Dive Brief:
- During its recent Q4 earnings call, McDonald's announced plans to open about 500 new restaurants in the U.S. and international operated market segments, part of a bigger plan to open more than 1,300 new locations around the world. During the call, CFO Kevin Ozan said the company will spend nearly half of its $2.3 billion of capital to open those restaurants, calling new restaurant development an "important driver of our growth."
- The chain will spend an additional $500 million on modernizing about 1,200 U.S. McDonald's locations, though specific markets were not disclosed. As part of that modernization effort, both upgraded and new restaurants will focus on digital, delivery and drive-thru operations.
- In November, McDonald's announced it is creating more dual drive-thru lanes to allow two customers to order at the same time and, in some cases, a third drive-thru line for larger, more complex orders. McDonald’s has also expanded delivery to about 28,000 locations and plans to roll out delivery ordering via the McDonald's app in some markets.
Dive Insight:
McDonald's is building smaller, off-premise focused restaurants with limited or no dine-in seating in an effort to make more room for its drive-thru enhancements. There's a reason the chain is laser-focused on its drive-thru channel — McDonald's generated about 90% of sales at the drive-thru window during Q2 2020.
McDonald's ubiquitous drive-thru presence helped drive some of its strongest quarters in roughly a decade despite the crisis. Its Q3 2020 same-store sales were up 4.6%, for example, while Q4 2020 was up 5.5%.
"Customers' desire for convenience, speed and ease will only grow, and we're ready for that. We're taking steps to accelerate our phenomenal drive-thru advantage," Mason Smoot, McDonald's SVP and chief restaurant officer, said in November.
McDonald's new builds are also primed for takeout and delivery, two massive opportunities created by a shift in consumer behavior throughout the past year.
Data from The NPD Group finds takeout orders increased by 10% in December versus a year ago, and by the end of 2020 carryout represented 46% of off-premise order share. Delivery ended the year with a 137% gain year-over-year. Drive-thru was up by 22% in December versus December 2019, and ended the year with 44% of share of off-premise orders.
These habits won't be easy to shake. According to the National Restaurant Association’s State of the Industry 2021 report, 53% of adults now say purchasing takeout or delivery is "essential" to the way they live.
Ozan said during the Q4 earnings call that McDonald's is nearing completion of its U.S. modernization efforts and expects over 90% to be completed by the end of 2021. Meanwhile, new restaurants — with most featuring those drive-thru upgrades — are expected to contribute up to 1% of McDonald's systemwide sales growth in 2021.
Correction: In a previous version of this article, the number of U.S. stores McDonald's plans to open in 2021 was misstated. McDonald's plans to open nearly 500 stores across the U.S. and international operated market segments.
