Photo: RBC Capital Markets
McDonald’s isn’t known as a place for hanging out with friends or reading a book and drinking a cup of coffee. That’s what you do at places like Starbucks or Panera.But more than 6,000 McDonald’s across the U.S. are candidates for a new image, according to RBC Capital Markets.
Exteriors will be rebuilt using stone, porcelain tile or stucco. The company will replace the bright red pointed roofs with flatter roof.
The interior redesign will get rid of classic bright reds and yellows and feature a more muted, relaxing scheme. The lighting will be more contemporary, instead of fluorescent, and the seating, more comfortable. Also, the dining area will be divided into separate rooms to accommodate needs. Some dining rooms will even have flat screen TVs.
It won’t be cheap, but the return on investment will be significant, according to RBC:
• Investment cost—the average cost is about $550,000 with a range of $400,000-$700,000 and McDonald’s contributes 40%, or about $220,000. The co-investment is reflective of a fair split of return and allows for acceleration. For a rebuild, the cost of the building is in the $1.0-$1.2 million range with technology and equipment adding another $700,000-$900,000.
• Sales lift—Average sales lift for a reimage is 6%-7% above the market in the first year. Sales continue to build above the market into the second and third years. Historically, the sales lift for a rebuild is about 15%. In fully reimaged markets (like Australia), new product sales are higher than in non-reimaged markets.
• ROI—A reimage ROI to MCD is low-double digits, and mid-teens to the franchisee. Overall, MCD hits its high teens ROIIC target through a combination of relocations, rebuilds, and reimages (in order of ROIIC contribution).
Chain restaurant, Red Lobster, is also trying for a new sophisticated redesign.
The interior is also more modern, neutral coloured walls with splashes of colour. They have also tried to incorporate more comfortable, private seating
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