#3 on the Franchise 500: McDonald's Had a Bumpy Year, But Still Leads in Innovation
From the remote island of Mauritius to the distant deserts of Kuwait, you can’t escape the Big Mac. The world is home to more than 38,000 McDonald’s. So what’s left to conquer?
McDonald’s has ranked near the top of the Franchise 500 for the past three years, and much of the credit goes to its push toward modernization. With its $10 billion system-wide store redesign nearly complete, McDonald’s is now uploading new tech to accelerate its race toward the future.
In 2019, the company acquired two companies that signal its ambitions: Dynamic Yield, which builds digital menu displays that tailor suggestions to the time of day, weather, and items already in customers’ orders; and Apprente, a voice-based AI company that will kick off the newly minted McD Tech Labs in Mountain View, Calif.
But despite $21 billion in 2018 revenues, the fast-food OG faced some challenges last year. CEO Steve Easterbrook was fired over a consensual relationship with an employee, and despite a 5.9 percent increase in global same-store sales, third-quarter earnings fell short of expectations. (The company would not make an executive available for an interview for this story.) That said, revenues spiked by $61.2 million, and redesigned stores are seeing mid-single-digit uplifts in sales. The good news has insulated the company from the bad, and it’s currently riding on 17 consecutive quarters of growth. During his last earnings call in October, Easterbrook said he expected McDonald’s recently added delivery program to drive $4 billion in sales by the end of 2019; McDonald’s is now filling 10 delivery orders every second.
It may be too early to assess the company’s tech gamble. “But if it brings down the speed of service, it’s worth it,” says longtime restaurant analyst Howard Penney at Hedgeye Risk Management. “McDonald’s is the first. They are leading the way. Nobody is doing what they are.”