On Thursday, McDonald’s executives told investors that they expect to add locations in the U.S. in 2022 “for the first time in a few years.”
Eight years, to be specific. The last time McDonald’s added locations domestically was 2014.
In the years since then, the omnipresent burger giant has become a bit less ubiquitous. The company shed 239 restaurants in 2021, according to new data reported this week. That brings the total number of U.S. locations to just under 13,500—13,443 to be exact.
That is 7% fewer locations than it had in 2014.
It is also the smallest number of McDonald’s restaurants in 20 years.
To put that unit count decline into perspective, let’s compare that to the restaurant count operated by the country’s second-largest restaurant chain, Starbucks. Over that 20 year period, the Seattle-based coffee giant has become an industry force. It now has more locations than any U.S. restaurant chain outside of Subway.
McDonald’s and Starbucks U.S. restaurant count
Source: Technomic, Restaurant Business, SEC
To be sure after growing at a breakneck pace for years, McDonald’s opted to slow growth two decades ago and focus on unit volumes. When sales began stumbling altogether after 2012, the company pulled back further. Franchisees closed a number of underperforming locations, particularly those inside retailers like Walmart.
Those of you paying close attention know that the company hasn’t exactly stopped growing in the years since then.
McDonald’s has had just two quarterly declines in U.S. same-store sales since the third quarter of 2015, when it broke out of a six-quarter slump that led to massive changes in company management and organization.
System sales since then have grown by about $10 billion. Average unit volumes, which were about $2.5 million in 2015, are now up to about $3.3 million, based on Restaurant Business estimates.
As we wrote yesterday, McDonald’s has opted to serve fewer customers in recent years and focus on those customers willing to pay higher prices for Big Macs and Quarter Pounders. But now we know it is serving that smaller number of customers from fewer locations.
But those locations generate higher profits. The strong growth in unit volumes, with customers paying higher prices, has helped operator cash flow rise 50% in three years. You would be hard-pressed to find results like that. The typical store now generates more than $500,000 in cash flow.
It’s not as if McDonald’s has been shrinking globally, by the way. The company has been adding locations internationally throughout this period and now has more than 40,000 global restaurants. Like most legacy chains, its big growth engine is outside the U.S.
It is uncertain how many domestic locations McDonald’s plans to add in 2022. The company plans to add 1,300 global locations this year. But 800 of them will be in China, the company’s biggest growth market and already its second biggest market overall.
McDonald’s biggest global markets by unit count
Source: SEC filings
The company plans to add 500 locations in the U.S. and some of its biggest international markets. The implication suggests perhaps about 250 domestic locations.
Whatever the number, however, it will be more than the past eight years combined.