McDonald’s Targets 50,000 Restaurants In Expansion Blitz

(Bloomberg) -- McDonald's Corp. is looking to hit 50,000 locations around the world by 2027 in what the company calls the fastest expansion spurt in its history.

The chain currently has more than 41,000 restaurants and already committed to opening an extra 2,000 by the end of this year. The new target highlights the burger giant's stepped-up ambitions as it looks for its next leg of growth.

Some of the new restaurants will likely be delivery or drive-thru only, but the vast majority will have the traditional McDonald's format that includes dining areas, Chief Executive Officer Chris Kempczinski said in an interview.

New restaurant openings will boost sales generated by franchised and company-operated stores by 2% next year and by 2.5% annually after 2024, McDonald's said Wednesday in a statement. The company expects sales by that metric, known as systemwide sales, to reach $130 billion this year, executives said in a presentation to investors. The US alone will surpass $50 billion.

The expanded footprint is part of a multiyear growth plan that includes a renewed marketing push, improvements to core menu offerings such as hamburgers, and digital channels including delivery, the mobile app and kiosks. 

“We're gaining share in almost every single market around the world, we have a fully modernized estate, and we have tremendous firepower in our balance sheet,” Kempczinski said. 

McDonald's plans 900 new restaurants in the US by 2027 and another 1,900 in international markets where the company operates and franchises restaurants, Chief Financial Officer Ian Borden said Wednesday in a presentation to investors. About 7,000 will be opened in countries where licensees and affiliates run the restaurants, he said.

The chain has added 5,000 restaurants in the past decade, with growth mostly in countries such as China and Brazil, while renovating locations in the US and Western Europe and some other markets, Global Chief Customer Officer Manu Steijaert said. But demand is now outpacing the capacity of the chain's current footprint, he added.

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Loyalty Focus

McDonald's also looks to increase users of its loyalty program to 250 million 90-day active customers by 2027, from about 150 million currently. It's targeting an additional $25 billion in systemwide sales, which include both franchised and company-owned stores, from loyalty-program users over the same period. That compares with about $20 billion today. 

Loyalty members in the US and Canada spend twice as much on average as other guests, according to Joe Erlinger, the chain's US president. US loyalty members visit 15% more frequently, he said. 

Part of the plan includes expanding its US pilot of “ready on arrival,” in which crew members start assembling online and mobile orders before guests get to the restaurant. The chain plans to roll out the test across its top six markets by 2025.

The company is also investing in its core menu items. Chicken now accounts for $25 billion in systemwide sales — on par with beef — and McDonald's plans to offer the McCrispy chicken sandwich in nearly all global markets by the end of 2025. It will offer a version of the product in wrap and chicken tender forms. 

On the company's signature offering, McDonald's seeks to improve the quality of its burgers in nearly all markets by 2026. 

The Chicago-based company sees operating margins in the mid-to-high 40% range in 2024, which is similar to the last two quarters, followed by continued expansion in subsequent years. It's forecasting capital expenditures of $2.5 billion next year, and sequential increases of about $300 million to $500 million each year through 2027.

The chain has held up in the face of pressured consumer budgets in recent months, beating expectations on sales and profits in the third quarter. Still, US customer traffic dipped for the first time this year in the period. 

McDonald's shares were little changed at 12:36 p.m. in New York trading. The stock rose 8.7% this year through Tuesday's close, short of the 19% advance of the S&P 500 Index over the same period. 

(Adds executive commentary; updates shares.)

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