For the next four quarters, analysts are expecting McDonald’s (MCD) to post revenue of $20.75 billion, which is a 3.9% fall from $21.59 billion in the corresponding four quarters of the previous year. The refranchising of company-owned restaurants is expected to lower its revenue, which could likely be partially offset by positive SSSG (same-store sales growth).
To make the company more efficient and stable, McDonald’s has adopted a refranchising strategy and is focusing on increasing the ownership of its franchised restaurants to ~95% in the long term. By the end of the second quarter, 92.3% of its restaurants were operated by franchisees.
To drive its SSSG, McDonald’s is focusing on enhancing the customer experience through the deployment of its Experience of the Future (or EOTF) initiative, improvements in convenience through delivery and digital initiatives, and menu innovations. By the end of the second quarter, it had deployed EOTF in 5,000 of its restaurants. It plans to complete the conversion of 4,000 more restaurants to EOTF by the end of 2018.
McDonald’s has announced that it will remove all artificial ingredients from its classic burgers and use fresh beef in its quarter-pound burgers in US restaurants to improve the quality of its food. It also plans to spend $6 billion to modernize its restaurants by 2020. The expansion of its delivery service is also expected to contribute to its SSSG.
Let’s not forget how important McDonald’s EPS is. In the next part, we’ll look at analysts’ expectations for EPS for the next four quarters.