- Targeting 50,000 restaurants by 2027; ushering in
fastest period of growth in brand's history
- Expanding one of the world's largest loyalty programs
from 150 million to 250 million 90-day active users by
2027
- Connecting thousands of restaurants worldwide with Google
Cloud technology to improve operations and customer & crew
experience, beginning in 2024
CHICAGO, Dec. 6, 2023
/PRNewswire/ -- Today McDonald's Corporation announces ambitious
new growth targets to advance its Accelerating the Arches
strategy.
"As I've said before, there has never been a better time to be
part of Brand McDonald's. The
McDonald's System has demonstrated exceptional execution of our
Accelerating the Arches strategy and is delivering
tremendous results across our key growth pillars," said McDonald's
President and Chief Executive Officer Chris
Kempczinski. "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."
Since 2019, the Company has delivered significant
performance, generating 30% comparable sales growth through
Accelerating the Arches. The all-encompassing strategy is
underpinned by modernized values and fueled by the M-C-D growth
pillars to:
- Maximize our Marketing
- Commit to the Core
- Double Down on the 3Ds (Delivery, Digital, and Drive Thru) –
with the addition of a fourth D (Development) earlier in 2023
Maximize our Marketing
The Company continues to build relevance amongst customers
through emotional connections and world class creative, which are
central to the brand's "Feel-Good Marketing" approach.
Kantar recently named McDonald's one of the world's top five
most valuable brands, driven by culturally relevant
creativity that drives growth. It's a recognition that speaks to
the heart of McDonald's iconic position as one of the world's
leading consumer-facing brands.
The Raise Your Arches campaign demonstrated the brand's
efficiency and agility to create and scale award-winning campaigns
that feed McDonald's global fandom and inspire brand affinity.
Originally developed in the U.K., the campaign was quickly picked
up by more than 35 markets around the world.
Another way in which McDonald's connects with its customers is
through personalized value and digital offers, like those available
on the McDonald's mobile app. McDonald's is proud to be a
destination of choice, and it continues to be recognized by
customers with the number one position on Value and Affordability
scores in the industry.
Commit to the Core
Core menu items – like the Big Mac, Quarter Pounder, Chicken
McNuggets and World-Famous Fries – are truly the core of this
business, representing about 65% of Systemwide sales and driving
profitable growth. Seventeen classic McDonald's menu items are
billion-dollar brands in their own right, beloved by customers
around the world.
Building on its historic strength with burgers, the Company
continues to evolve and innovate around its longest-standing menu
item with plans to deploy the Best Burger initiative to nearly
all markets by 2026.
All while the Company gains share in the rapidly growing chicken
category, which it has highlighted as a significant opportunity.
Today, the size of the Company's chicken business is on par with
beef, as the Company continues to aggressively expand through
billion-dollar equities including McNuggets, McChicken, McCrispy
and McSpicy. This includes plans to offer McCrispy in nearly all
markets around the world by the end of 2025 and to expand
McCrispy into wraps and tenders. These planned innovations and
new menu offerings reflect the Company's ability to test and scale
quickly to serve customers.
Double Down on the 4Ds: Digital, Delivery, Drive Thru and
Development
Digital
With 150 million 90-day active users and over $20 billion in Systemwide sales to loyalty
members, McDonald's loyalty program is one of the largest in the
world. Still, the Company plans to increase its active loyalty
user base to 250 million 90-day active users and
deliver $45 billion in annual Systemwide sales to
loyalty members by 2027. Mobile ordering is a popular and
growing choice for customers, with hundreds of millions of mobile
orders recorded during the third quarter of 2023.
To ensure McDonald's restaurant teams are able to deliver the
speed, convenience and freshness customers expect when they place a
mobile order, the Company will expand its U.S. pilot of Ready
On Arrival across its top six markets by 2025. This
initiative enables crew members to begin assembling a customer's
mobile order prior to their arrival at the restaurant to expedite
service and elevate customer satisfaction.
