McDonald’s expects industrywide customer traffic in key markets to remain flat while inflation stays elevated, adding to concerns over the pace of its turnaround even as the fast-food giant unveiled an US$8.5 billion franchisee support package and new long-term growth targets.
Shares fell as much as 6.5% on Wednesday to a near four-year low of US$234.03 and are now down about 22% this year.
CEO Chris Kempczinski said the company expects traffic growth in its wholly owned markets to remain flat while inflation remains high.
“We expect industry traffic growth in our wholly owned markets will be flat while inflation remains elevated,” he said during an investor meeting. “The winners will be the companies that create more demand and deliver it more efficiently.”
The warning comes after McDonald’s missed estimates for second-quarter US sales growth last month, with the company citing execution problems that affected efforts to win back lower-income consumers.
Newly appointed US business head Skye Anderson acknowledged those shortcomings, saying McDonald’s had fallen short on “consistent execution” and needed to improve restaurant operations.
The company is now putting more money behind its “NEXT” strategy, announced in June, which focuses on food quality, hospitality, value and innovation.
Under the plan, McDonald’s will provide about US$8.5 billion in support to franchisees over the next decade, including around US$5 billion by 2030 through rent relief and capital support.
The company is targeting restaurant operating margins in the low- to mid-50% range by 2030 and expects the strategy to improve restaurant-level efficiency by 250 basis points, generating about US$100,000 in additional annual cash flow for the average US restaurant.
However, franchisees will still bear much of the cost of upgrades required under NEXT. Restaurant remodelling and other improvements could cost at least US$1.2 million for the average US location, with McDonald’s support not extending to remodelling costs.
“It’s a big commitment for franchisees,” said McDonald’s investor Jake Dollarhide, CEO of Longbow Asset Management.
Dollarhide said he was watching relations between McDonald’s and its franchisees closely, warning that a lack of franchisee support could undermine the execution of the company’s strategy.
The NEXT strategy also involves simplifying restaurant operations, modernising designs, increasing employee training and expanding ArchIQ, an AI-powered restaurant operating system designed to automate tasks such as drive-thru ordering.
McDonald’s is also adapting its menu to changing consumer preferences, including greater demand for protein and portion flexibility among GLP-1 users.
Anderson said the company was exploring bowls, grilled chicken and egg bites to expand protein-focused choices across breakfast, lunch and dinner.
“Consumers are making choices based on more than price, and McDonald’s needs to give them reasons to visit beyond a deal,” said eMarketer analyst Suzy Davidkhanian.
The company expects restaurant expansion to contribute about 2.5% of systemwide sales growth in 2027 and around 2% by 2030.
US foot traffic at McDonald’s has declined year-on-year for every complete month since March, according to estimates from data analytics firm Placer.ai.
Dollarhide compared McDonald’s turnaround with Starbucks, saying similar changes took time to translate into stronger sales.
“Look at Starbucks, these changes don’t happen overnight,” he said, referring to the coffee chain’s turnaround.
