McDonald’s is rolling out an $8.5 billion modernization plan through 2036, introducing hand-breaded chicken, AI-powered drive-thrus, and classic PlayPlace upgrades across its global restaurants to regain foot traffic and counter competition from rivals like Burger King.
The fast-food giant unveiled its ambitious long-term strategy at an investor meeting at its Chicago headquarters. Facing flat domestic traffic and pressure from competitors, McDonald’s Chairman and CEO Chris Kempczinski said at a meeting with investors at the company’s Chicago headquarters that for McDonald’s to continue to grow it has to grab share from competitors and improve restaurant productivity. McDonald’s wants to automate more tasks, like inventory and scheduling, and improve kitchen operations. The winners will be the companies that create more demand and deliver it more efficiently,
Kempczinski said. McDonald’s shares fell 5% in afternoon trading Wednesday, their largest percentage drop in six years, as investors shuddered at the eye-popping price of improving McDonald’s 46,000 global stores. McDonald’s said it plans to invest $8.5 billion through 2036 to support restaurant tech updates with rent relief and capital. It intends to deliver roughly $5 billion of that investment by 2030. You start with the opportunity, which we think is really clear and compelling,
McDonald’s CFO Ian Borden told Yahoo Finance. We think it's going to provide a really strong return for our operators and for McDonald's.
Franchisees are encouraged to adopt the plan in phases.
Franchisee Financial Pressures and the Cost of Modernization
While executives argue the investments are essential, franchisees face a challenging economic environment characterized by higher ingredient, labor, and rent costs. One franchisee operator told Yahoo Finance they are skating on thin margins with higher ingredient, labor, and rent costs, making another costly redesign difficult, especially in a high-interest-rate environment. Operators are expected to update the restaurants’ look and feel as part of a remodel cycle every 10 years, per McDonald’s, and Kempczinski said those costs typically add up to $400,000 to $450,000 per restaurant.
Addressing the shift in borrowing expenses, Kempczinski noted that the current interest rate environment differs sharply from a decade ago. Even so, he emphasized that corporate backing allows operators to secure better financing terms than independent competitors.
“Certainly, it’s a different interest rate environment with franchisees,” McDonald’s CEO Chris Kempczinski told Yahoo Finance. “Back 10 years ago, … it was practically like free money.” However, he added, “the benefit is franchisees, even though they’re taking on the money, they’ve got … that sort of halo of McDonald’s. … The interest rate that they’re getting charged by banks or will get charged by banks is going to be significantly less than if they were Joe’s Burger joint.”
Revamping the Menu with Hand-Breaded Chicken and Healthier Options
To win back customers who drifted toward competitors, McDonald’s is overhauling core menu categories. On the product side, McDonald’s said hand-breaded chicken, which is being tested at 10,000 restaurants in Asia and a handful of restaurants near Chicago, has boosted sales and quality ratings. Many of McDonald’s competitors, like Chick-fil-A and KFC, offer hand-breaded chicken. The company plans to expand its testing to more markets in the U.S. and Ireland next year.
The menu updates also address broader consumer health trends. McDonald’s also plans to introduce grilled chicken sandwiches and wraps in the U.S. and other markets and experiment with products like egg bites and bowls to meet the needs of customers who are seeking more protein and varied portion sizes. Skye Anderson, the president of McDonald’s USA, said approximately 30 million Americans are now using GLP-1 weight loss drugs, and they’re seeking smaller, more protein-packed meals as a result. But the company’s research indicates that 60 million Americans are actively seeking more protein in their diet. This is an opportunity. We need to keep giving them more reasons to make McDonald’s their first choice,
Anderson said at McDonald’s investor day.
Bringing Playfulness Back to Store Layouts and Dining Rooms
Corporate leadership is also rethinking restaurant aesthetics and operations. McDonald’s said the restaurant modernizations include lockers to handle delivery orders, more visible coffee preparation areas, and bigger play areas. Fast-food traffic in many markets, including the U.S., is flat, so the company is striving to make fast food feel less like fast food through enhanced environments, engaging social media campaigns, and upgrades to restaurants. This is meant to help McDonald’s cement itself as more diners’ first choice.