uploads///Restaurant Units

McDonald’s Unit Count Grew By 390 Plus During 4Q14

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Jan. 29 2015, Updated 12:06 p.m. ET

McDonald’s unit growth

For a restaurant, the second key revenue driver is growing restaurant units. By setting up stores in underpenetrated regions, the company can capture revenue growth.

As of the fourth quarter ending in December 2014, McDonald’s (MCD) had a total of 36,258 plus restaurants across the globe. In the fourth quarter alone, McDonald’s added 394 new restaurant units. It’s important to note that 22 were company-operated and 372 were franchise restaurants. On a full-year basis, the company added 829 restaurants globally. It closed 24 company-operated restaurants.

Management highlighted its change in site selection. It’s site selection improved over the years. According to the company, this positioned McDonald’s for long-term growth. It selects relevant locations. It doesn’t only focus on new unit movement.

McDonald’s reached maturity in the US. As a result, revenue growth through same-store sales is a more important metric for the company than unit growth.

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Unit growth is more important for newer companies

For newer restaurant companies—like Chipotle Mexican Grill (CMG) and Shake Shack (SHAK)—unit growth is more important to penetrate deeper into the markets. To put it into perspective, McDonald’s has over 14,000 restaurants in the US. Chipotle has about 1,700 restaurants in the US.

Growing same-stores sales depends on growing traffic and transaction. Companies, like Dunkin’ Brands (DNKN), have been able to grow traffic and transaction by offering promotions.

To take advantage of McDonald’s and Chipotle Mexican Grill, you may consider an ETF like the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY also includes Darden Restaurants (DRI).

In the next part of this series, we’ll look at how weak same-store sales growth and growing units impacted McDonald’s revenue.

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