Delivery
With a massive global footprint and unmatched proximity to
customers, McDonald's has the industry's largest delivery
program globally – with 55,000 orders prepared and delivered to
customers at any given moment. Customers can order delivery
within the McDonald's mobile app in five of the Company's top
markets and the Company is scaling this capability, expecting
30% of delivery orders to originate in its mobile app by
2027.
Drive Thru
McDonald's is the largest drive thru player worldwide, with
more than 27,000 drive thru locations. A first mover in locking
down the best locations at attractive prices, McDonald's network
provides unmatched scale and convenience for customers. This
competitive advantage in drive thru also presents significant
opportunities for growth. Enhancements, such as improving the
physical layout of the drive thru with additional lanes, creates
additional capacity, which improves speed and efficiency and
ultimately leads to sales growth and strong returns.
Development
As the Company previously announced, it will accelerate the pace
of restaurant openings to fully capture the increased demand being
driven through the M-C-D growth pillars. Today the Company
announced it will continue to build on its industry-leading
development progress by targeting expansion to 50,000
restaurants by the end of 2027. This will mark the fastest
period of growth in Company history, with an expected run rate
of 1,000 gross openings across the U.S. and International
Operated Markets in 2027.
Advancing Tech-Driven Solutions
The Company's technology strategy aims to leverage scale and
unlock greater speed and efficiency for customers, restaurant
teams, and employees.
Today, McDonald's and Google Cloud announced a strategic
partnership to connect the latest cloud technology and apply
generative AI solutions across its restaurants worldwide. This
will help accelerate automation innovation from equipment
manufacturers and allow restaurant general managers to quickly spot
and enact solutions to reduce business disruptions. Overall,
this will also reduce complexity for crew and lead to
customer benefits such as hotter, fresher food.
"We're focused on making AI more helpful for everyone, with the
potential to unlock many new opportunities for innovation," said
Sundar Pichai, CEO of Google and
Alphabet. "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."
In addition, and beginning in 2024, the Company will begin to
deploy new, universal software that all McDonald's customer and
restaurant digital platforms will run on – from the mobile app to
loyalty and kiosks in store. The bespoke operating system will
enable restaurants to roll out innovation even faster, with less
complexity and more stability; and customers will enjoy a more
familiar, consistent experience no matter where they go or how they
order.
More shared data means more opportunity to accelerate customized
AI solutions. 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.
FINANCIAL PERFORMANCE EXPECTATIONS
"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. This has resulted in a more
durable business model that yields a consistently strong TSR
algorithm that is expected to grow," said Global Chief Financial
Officer Ian Borden. As a result, the
Company expects its evolved growth strategy to deliver the
following financial targets:
|
Preliminary 2024
guidance
|
Average, annual
long-term financial
targets beyond 2024
|
Net restaurant
unit
expansion
|
Nearly 2% of Systemwide
sales growth
in constant currencies
|
About 2.5% of
Systemwide sales growth
in constant currencies
|
Operating
margin
|
In the mid-to-high 40%
range
|
Continued
expansion
|
Net new restaurant
unit
growth
|
Over 4%
|
Between 4% to 5%
annually, targeting
50,000 global units by 2027 with a run
rate of about 1,000 gross restaurant
openings across the U.S. and
International Operated Markets in 2027
|
Capital
expenditures
|
About $2.5
billion
|
Sequential increases of
about $300-
$500 million each year through 2027
|
Free cash flow
conversion
|
In the 90%
range
|
In the 90%
range
|
"It's clear that our Accelerating the Arches strategy has
delivered exceptional results and we're operating from a position
of strength," said Borden. "The goals we've outlined today further
our competitive strengths across the M, C, and Ds and our ability
to continue to identify new platforms for growth puts us in the
best possible position to maximize the opportunities in our
strategic plan and provide long-term profitable growth for all
stakeholders."
The Following Definitions Apply to These Terms as Used
Throughout This Release
Constant currency results exclude the effects of foreign
currency translation and are calculated by translating current year
results at prior year average exchange rates. Management reviews
and analyzes business results excluding the effect of foreign
currency translation, impairment and other charges and gains, as
well as material regulatory and other income tax impacts, and bases
incentive compensation plans on these results because the Company
believes this better represents underlying business trends.
