In McDonald’s first investor day in three years, the company shared it was ready to put down its “fastest period of growth” in brand history. It’s an expected run rate of 1,000 gross openings across the U.S. and International Operated Markets in 2027 that will take the chain, which closed 2022 with 40,275 restaurants, to 50,000 units by that time.
It breaks down as 4–5 percent annual net new restaurant growth. McDonald’s also expects CapEx to be roughly $2.5 billion in 2024, with sequential increases of about $300–$500 million each year through 2027; operating margin in the mid-to-high 40 percent range before continued expansion; free-cash flow conversion in the 90 percent range; and nearly 2 percent of systemwide sales growth in constant currencies, bumping to 2.5 percent long-term.
“Despite a challenging and unpredictable environment, McDonald’s has continued to deliver,” CEO Chris Kempczinski said during Wednesday’s call. “In 2019, we reached $100 billion in systemwide sales. This year, we expect to reach nearly $130 billion in systemwide sales. I’ll let you do the math on how many of our competitors’ entire businesses it would take to add up to $30 billion worth of dollar growth in our systemwide sales. But spoiler alert: It is a lot.” McDonald’s appreciated 30 percent comparable sales growth since 2019. Comps hiked 8.1 percent in Q3, rolling over 6.1 percent growth in the year-ago period. That after a 10.3 percent rise in Q2 and a 12.6 percent increase in Q1.
McDonald’s projected growth of 9,000 or so locations includes about 900 openings in the U.S., 1,900 in McDonald’s IOM (international operated markets, like France, Australia, and Canada), and 7,000 in its IDL segment (where China is included).
On the path to 50,000, McDonald’s noted it would double down on the “4Ds: digital, delivery, drive-thru, and development.”
Speaking to the first point, the company boasts about 150 million 90-day active loyalty users (70 million in China alone) and over $20 billion in systemwide sales to members. It plans to increase that active pool to 250 million by 2027 and deliver $45 billion in annual systemwide sales to loyalty members. To ensure stores can deliver speed, convenience, and freshness, McDonald’s added, it will expand its U.S. pilot of “Ready On Arrival” across the brand’s top six markets by 2025. It’s an initiative that allows employees to begin assembling guests’ mobile orders prior to their arrival.
Kempczinski called the app “the gateway into the McDonald’s experience.” Across 50 of the chain’s largest markets, it’s had more than 100 million customer registrations on its mobile app during the last 12 months, “exceeding all other restaurant brands.”
“We’ve built one of the largest loyalty programs in the world,” he said. “… This provides us with scalable data to serve each of our customers in unique and engaging ways. Our purpose-built technology has propelled this momentum. It represents a continuation of McDonald’s heritage to continue to reimagine the customer experience. This powerful triad of physical presence, digital ecosystem, and our brand, has positioned us as a leader. And we’re not done yet.”
McDonald’s digital business mixed more than 40 percent of sales across its top six markets last quarter, totaling nearly $9 billion.
With delivery, McDonald’s, which said it prepares 55,000 orders globally at any given moment, customers can order within the app in five of McDonald’s top markets. The company will now scale that function, with the goal to have 30 percent of delivery orders originate in the mobile app by 2027.
McDonald’s has more than 27,000 drive-thru locations. Enhancements, such as improved physical layouts and additional lanes, are coming, the company said.
And more into tech, McDonald’s on Wednesday announced a strategic partnership with Google Cloud to connect cloud technology and apply generative AI solutions across restaurants worldwide. McDonald’s said the deal would “help accelerate automation innovation from equipment manufacturers and allow restaurant general managers to quickly spot and enact solutions to reduce business disruptions.” Broadly, it would also reduce complexity for crew and lead to customer benefits such as hotter, fresher food.
Google Distributed Cloud, a combined hardware and software offering, will spread to “thousands” of McDonald’s restaurants so they can leverage both cloud-based software applications and their own software and AI solutions locally on-site, as needed, the company said. With Google Cloud edge computing capabilities, McDonald’s can draw new insights into how equipment is performing, enact solutions that reduce business disruptions, and diminish complexity for employees. McDonald’s will be the largest global foodservice retailer to use Google Distributed Cloud’s new capabilities—those “thousands” of restaurants are expected to begin receiving hardware and software upgrades next year.
A dedicated Google Cloud team in Chicago will work near McDonald’s global innovation center, known as Speedee Labs.
“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.”
Additionally, starting in 2024, McDonald’s plans to deploy new, universal software that all customer and digital platforms will run on—from the mobile app to loyalty to in-store kiosks. The bespoke operating system, McDonald’s said, will allow stores to speed innovation, with less complexity and more stability, and streamline consistency in customer experiences.
“More shared data means more opportunity to accelerate customized AI solutions,” McDonald’s said. “The scale of incoming information from all corners of the globe will allow McDonald’s GenAI models to better understand the broadest range of patterns and nuances, resulting in more informed tests and automated solutions to enhance restaurant operations.”
And in a continued effort that’s pulsed throughout recent earnings calls, McDonald’s said it will focus efforts around core menu items—Big Mac, Quarter Pounder, Chicken McNuggets, and World Famous Fries, etc. Those represent about 65 percent of systemwide sales. Seventeen classic McDonald’s menu items are billion-dollar brands in their own right.
McDonald’s said its “Best Burger” initiative will deploy to nearly all markets by 2026. The company unrolled that plan in April with new, softer buns, more Big Mac Sauce and some other tweaks, like meltier cheese, onions cooked on the grill, and more consistent sears from adjusted grill settings. The changes began in international markets and first landed in the West Coast before spreading, with a goal to go nationwide next year. It marked the first burger changes since 2018 when Quarter Pounders with Cheese transitioned to fresh beef and began to be cooked to order. McDonald’s stripped artificial flavors, colors, and preservatives from burgers earlier that year as well.
It’s not stopping at beef, either. McDonald’s shared the size of the company’s chicken business is now on par with beef, as it aggressively expands through billion-dollar equities including McNuggets, McChicken, McCrispy, and McSpicy.
McCrispy is headed to nearly all markets around the world by the end of 2025 and the brand expects to expand the product into wraps and tenders.
“McDonald’s over $4 billion every year marketing our brand—3 to 4 times more than our nearest brand competitor,” Kempczinski said. “Our marketing scale ensures that our brand maintains high top-of-mind awareness, which drives customer affinity and frequency.”
McDonald’s larger growth targets have been mounting. The chain reported net unit growth domestically last year for the first time in eight years. Although just a net of six stores, it signaled a shift. BTIG analyst Peter Saleh, through franchisee checks, said last week he heard there was as many as 250 new units in the pipeline in the U.S. McDonald’s had 13,444 domestic restaurants year-end 2022. Contacts told BTIG McDonald’s was “very active” in purchasing property during COVID-19 to position itself for faster development, with a particular focus on the South and Southeast regions given population trends.
“As I’ve said before, there has never been a better time to be part of Brand McDonald’s,” Kempczinski said.