CHICAGO, Nov. 9, 2020 /PRNewswire/ -- McDonald's
Corporation announces a new growth strategy, Accelerating the
Arches, which encompasses all aspects of McDonald's business as
the leading global omni-channel restaurant brand. The strategy
includes a refreshed purpose to feed and foster the communities
McDonald's and its franchisees serve around the world, updated
values that guide actions and behaviors, and growth pillars that
build on McDonald's competitive advantages.
The growth pillars, which are rooted in the Company's identity,
MCD, build on historic strengths and articulate areas of further
opportunity. Specifically, the Company will animate the MCD in the
following ways:
- Maximize our Marketing by investing in new,
culturally relevant approaches to effectively communicate the story
of brand, food and purpose.
- Commit to the Core by tapping into customer
demand for the familiar and focusing on serving delicious burgers,
chicken and coffee.
- Double Down on the 3 D's (Digital, Delivery and Drive
Thru) by leveraging competitive strengths and building a
powerful digital experience growth engine that provides a fast,
easy experience for our customers.
"In countries around the world, we have seen customer behaviors
change at an unprecedented pace over the last several months. We
believe this presents an opportunity to do something special as we
write the next great chapter of McDonald's," said McDonald's
President and Chief Executive Officer Chris
Kempczinski. "By embracing a bigger, more holistic vision
for the future, Accelerating the Arches defines
how McDonald's will deliver value to all stakeholders by providing
a clear roadmap of what we can do for the millions of customers, in
the thousands of communities, we serve each and every day. With our
new growth strategy, we will build on our inherent strengths by
harnessing our competitive advantages and investing in innovations
that enable us to continue to offer fast, easy moments for our
customers."
A Renewed Purpose to Drive Greater Impact
The Company is prioritizing its role and commitments to the
communities it has served for more than 65 years.
This year, McDonald's unveiled its refreshed purpose to feed and
foster communities. Through both actions and communications, the
Company is looking to make an even greater impact by focusing on
four areas that matter most to communities: responsibly sourcing
quality ingredients, driving climate action to protect the planet,
connecting with communities in times of need, and increasing focus
on equity by providing opportunity for restaurant crew.
This purpose translates into action through: support for farming
communities; the goal of sourcing 100% of guest packaging from
renewable, recycled, or certified sources by 2025; donating
millions of pounds of quality food from our supply chain and
restaurants to neighbors in need in 2020; and reducing barriers to
employment for over 2 million people worldwide.
Maximize our Marketing
The Golden Arches that represent McDonald's are iconic because
of what the Company does in the world. Customers today want to know
the brands they love share their values and support causes that are
important to them. As McDonald's looks at its next chapter, its
purpose of "feeding and fostering communities" sets a clear
direction for its strategy and its connection with customers.
Underpinned by actions that support communities, the Golden Arches
will maintain another 65 years of cultural relevance through
clearer and more effective marketing, unlocking the power of the
brand as a growth driver in its own right.
A renewed focus on McDonald's purpose will come to life in a new
campaign, "Serving Here." The campaign demonstrates the Company's
values and illustrates its commitments to the communities,
customers, crew, farmers, franchisees and suppliers it partners
with and will be animated with actions in its top markets.
Customers want to love and connect with McDonald's creative
content as much as the food. To drive that connection, the Company
will continue listening to customers and finding opportunities to
create cultural moments. The Famous Orders promotion in the U.S.,
so far with Travis Scott and J
Balvin, is just the beginning.
Affordability is also crucial in today's environment and remains
a cornerstone of the McDonald's brand. The Company is committed to
offering the right price and product combination so that customers
realize value at every tier of the menu.
Finally, McDonald's will introduce stunning new packaging
globally with a modern, refreshing feel and playful touches to
unify branding in markets all over the world.
Commit to the Core
What customers love most about McDonald's menu is the classics -
like the Big Mac, Quarter Pounder, Chicken McNuggets and
World-Famous Fries. Core menu items, like these, represent the
heart of the business, making up about 70 percent of food sales
across its top markets. As demand for the familiar in these
uncertain times is more important than ever, the Company believes
these core classics will continue to be significant drivers of
growth thanks to both their popularity and profitability.
