly expand some more.
“We have to walk and chew gum” when it comes to unit growth and comparable sales growth, Kempczinski said on the call. “It’s not one or the other; it’s the two of them in combination…[when] you want to be growing units is when you got strong comparable sales, because that reflects the underlying health of the business.”
I am always very leery when I see some someone out there putting a strong unit growth number without those strong comparable sales because that’s historically not been a good recipe in our industry.
McDonald’s growth is part of a much larger goal of theirs called the Accelerating the Arches strategic plan – with one of the tenets to “double down” on “restaurant development.”
In December McDonald’s opened a fully-autonomous location, with a robot handling the orders at the window and inside the building.
AUTHOR COMMENTARY
[20] Be not among winebibbers; among riotous eaters of flesh: [21] For the drunkard and the glutton shall come to poverty: and drowsiness shall clothe a man with rags.
Proverbs 23:20-21
What a sign of the times. The American consumer is beyond broke, in massive debt that will never get repaid, and are all but nearly tapped-out yet; yet one of the largest chains is having yet another one of their largest expansions they have had in a while.
But this is what happens when you lockdown an economy, shutdown small businesses and restaurants, but specifically leave McDonalds open. I distinctly remember Trump talking about this during his daily briefings in March of 2020, how everything was going to be basically shutdown but shacks like McDonalds could stay open. And, surprise surprise, McDonald’s sales grew, as did American’s waistlines.
[7] Who goeth a warfare any time at his own charges? who planteth a vineyard, and eateth not of the fruit thereof? or who feedeth a flock, and eateth not of the milk of the flock? [8] Say I these things as a man? or saith not the law the same also? [9] For it is written in the law of Moses, Thou shalt not muzzle the mouth of the ox that treadeth out the corn. Doth God take care for oxen? [10] Or saith he it altogether for our sakes? For our sakes, no doubt, this is written: that he that ploweth should plow in hope; and that he that thresheth in hope should be partaker of his hope. (1 Corinthians 9:7-10).
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