There's Nothing Convenient About Cannibalization

On Monday, February 10th, McDonald's Corp. will announce its historical results for 2024 and the fourth quarter of 2024. McDonald's management has made public commitments for several years regarding the number of new restaurants it plans to open through 2027. One year ago, management promised to open 2,100 new restaurants worldwide in 2024. Did they reach their goal?

Shareholders demand never-ending sales growth from McDonald's. If those sales don't come from same-store sales, they must come from new store openings. Shareholders must be convinced that McDonald's can open an infinite number of new stores.

Unfortunately, the worst series of mistakes in the history of the McDonald's system resulted from building too many new stores too quickly. And that wasn't recently; it was a quarter century ago. We've often discussed the "Convenience Strategy" and published a summary of those events two years ago, HERE > New MCD stores 1995 to 1999

Some of the most serious mistakes made during the "Convenience Strategy" were store hungry Owner/Operators grabbing up new stores with no fear that the store should not be built. The second mistake Operators made was believing corporate assurances about cannibalization.

Some things have changed. Given changes in store economics, McDonald's Corp derives a more significant benefit from moving sales dollars from older stores to newer stores with higher rents and royalties. Another change is, there is no one working for McDonald's Corp. that knows the "Convenience Strategy" even existed or that "Cannibalization" is a real thing.

The fourth quarter of 2024 will tell us a lot about 2025.