McDonalds Announces $6 Billion Modernisation Program

McDonalds Announces $6 Billion Modernisation Program
August 15, 2018

 

Fast food chain McDonald’s Corp. (NYSE: MCD) and its franchisees are planning to spend $6 billion to revamp most of its 14,000 restaurants in the US and Commonwealth, by the year 2020. The announcement represents the company’s biggest facelift in several decades. Through separate statements, McDonald’s elaborated on its planned investment in several states and cities during 2018 and 2019.

 

Planned changes in restaurants

The Chicago-based company is planning an array of changes to not only give its restaurant a modern look, but also provide a digital age service. Back in November 2016, McDonald’s began modernising its restaurants through a program dubbed the “Experience of the Future.” Earlier this month, the company opened a new state-of-the-art restaurant in Chicago, with digital kiosks, mobile-order-and-pay facility, table service and many more improvements assured by the program. Notably, the Chicago restaurant was decorated with 70 trees, a floating glass garden, and also fitted with solar panels.

The features planned under the modernisation plan announced yesterday include ultra-modern dining rooms, new décor and furniture, redesigned counters that facilitate table service, and refreshing exteriors. Furthermore, keeping up with the change life styles, McDonald’s is planning to install digital self-order kiosks and digital menu boards within the restaurant and at the drive-through lanes. The company is even planning to set aside separate parking places for clients who order food through its mobile app. The counters will also be more spread out with large displays.

The company is also introducing “McDelivery” service in partnership with Uber at 5,000 locations.

 

Locations and investment

McDonald’s will be investing approximately $320 million in New York to redesign its 360 plus restaurants. In Virginia, it plans to invest $163 million to modernise its 250 restaurants. In North Carolina McDonald’s is planning to spend $214 million to remodel its 430 local restaurants. In Washington DC, the company intends to spend $19 million to improve the appearance of 15 restaurants.

Other planned investments include: $104 million in Maryland for revamping 135 restaurants, $251 million in Ohio for redesigning 380 restaurants, $143 million in Massachusetts for modernising 140 restaurants, $168 million in Indiana to remodel 270 restaurants, $186 million in Florida to decorate 240 restaurants, $170 million in Georgia to improve 340 restaurants, and $266 million in Pennsylvania for decorating 360 restaurants.

 

Costs to be borne by Franchise owners

According to restaurant industry consultant Richard Adams, McDonald’s franchise owners may have bear 75% of the refurbishment costs, while McDonald’s will be footing the rest of the bill. In the case of franchisee operated outlets, McDonald’s owns the real estate and buildings.  The company has also stated guidelines that must be adhered by the franchisees.

Adams further revealed that the franchisee of a relatively new restaurant established on or after 2010 may have to shell out a few hundred thousand dollars. Redesigning an older restaurant may cost up to a million dollars. So, those franchisees who cannot afford to absorb the costs will be forced to  sell their business.

 

Company performance

McDonald’s has resumed to growth trajectory after years of stagnation, under the leadership of Steve Easterbrook. The all-day breakfast launched by the CEO in 2015 boosted sales tremendously.

 

Stock analysis

The stock has closed above its 50-day moving average. Furthermore, the MACD indicator is rising upwards. Therefore, we can expect the uptrend to continue.

McDonalds - Technical Analysis - 15th August 2018

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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