McDonald's Corp. is earmarking roughly $8.5 billion to help franchisees implement a multiyear plan to serve better food, improve service and make restaurants easier to run.
The company will deploy the money — a mix of capital support and rent relief — through 2036, according to a statement Wednesday ahead of the fast-food chain's investor day. The funds are intended to “accelerate restaurant modernization, technology deployment and operational improvements” as part of a plan unveiled earlier this year.
McDonald's has said its initiative, called “Next,” aims to turn the chain into more than a stop for a quick, cheap meal. The idea is to redesign restaurants to be more open and bring back playful elements lost in previous remodels, while streamlining kitchens so staff can work more efficiently. It's also focusing on improving its food offerings and training staff on how to provide better service through initiatives like always greeting customers. More personalized marketing is in the works, too.
The company is unveiling the investment as it contends with a slowing US business. Sales last quarter rose at their slowest pace in more than a year. Missteps with its value offerings drove weakness after some deals didn't resonate with customers.
McDonald's shares rose less than 1% in premarket trading in New York on Wednesday. The stock has fallen 18% this year to date, as of Tuesday's close.
Moreover, the chain said that its restaurants were overwhelmed by too many product launches, resulting in slower service and falling customer satisfaction ratings. Some marketing campaigns, including meals tied to the World Cup, fell short of forecasts. Lastly, it's facing fierce competition from emerging brands focused on offerings such as chicken and beverages.
McDonald's last month replaced its longstanding US chief with company veteran Skye Anderson to bring “focus and urgency” to its home market. The company is simplifying its marketing calendar and promoting “proven” deals, such as its Extra Value Meals. It's also working on a “longer-term” value strategy, Bloomberg News reported.
In the US, McDonald's usually owns locations and charges franchisees rent, in addition to royalties and other fees.
More Efficiency
As part of “Next,” McDonald's is looking to make restaurants more efficient, which it said could save the average US restaurant some $100,000 in annual cash flow. One of its initiatives is a generative-AI system called ArchIQ. McDonald's has previously tested automated order-taking in its drive-thrus.
McDonald's said it's looking to increase its market share in chicken and beverages by 1.5 percentage points by 2030, two red-hot categories in the US. Newer brands such as Raising Cane's and 7 Brew are expanding across the country, forcing McDonald's to improve its own offerings to compete, including testing hand-breaded chicken. Meanwhile, trainings on hospitality and delivering food that's up to standard will start Oct. 5.
The company also laid out a range of financial targets on Wednesday. It sees new restaurants contributing about 2.5% to total sales growth in 2027 before moderating to about 2% by 2030. Operating margins will be in the low-to-mid-50% range by 2030, while free cash flow conversion should come in the mid-to-high-80% range.
In response to slowing consumer demand, McDonald's earlier this year pushed back its target of reaching 50,000 total restaurants to 2028, from the end of 2027 as promised at its last investor day three years ago. The company also cited rising construction costs.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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