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McDonald’s Invests in Remodeling Stores and Menus

With its smaller rivals already struggling to match its sales, McDonald’s Corp. today told analysts that it and its franchisees will spend heavily on an accelerated “reimaging” of its restaurants, an effort that it says boosts remodeled stores’ sales by 6% to 7%. CFO Peter Bensen said the company will be “investing on a scale that can’t be matched” by competitors.
McDonald's in Australia

McDonald's in Australia

It’s a boast grounded in fact. Even in this still-soft economic environment, McDonald’s has the capital to contribute up to $200,000 per remodel with operators paying an additional $250,000 to $500,000 per unit. The final cost of each remodel will depend on whether it is exterior only (where interior already has been updated) or both interior and exterior.

Bensen told analysts McDonald’s will remodel at least 2,000 of its 32,500 restaurants this year. Half will be in Europe, 600 in Asia/Pacific/Middle East/Africa (APMEA), and the remaining 400 to 500 will be in the U.S. These will be “older, higher-volume locations” across the country. One-third of its 14,000 U.S. stores already have been “refreshed.” The company also will tear down and rebuild 150 U.S. stores.

Europe and Australia are farther along in interior remodeling than is the U.S. Europe also has adopted the Bridge Operating Platform’s more-efficient kitchen (in 90% of European units) that allows greater menu variety and enhanced service speed.  CEO Jim Skinner noted that Europe’s creation of smaller-size and smaller- price “fourth-tier menu items” has helped sales. He pointed to the Snack Deluxe line in Germany and P’tit Plaisir mini sandwiches in France as examples.

Beef Provence, part of the Snack Deluxe line in Germany.

Beef Provence, part of the Snack Deluxe line in Germany.

For the quarter ended March 31, 2010, McDonald’s announced a global comparable sales increase of 4.2% with the U.S. up 1.5%, Europe up 5.2% and APMEA showing a 5.7% increase. Skinner said Q1 sales in the U.S. benefited from Olympic-promotion Chicken McNugget sales, McCafé expansion and the Breakfast Dollar Menu. One-third of U.S. stores now operate 24/7; 80% are open by 5 a.m.

McDonald’s President Don Thompson said the Breakfast Dollar Menu has been an effective response to morning-traffic softness caused by higher unemployment. “We knew we couldn’t take a lot of price [increase]so it has really helped pull people back at breakfast.” The Dollar Menu has increased sales of higher-margin products such as coffee, hash browns and breakfast sandwiches.mcfrappe

Thompson said frappés are in 9,000 U.S. restaurants and are selling above expectations even though marketing has not begun. Smoothies are in 2,000 stores and Wildberry and Strawberry-Banana smoothies will roll out nationally by early summer. Only 25% of frappé sales come at breakfast; 15% of smoothie sales (where available).

Noting that April sales continue to be up across all dayparts, as they were in March, Skinner said the McDonald’s system is “energized and confident.” Asked about impact of new healthcare legislation, Skinner said it was too early to know but said the law’s provision for a 90-day waiting period before health insurance would be provided new employees would be a boon to its operations.

3 Responses to McDonald’s Invests in Remodeling Stores and Menus

  1. jorge

    will you be remodeling the mcdonald”s in miami fl.20315 old culer road miami fl 33189 is the location. It needs to be upgraded already!!

  2. Karen

    I just went to the new remodeled McDonald’s in Anaheim on Ball Road and I was very surprised to see they do not have seat covers in the bathroom. Since when is that ok? The only place I have seen with no seat covers before was in NY. Please do something about this!

  3. lily lo

    I just went to new remodeled McDonald’s in San Ramon California. I really like the way you remodeled and can you help my family restaurant to remodeled the same way??