This article is from the Economic Observer Network, written by Wei Xiaoning, and the original title is "dismantling McDonald's Corp Q2 Financial report: increasing heavy Investment in Future Restaurant franchises in China to 3152".
McDonald's Corp recently released his second-quarter results. Data show that McDonald's Corp's operating income in the second quarter was 5.34 billion US dollars, higher than the market estimate of 5.33 billion US dollars. Net profit was $1.517 billion, lower than market expectations of $1.577 billion, but up from $1.496 billion in the same period last year. Same-store sales in the US rose 5.7 per cent year-on-year, while global comparable sales rose 6.5 per cent, reflecting strong growth in comparable sales in market segments.
According to the financial report, compared with last year's Q2 data, the number of franchise stores in China has increased by 352 to 3152 this year, surpassing Japan, which has 2900 franchise stores, and is currently McDonald's Corp's second largest market in the world after the US headquarters.
McDonald's Corp's shares rose 0.95% in intraday trading, closing down 0.01% at $214.98. On Friday, McDonald's Corp shares soared to an all-time high of $218.96 on the day of the earnings announcement, before narrowing their gains to close up just 0.5% at $215.58.
Us headquarters: estimated expenditure of $1 billion for future restaurants in 2019
According to the results, the company expects capital expenditure of about $2.3 billion in 2019, of which about $1.5 billion will be earmarked for the U.S. Market, of which nearly 2/3 will be allocated to about 2000 future restaurant (EOTF) projects. Kevin Ozan, chief financial officer of McDonald's Corp, revealed in a conference call with Q2 investors in 2019 that he had converted 600 restaurants into future restaurants in the second quarter and completed 1000 future restaurant projects in the first half of this year, with a total of about 2000 projects expected for the whole year.
EOTF (Experience of the Future) Future Restaurant is one of the three accelerators of McDonald's Corp's Speed growth Plan, which aims to provide convenient and personalized choices to enhance the consumer experience by introducing touch screen, mobile phone ordering, table service, door-to-door delivery and wireless charging in the restaurant, and integrate green environmental protection and energy conservation measures, thereby increasing the visit frequency and average expenditure of each customer.
Similar to the first quarter, future restaurant sales have contributed to overall U.S. performance and are expected to continue for the rest of 2019, Kevin Ozan said.
Steve Easterbrook, president and CEO of McDonald's Corp, said that more than 8500 American restaurants have been modernized and will continue to tap the potential of the international market in EOTF restaurants in the future.
Earlier, McDonald's Corp opened a future-style flagship store in Chicago, which uses solar ceilings, energy-saving appliances and cooking equipment, and the design of floor-to-ceiling glass windows and wooden elements is said to be similar to Apple Inc's flagship store.
McDonald's Corp launched the "Speed growth Plan" in March 2017 to respond to changes in global consumption patterns and improve quality, service and convenience. The plan mainly consists of three strategies: future restaurants, digitization and distribution.
After McDonald's Corp China became "McDonald's Corp"
CITIC Limited, CITIC Capital and Carlyle Group completed the acquisition of McDonald's Corp China in July 2017, operating and managing about 2500 McDonald's Corp restaurants in mainland China and about 240 McDonald's Corp restaurants in Hong Kong. McDonald's Corp (China) Co., Ltd. changed its name to McDonald's Corp (China) Co., Ltd in October of that year.
It has been 22 months since McDonald's Corp China became "McDonald's Corp" from the time of completion of the acquisition. Information from various parties shows that McDonald's Corp China has made remarkable growth and progress in the number of stores, distribution and digitization after it was acquired by CITIC and Carlyle.
McDonald's Corp 2019Q2 financial report shows that compared with last year's Q2 data, the number of franchise stores in China has increased by 352 to 3152 this year, surpassing Japan, which has 2900 franchise stores, and is currently McDonald's Corp's second largest market in the world after the US headquarters. Before 2017, McDonald's Corp opened about 200 new stores in China each year, lagging behind Japan in total.
After becoming "McDonald's Corp", McDonald's Corp China also launched the "Vision 2022" project, which is expected to increase the number of McDonald's Corp restaurants in mainland China to 4500 by the end of 2022, with the rate of opening increasing from about 250a year in 2017 to about 500a year in 2022.
In terms of distribution, McDonald's Corp estimates that the delivery business of McDonald's Corp and his franchised restaurants will reach 4 billion US dollars worldwide. Citic Group, as McDonald's Corp's largest franchise outside the United States, invests a lot of resources in takeout. "in our first year, takeout grew by 75% in 2017, 40% in 2018, and about 25% in the first quarter of this year. Takeout in McDonald's Corp China has accounted for more than 20% of the share. " Zhang Yichen, chairman and CEO of Citic Capital and chairman of the board of McDonald's Corp (China) Co., Ltd., said at the annual meeting of China Green Company in April this year.
"We will also continue to learn from China, the most developed delivery market, to help us deploy and develop new delivery markets, especially those related to restaurant operations." Steve Easterbrook said at the annual earnings investor conference in January 2019.
In terms of digitization, McDonald's Corp China launched a mobile food ordering app in 2017. According to Zhang Yichen, "he allowed us to work with Tencent's Mini Program, and we made this app in six weeks." By the end of last year (2018), we had 75 million members on this app, which is completely unthinkable in the United States. " As an integrated enterprise with rich cross-border business data, Citic is promoting the progress of digitization such as McDonald's Corp and China Mobile Limited payment.
At its results meeting in the third quarter of last year, Steve Easterbrook revealed that there are nearly 3000 McDonald's Corp restaurants in the Chinese market, 75 per cent of which have been transformed into restaurants of the future. According to Vision 2022, restaurant coverage in China will increase to more than 90% in the future, providing more customers with a digital and user-friendly dining experience.
In addition, Vision 2022 plans that about 45 per cent of restaurants will be located in third-and fourth-tier cities. Different from McDonald's Corp's development trend of "encircling the city from the suburbs" in the United States, China's McDonald's Corp developed from the city. Under the background of the rapid development of urbanization, the third-and fourth-tier cities have a lot of incremental space. "in addition to opening stores in first-and second-tier cities, we have to accelerate the sinking." Zhang Yichen said.