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McDonald's $3B Global Reno: A Progress Report

Posted by Mark J. Miller on February 7, 2012 10:04 AM

While it may not be getting as high-tech glam as the French prototype above, McDonald's is undergoing a billion-dollar makeover ($2.9 billion, to be exact) in a bid to boost sales.

McDonald's global same-store sales gains for nearly nine years have consistently gone up, including the 7.5 percent uptick during the fourth quarter of last year, but its executives would like to keep it going, thank you very much. Plus, it’s got some very aggressive fast-casual rivals, such as Panera and Chipotle, nipping at its market share.

That's why the executives setting the Golden Arches strategy announced a global overhaul of its stores last year, redesigning them to look more upscale and attract more business.

Analysts see it as a sound investment. “Restaurants undergoing simultaneous interior and exterior remodels are expected to see a 6 to 7 percent increase in same-store sales upon reopening, no matter where they are located,” the Chicago Tribune reports.

McDonald's is spending around $2.9 billion on remodeling 2,400 restaurants and opening another 1,300 this year, the paper notes, so that by year’s end, the company will have remodeled about half of its 33,000 restaurants worldwide. The chain pays “40 to 45 percent of a franchisee's remodeling costs for each restaurant” U.S., renovation costs average out at $600,000, according to the Trib.

The idea is to make the restaurants feel more upscale, with half-moon-shaped booths, low stools, wooden blinds, and flat-screen TVs. This will help draw more customers and, the chain hopes, attract them to items already on the menu, such as smoothies and Angus burgers.

"The evolution of the McDonald's brand is, I think, necessary because so many other fast-casual brands are growing up," said Darren Tristano, EVP of Technomic, a Chicago food-industry consulting firm, to the Tribune.

Remodeling has helped turn the business around in Europe, where it once struggled. “Average restaurant sales (in Europe) have increased in recent years, which the company attributes to remodeling, among other initiatives,” the paper reports.

[Patrick Norguet image at top via]

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