Comparable sales and comparable guest counts are compared to the
same period in the prior year (unless a different period of
comparison is noted) and represent sales and transactions,
respectively, at all restaurants, whether operated by the Company
or by franchisees, in operation at least thirteen months including
those temporarily closed. Some of the reasons restaurants may be
temporarily closed include reimaging or remodeling, rebuilding,
road construction, natural disasters, pandemics and acts of war,
terrorism or other hostilities. Comparable sales exclude the impact
of currency translation and the sales of any market considered
hyperinflationary (generally identified as those markets whose
cumulative inflation rate over a three-year period exceeds 100%),
which management believes more accurately reflects the underlying
business trends. Beginning in the first quarter of 2023, McDonald's
excluded results from Argentina
and Lebanon in the calculation of
comparable sales due to hyperinflation (Venezuela continues to be excluded).
Comparable sales are driven by changes in guest counts and average
check, the latter of which is affected by changes in pricing and
product mix.
Systemwide sales include sales at all restaurants, whether
operated by the Company or by franchisees. This includes sales from
digital channels, which are comprised of the mobile app, delivery
and kiosk at both Company-operated and franchised restaurants.
While franchised sales are not recorded as revenues by the Company,
management believes the information is important in understanding
the Company's financial performance because these sales are the
basis on which the Company calculates and records franchised
revenues and are indicative of the financial health of the
franchisee base. The Company's revenues consist of sales by
Company-operated restaurants and fees from franchised restaurants
operated by conventional franchisees, developmental licensees and
affiliates. Changes in Systemwide sales are primarily driven by
comparable sales and net restaurant unit expansion.
Operating margin is defined as operating income as a
percent of total revenues. The contributions to operating margin
differ by segment due to each segment's ownership structure,
primarily due to the relative percentage of franchised versus
Company-operated restaurants.
Free cash flow, defined as cash provided by operations less
capital expenditures, and free cash flow conversion rate, defined
as free cash flow divided by net income, are measures reviewed by
management in order to evaluate the Company's ability to convert
net profits into cash resources, after reinvesting in the core
business, that can be used to pursue opportunities to enhance
shareholder value.
Related Communications
McDonald's Corporation will host an Investor Update at
McDonald's headquarters beginning at 9:30
a.m. (Central Time) on December 6,
2023. For additional information and registration details,
please visit the Investor Events section of the Company's Internet
home page at www.investor.mcdonalds.com. There will also be an
archived webcast available for a limited time thereafter.
Upcoming Communications
For important news and information regarding McDonald's,
including the timing of future investor conferences and earnings
calls, visit the Investor Relations section of the Company's
Internet home page at www.investor.mcdonalds.com. McDonald's uses
this website as a primary channel for disclosing key information to
its investors, some of which may contain material and previously
non-public information.
About McDonald's
McDonald's is the world's leading global foodservice retailer
with over 40,000 locations in over 100 countries. Approximately 95%
of McDonald's restaurants worldwide are owned and operated by
independent local business owners.
Forward-Looking Statements
This release contains certain forward-looking statements, which
reflect management's expectations regarding future events and
operating performance and speak only as of the date hereof.
Generally speaking, any statement in this release not based upon
historical fact is a forward-looking statement. Forward-looking
statements can also be identified by the use of forward-looking or
conditional words, such as "could," "should," "can," "continue,"
"estimate," "forecast," "intend," "look," "may," "will," "expect,"
"believe," "anticipate," "plan," "remain," "confident," "commit,"
"potential" and "trajectory" or similar expressions. In particular,
statements regarding our plans, strategies, prospects and
expectations regarding our business and industry are
forward-looking statements. These forward-looking statements
involve a number of risks and uncertainties. Factors that could
cause actual results to differ materially from our expectations are
detailed in the Company's filings with the Securities and Exchange
Commission, such as its annual and quarterly reports and current
reports on Form 8-K. The Company undertakes no obligation to update
such forward-looking statements, except as may otherwise be
required by law. You should not rely unduly on forward-looking
statements.
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