Going into a McDonald’s has always been a comforting actgetting in the car from a busy day and seeing those familiar golden arches to pull into for a quick bite. Today, that feeling is about to get a whole lot more sustainable. McDonald’s has formally committed to investing roughly 8.5 billion dollars into its franchise system through 2036, with nearly 5 billion dollars of that investment through 2030. Nearly, all of the new investment will go toward helping the franchise system refresh its restaurants and technology for modernization and system revitalization at the local level.
This is no generic corporate press release echoing inflated numbers. It is a real business plan with the company working in partnership with the independent operators running many the 46,000+ restaurants around the world. Franchisees have already invested in their stores, incurring capital costs averaging hundreds of thousands of dollars for mandated remodels over ten years. Now they will go further but McDonald’s will help financially with rent relief and capital contributions to reduce the pain. The effect is relatively straightforward and the goal clear: make every restaurant more productive and more appealing so that the customer will eat at McDonald’s more regularly.
CEO Chris Kempczinski has defined the initiative as part of a program known as McDonald’s NEXTwhich stands on previous initiatives but touches four linked dimensions: menu consumers restaurants, and employees. For the restaurants, this involves more efficient kitchen workflows, reimagined restaurant formats, and more intelligent use of technology. Some initiatives have already garnered press, among them the smartsouth system (using articial intelligence to processes orders and trims service times), and the concept of autonomous order pickup equipped with canny little delivery lockers and mobile order kiosksallowing guests to request their fare without relying on traditional waiting in line.
The numbers behind the efficiency drive are startling. McDonalds anticipates that the new innovations will generate around 250 basis points of increased efficiency at the restaurant level. For an average restaurant in the U.S this could mean approximately 100,000 dollars of incremental cash flow generated each year, most of which should ultimately flow through to the bottom line. This is an important improvement. Improved economics at the unit level will enable franchisees to have greater flexibility to invest in the business, to develop and get staff up to speed, and to further improve the customer proposition. Given the environment of increasing competition in the ‘value’ fast food market and the demand for convenience, this operational strength will prove invaluable.
Employees are at the core of this project too. The firm is getting ready for what it calls one of the biggest upskilling initiatives in its history, as it tackles the task of retraining millions of crew members throughout its global estate. Improved training should lead to faster service, better food and fewer variations between visits. Customers should experience less waiting, hot fries and a restaurant that feels more contemporary and better looked after.
In many markets, consumers are still wary of spending, and the call for value for money is as fierce as ever. McDonald’s knows this only too well now as their recent value promotions backfired. The NEXT investments are meant to combat just these kinds of pressures by increasing restaurant productivity, so enabling McDonald’s to be price competitive and still improve the experience.