McDonald's heritage is in burgers, and committing that customers
get the best version of their popular burgers every time they visit
is a priority. To improve upon the great taste of its burgers and
to serve them hot and deliciously juicy, markets around the world
are implementing a series of operational, process and formulation
changes. These include using new buns toasted to golden brown and
an enhanced grilling approach to unlock more flavor.
McDonald's also has significant opportunity to expand its
chicken offerings, a category that is growing faster than beef.
This includes leveraging the extraordinary global strength of
Chicken McNuggets and the McChicken sandwich, and investing in new
line extensions and flavors. It also means continuing to offer food
that aligns with current consumer trends and taste profiles, like
spicy. To continue building on its chicken portfolio, the Company
plans to introduce a new Crispy Chicken Sandwich in the U.S. early
next year.
Double Down on the 3 D's: Digital, Delivery and Drive
Thru
The shift in customer behavior during COVID-19 has illustrated
the competitive advantages of McDonald's. Delivery is booming and
the use of the McDonald's app has surged as more and more customers
are ordering and paying for their food on mobile devices.
McDonald's 25,000 drive thru lanes worldwide have become an oasis
for customers around the world.
To unlock further growth, the Company will accelerate technology
innovation so that the tens of millions of customers who interact
with McDonald's each day can enjoy a fast, easy experience that
fits their needs at the moment, whether a family dinner delivered
to a doorstep or late-night fries from the drive thru.
Digital
To transform its digital offerings across drive thru, takeaway,
delivery, curbside pick-up and dine-in, the Company announced a new
digital experience growth engine, "MyMcDonald's." Through the
digital tools across this platform, McDonald's will offer customers
the fast and easy experiences they love and provide them with many
reasons to keep coming back. Customers will receive tailored
offers, be able to participate in a new loyalty program and easily
order and receive McDonald's food through the channel of their
choice. One key component of "MyMcDonald's" starts in the coming
weeks in the Phoenix area in the
U.S. with a pilot of a new loyalty program.
The Company expects digital sales to exceed $10 billion or nearly 20% of Systemwide sales
across its top six markets in 2020. To further expand on its
already significant digital presence and bring more speed and
convenience, more personalization, and even better value for its
customers, the Company expects to launch "MyMcDonald's" across
those top six markets by the end of 2021.
Delivery
Nearly 75% of the population across the Company's top markets
lives within three miles of a McDonald's, and this advantage allows
the Company to meet customers' evolving needs for speed and
convenience. In the past three years, McDonald's has expanded the
number of restaurants that offer delivery nine-fold, to about
28,000 restaurants.
Building on this progress means enhancing the delivery
experience for customers. This includes the ability to order on the
McDonald's app, which is already available in several markets
around the world, and optimizing operations with a focus on speed
and accuracy.
Drive Thru
McDonald's drive thru presence and experience with operating
high performing drive thrus for over 45 years is unrivaled.
McDonald's has a drive thru in approximately 65% of its restaurants
around the world and, in the U.S., nearly 95% of the approximately
14,000 locations have a drive thru. During COVID-19, this channel
has heightened importance and will be even more critical in the
future to meet demand for flexibility and choice.
McDonald's will maximize the advantages of its strong drive thru
presence by testing new concepts and technology to make the
customer experience even faster. This includes innovations to
provide a faster, more convenient experience such as automated
order taking; a new drive thru express pick-up lane for customers
with a digital order; and a restaurant concept that offers drive
thru, delivery and takeaway only. In addition, the Company will
build on its drive thru advantage as the vast majority of new
restaurants in the U.S. and International Operated Markets will
include a drive thru.
Run Great Restaurants
McDonald's reinvigorated strategy is underpinned by a relentless
focus on running great restaurants and empowering restaurant crew.
The Company has reduced its drive thru service times by about 30
seconds over the past two years in its largest markets, on average.
