McDonald’s commits $10.9b to fend off fierce competition

McDonald’s is earmarking roughly US$8.5 billion (S$10.9 billion) to help franchisees implement a multi-year plan to serve better food, improve service and make restaurants easier to run.

The company will deploy the money – a mix of capital support and rent relief – through 2036, according to a statement on Sept 23 ahead of the fast-food chain’s investor day. The funds are intended to “accelerate restaurant modernisation, technology deployment and operational improvements” as part of a plan unveiled earlier in 2026. 

McDonald’s has said that its initiative, called “Next”, aims to turn the chain into more than a stop for a quick, cheap meal. The idea is to redesign restaurants to be more open and bring back playful elements lost in previous remodels, while streamlining kitchens so staff can work more efficiently. It is also focusing on improving its food offerings, and training staff on how to provide better service through initiatives like always greeting customers. More personalised marketing is in the works, too. 

The company is unveiling the investment as it contends with a slowing US business. Sales last quarter rose at their slowest pace in more than a year. Missteps with its value offerings drove weakness after some deals did not resonate with customers. 

Moreover, the chain said that its restaurants were overwhelmed by too many product launches, resulting in slower service and falling customer satisfaction ratings. Some marketing campaigns, including meals tied to the World Cup, fell short of forecasts. Lastly, it is facing fierce competition from emerging brands focused on offerings such as chicken and beverages. 

In August, McDonald’s replaced its longstanding US chief with company veteran Skye Anderson to bring “focus and urgency” to its home market.

The company is simplifying its marketing calendar and promoting “proven” deals, such as its Extra Value Meals. It is also working on a “longer-term” value strategy, Bloomberg News reported.

In the US, McDonald’s usually owns locations and charges franchisees rent, in addition to royalties and other fees.

More efficiency

As part of “Next”, McDonald’s is looking to make restaurants more efficient, which it said could save the average US restaurant some US$100,000 in annual cash flow. One of its initiatives is a generative AI system called ArchIQ. McDonald’s has previously tested automated order-taking in its drive-throughs.

McDonald’s said it is looking to increase its market share in chicken and beverages by 1.5 percentage points by 2030, two red-hot categories in the US. Newer brands such as Raising Cane’s and 7 Brew are expanding across the country, forcing McDonald’s to improve its own offerings to compete, including testing hand-breaded chicken. Meanwhile, training on hospitality and delivering food that is up to standard will start Oct 5.

The company also laid out a range of financial targets on Sept 23. It sees new restaurants contributing about 2.5 per cent to total sales growth in 2027 before moderating to about 2 per cent by 2030. Operating margins will be in the low-to-mid-50 per cent range by 2030, while free cash flow conversion should come in the mid-to-high-80 per cent range.

In response to slowing consumer demand, McDonald’s earlier in 2026 pushed back its target of reaching 50,000 total restaurants to 2028, from the end of 2027 as promised at its last investor day three years ago. The company also cited rising construction costs. BLOOMBERG