McDonald’s grew U.S. same-store sales by 0.8 percent in its second quarter. Burger King grew 8.5 percent. That gap sits behind the plan the company laid out at its investor day in Chicago.
McDonald’s said it will invest $8.5 billion through 2036 to support restaurant technology updates, with rent relief and capital for operators. About $5 billion of that is meant to arrive by 2030. The company is also betting on artificial intelligence, hand-breaded chicken and a return of 1990s-style restaurants to win back customers who drifted to other chains.
“You start with the opportunity, which we think is really clear and compelling,” CFO Ian Borden told Yahoo Finance. “We think it’s going to provide a really strong return for our operators and for McDonald’s.”
Who pays
Franchisees are being encouraged to take the plan in phases, and the bill falls partly on them. Operators are expected to refresh their restaurants’ look in a remodel cycle every 10 years, which CEO Chris Kempczinski put at $400,000 to $450,000 per restaurant. The productivity upgrades add another $800,000 for each U.S. restaurant, and $650,000 to $750,000 abroad.
Kempczinski said the money is not all gloss. “Paint the walls, fix the roof, make sure the parking lots are in good shape, all of that is part of that investment,” he said. The remainder, roughly $800,000, is “tied to sales driving or productivity driving initiatives.”
One franchisee told Yahoo Finance that margins are already thin, with higher ingredient, labor and rent costs, and that another costly redesign is hard to swallow with interest rates high. Kempczinski conceded the point: “Back 10 years ago, it was practically like free money.” Still, he argued, franchisees borrow on the strength of the McDonald’s name and should pay “significantly less” than “Joe’s Burger joint.”
Shares have lagged
Investors have not yet bought in. McDonald’s shares are down 18 percent for the year. Restaurant Brands International, Burger King’s parent, is up 4.6 percent, and the S&P 500 has gained 13 percent.
