McDonald’s Corporation (NYSE:MCD) Q2 2023 Earnings Call Transcript

I’d use the US as one example. I think the other thing that we look at is, think about the US restaurant estate today. And the US restaurant estate today reflects probably what the demographic profile or the population profile looked like 20 or 30 years ago. And imagine the amount of shifts that happened, people moving to the South to the Southeast, that isn’t reflected in our footprint. Our footprint reflects what the population looked like probably 20 or 30 years ago. So you end up finding there’s a number of places around the US where we are significantly underdeveloped relative to where the population exists today, that opens up for us a whole bunch of development opportunities for us to go after. The other thing that we’re overlaying on top of this is we are, as I mentioned in my opening comments, thinking about small format and how do we bring new concepts that open up real estate opportunities that under a traditional model would not necessarily be available to us.

A big reason that we can now look at those is because of the growth that’s happened with the digital and delivery where you don’t necessarily need the big dining rooms that you needed in our traditional restaurants. So you’re now able to look at real estate sites that previously would have been sort of off limits to us those become opportunities. So we’re taking all of those things together and rolling that up to get a perspective of what we think the new unit potential is going to be over the next four or five years. As you would imagine, it’s a longer lead item. So this isn’t going to be something that shows up in 2024 and even in 2025. But you can start to focus on it, get some real benefits in ’26 and beyond, and that’s what we’ll share at Analyst Day.

Mike Cieplak: Our next question is from Andrew Charles with Cowen.

Andrew Charles: I wanted to ask about the reiterated $100 million to $150 million of targeted and temporary rent relief in Europe. And recognizing the numerous macro challenges in the market, the other brand is certainly successfully navigating these with impressive top line strength in front half of 2023. So when you combine this with better than expected IOM and McOpCo margins in 2Q, just in that cost pressure perhaps may not have been a severe surge than anticipated. What do you need to see to reduce the outlook for relief? And just a quick follow up to that, can you help level set how much of that $100 million to $150 million has been since then so far in 2023?

Ian Borden: So let me just kind of touch on a few things. Look, I think as we’ve talked about before, providing support to our franchisees is kind of normal course of business for us. Obviously, the difference this year is just the kind of the pace, the scale and the breadth of the pressures, and as you highlighted, obviously probably most centered in Europe. So I think on the backdrop of all of that, we decided towards the back end of last year to kind of provide some more extensive support, as we talk about always, it’s always targeted and temporary. It’s always fact based support, that support goes to franchisees that need support. And I think as you’ve heard me talk a little bit on some of the other questions this morning, that inflation is kind of coming to play the way we predicted it.

So I don’t think there’s been a difference versus our expectations, which is why we’ve reiterated that we continue to expect that we will spend between the $100 million to $150 million for the year this year. I think the other thing I just want to go back to because it’s so important and it’s certainly something I strongly believe in. I’ve given you the example before of as we work through COVID and we provided support at particular moments as we work through that with our franchisees, I think that was fundamental to the exit velocity and momentum that our business had. I think what you can see now if you look at our IOM segment, and Chris talked about this earlier, is the strength of our underlying momentum, the consistency of our momentum.