McDonald’s sets £1.3 billion CAPEX budget as it eyes 1,000 new branches in 2016

McDonald’s Flagship Olympic Park Restaurant Prepares For Opening

Fast food giant McDonald’s yesterday revealed it has set its capital expenditure budget at around $2 billion (£1.3billion) for 2016, as it goes about opening 1,000 new restaurants globally, the equivalent of almost three a day for an entire year.

The company said the investment would be split between launching the new stores and reinvesting in existing restaurants.

However, it expects capital expenditures to “modestly decline” over time after stating its intention to evolve to a more heavily franchised structure in future.

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McDonald’s had target the refranchising of 3,500 restaurants previously but told investors this week that it has now raised that to 4,000. Accelerating the pace of refranchising is designed to increase the global franchised percentage from the current 81% to about 93% by the end of 2018.

Long-term, the chain said its goal is to become 95% franchised.

The plans were laid out by British CEO Steve Easterbrook and members of the senior management team at a meeting with analysts, in which McDonald’s also announced that it expects positive fourth quarter comparable sales in all segments.

LONDON, ENGLAND - JUNE 25:  An interior view of the world's largest McDonald's restaurant and their flagship outlet in the Olympic Park on June 25, 2012 in London, England. The restaurant, which is one of four McDonald's to be situated within the Olympic Park, will have a staff of 500. After the Olympic and Paralympic Games conclude the restaurant will be dismantled and all fixtures and fittings will be either reused or recycled.  (Photo by Oli Scarff/Getty Images)

“While we are still in the early stages of turning around our business, we are gaining momentum by focusing on our customers and what matters most to them – hot and fresh food, fast and friendly service, and a contemporary restaurant experience at the value of McDonald’s,” said Easterbrook.

“My priorities for McDonald’s as a modern, progressive burger company are three-fold: driving operational growth, creating brand excitement and enhancing financial value. We are taking bold, urgent action to reset the business and prepare the company for the next chapter of its history.”

Easterbook conceded that to execute a successful turnaround plan, the company “must run great restaurants each and every day”.

“We’re leveraging our competitive strengths: iconic menu items that customers love, a unique franchise model that empowers local entrepreneurs, size and scale that makes operational investments efficient, and a global, well-diversified geographic footprint,” he declared. “Together, these brand attributes provide McDonald’s with the foundation and capabilities for continued success.”

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Andrew Seymour

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