McDonald’s Makeover

Filed in Uncategorized by on February 4, 2012 0 Comments

Low stools, half-moon-shaped booths, flat-screen TVs, and wooden blinds contribute to McDonald’s makeover. Despite this new sophisticated décor, this renovation will not affect the price of a hamburger, French fries, or smoothie.

This fast food chain based in Oak Brook, Illinois, is reaching essential mass on a decade-long, multibillion-dollar global reconstruction and restoration project. According to the Los Angeles Times, McDonald’s is confident that this will increase sales, brand perception, and traffic. Restaurants bearing simultaneous exterior and interior remodels expect to see a 6% to 7% boost in same-store sales upon reopening.

McDonald’s vice president of concept and design, Denis Weil, said that once an area has reached 40% to 60% completion in the renovation process, consumers begin to view the brand differently, stop in more often, and buy higher-end items. Analysts predict that at that phase they will also see the boost in sales.

McDonald’s is scheduled to open 1,300 restaurants and remodel 2,400 this year, spending approximately $2.9 billion. The fast food chain pays 40% to 45% of a franchisee’s remodeling costs for each restaurant. This averages to approximately $600,000 in the United States. By the end of 2012, the fast food chain will have fulfilled interior renovations on at least half of its 33,000 restaurants globally.

Pete Bensen, Chief Financial Officer of McDonald’s, believes now is an opportune moment to increase new store openings strategically while keeping an eye on re-imaging. “We have the financial capacity and talent to invest when many others cannot,” Bensen said.

On a nearly decade-long streak of global same-store sales gains, McDonald’s recently reported a rise of 7.5% during the 4<sup>th</sup> quarter of 2011. Nonetheless, fast-casual restaurants such as Panera and Chipotle report similar or greater gains. Thus, McDonald’s seeks to adopt a higher-end décor to gain broader acceptance for top-tier menu items, like Angus hamburgers and smoothies, to compete with the fast-casual industry.

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