McDonald's will continue to focus on driving efficiencies in its
operations to enhance the customer experience.
Also, now more than ever, safety, hygiene and customers' trust
and confidence in its restaurants is critical, so the Company has
established even greater discipline in how restaurants are run to
meet those needs. To support these efforts, McDonald's retained
Mayo Clinic to provide consulting services regarding cleanliness,
health and safety to mitigate the spread of COVID-19.
Financial Performance Expectations
As a result of the COVID-19 pandemic and associated resurgences,
countries around the world continue to be impacted by economic
instability, government regulations and changes in consumer
behavior. Due to this ongoing uncertainty, the Company continues to
evaluate its financial expectations on an ongoing basis and will
provide updates as situations warrant. Based on current conditions,
the Company expects its strong foundation and new growth strategy
to deliver the following key metrics for 2021 and 2022.
- Systemwide sales growth in the mid-single digits
-
- For 2021, growth is as compared to 2019
- For 2022, unit expansion is expected to contribute 1.5% to 2%
to Systemwide sales growth
- Operating margin percent in the low-to-mid 40s
- Annual G&A spend of about 2.3% of Systemwide sales
- Capital expenditures of approximately $2.3 billion, about half of which will be
directed towards new unit expansion
- Free cash flow conversion greater than 90%
Additionally, the Company's capital allocation priorities remain
investing in the business for growth, paying dividends, and
returning to pre-COVID-19 debt ratios.
"Our solid financial position and business foundation has been a
source of strength through the pandemic," said Chief Financial
Officer Kevin Ozan. "We are
confident that Accelerating the Arches builds on our
momentum and will drive long-term profitable growth for all
stakeholders."
THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED
THROUGHOUT THIS RELEASE
Systemwide sales include sales at all restaurants, whether
operated by the Company or by franchisees. While franchised sales
are not recorded as revenues by the Company, management believes
the information is important in understanding the Company's
financial performance, because these sales are the basis on which
the Company calculates and records franchised revenues and are
indicative of the financial health of the franchisee base. The
Company's revenues consist solely of sales by Company-operated
restaurants and fees from franchised restaurants operated by
conventional franchisees, developmental licensees and
affiliates.
Operating margin is defined as operating income as a percent of
total revenues. The contributions to operating margin differ by
segment due to each segment's ownership structure, primarily due to
the relative percentage of franchised versus Company-operated
restaurants.
Free cash flow, defined as cash provided by operations less
capital expenditures, and free cash flow conversion rate, defined
as free cash flow divided by net income, are measures reviewed by
management in order to evaluate the Company's ability to convert
net profits into cash resources, after reinvesting in the core
business, that can be used to pursue opportunities to enhance
shareholder value.
RELATED COMMUNICATIONS
McDonald's will broadcast its virtual Investor Update live over
the Internet at 8:30 a.m. (Central
Time) on November 9, 2020. For
additional information and registration details, please visit:
http://investorupdate.mcd.com or the Investor Events section
of the Company's Internet home page at www.investor.mcdonalds.com.
There will also be an archived webcast available for a limited time
thereafter.
UPCOMING COMMUNICATIONS
For important news and information regarding McDonald's,
including the timing of future investor conferences and earnings
calls, visit the Investor Relations section of the Company's
Internet home page at www.investor.mcdonalds.com. McDonald's uses
this website as a primary channel for disclosing key information to
its investors, some of which may contain material and previously
non-public information.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer
with over 39,000 locations in over 100 countries. Approximately 93%
of McDonald's restaurants worldwide are owned and operated by
independent local business owners.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements, which
reflect management's expectations regarding future events and
operating performance and speak only as of the date hereof. These
forward-looking statements involve a number of risks and
uncertainties. Factors that could cause actual results to differ
materially from our expectations are detailed in the Company's
filings with the Securities and Exchange Commission, such as its
annual and quarterly reports and current reports on Form 8-K. The
Company undertakes no obligation to update such forward-looking
statements, except as may otherwise be required by law.
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SOURCE McDonald's Corporation