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Good morning. Ian Borden, McDonald’s EVP and global CFO, is betting that the company’s next phase of profitable growth will come not just from opening more restaurants, but from making its existing network more productive.
McDonald’s unveiled its updated NEXT growth strategy on Wednesday at its investor day, committing about $8.5 billion in support for franchisees through 2036. That includes roughly $5 billion through 2030, primarily through rent relief and capital support.
The company also expects to spend about $3 billion a year on baseline capital expenditures from 2027 through 2030, based on current foreign exchange rates, plus $1.5 billion to $2 billion in cumulative capital partnering support to accelerate the rollout. The capital partnering support is part of the broader NEXT investment framework.
“It’s a value creation strategy, designed to generate attractive returns for franchisees and shareholders,” Borden said during his investor day presentation. It aims to strengthen restaurant economics and create the capacity to reinvest for long-term growth. Borden, who has been global CFO since 2022, has spent more than 30 years with McDonald’s, including extensive experience leading markets and global functions.
The strategy pairs continued expansion with productivity investments at existing restaurants. Unit growth is expected to contribute nearly 2.5% to systemwide sales growth in 2027, moderating to about 2% by 2030—meaning a growing share of McDonald’s sales gains will come from existing restaurants becoming more productive, not just from opening new ones.
Technology is another part of the strategy. McDonald’s plans to deploy ArchIQ, a generative AI-enabled operating system, at scale to help improve restaurant operations, including the drive-thru.
The company expects its Restaurant NEXT investments to generate about 250 basis points of gross restaurant-level efficiency gains, translating to roughly $100,000 in additional annual cash flow for the average U.S. restaurant. McDonald’s estimates a four-year payback period for franchisees, after partnering support.
By 2030, the company is targeting operating margins in the low-to-mid 50% range, free-cash-flow conversion in the mid-to-high 80% range and G&A costs of about 1.9% of systemwide sales.
The scale of the investment also creates execution risk. Investors appeared cautious: McDonald’s shares fell as much as 6.5% intraday Wednesday, amid concerns about the timing of the benefits and the execution of the strategy. CEO Chris Kempczinski attributed some of that caution to persistent inflation. “We expect industry traffic growth in our wholly owned markets will be flat while inflation remains elevated,” he said.
The strategy also calls for McDonald’s to gain 1.5 percentage points of market share in both chicken and beverages by 2030 while maintaining its leadership in beef.
McDonald’s (No. 170 on the Fortune 500) has more than 46,000 restaurants globally. Approximately 95% are owned and operated by independent local business owners, and the company says its restaurants serve more than 70 million customers daily.
The real test will be whether McDonald’s can turn billions of dollars in restaurant investments into the productivity gains and cash flow it has promised.
Sheryl Estrada
[email protected]
This story was originally featured on Fortune.com
