McDonald’s $6 Billion Makeover Will Cost Franchisees Millions

McDonald's market cap is over $100 billion.

Fast food giant McDonald’s, which has a market cap over $100 billion, announced a $6 billion nationwide makeover in mid-August 2018. Banking on tech upgrades like more digital kiosks for ordering, digital menu boards and designated parking for mobile app users, the company is also planning exterior design updates as part of the makeover for its 14,000 U.S. restaurants. Whether consumers will embrace the updates of the aging icon remains to be seen, but McDonald’s franchise owners will have to eat part of the makeover costs in the meantime.

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Franchise owners are responsible for 75 percent of the cost of refurbishments, reported CBS MoneyWatch, with McDonald’s footing the rest of the bill. That means that an older location in need of a complete remodel to meet McDonald’s new rules for franchise owners could face costs of nearly a million dollars per location. Newer restaurants might need a few hundred thousand per location to meet the update requirements, according to CBS.

Despite increasing competition in recent years — with everyone from Taco Bell to Starbucks getting in on the fast food breakfast action — McDonald’s has proven to be a relatively lucrative investment. If you had invested $1,000 in McDonald’s 10 years ago, that would be worth $3,400 in 2018, according to CNBC.

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In trying to keep a competitive edge and target a younger, digital-oriented audience, McDonald’s is investing more than its past year’s profits into this overhaul.

What McDonald’s Is Worth
McDonald’s Share Price, 52-Week Range$146.84-$178.70
McDonald’s Market Cap, 52-Week Range$113.9B-$138.6B
2017 Revenue$22.8B
2017 Profit$5.2B
GOBankingRates’ Evaluation of McDonald’s Net Worth$32.9B
All information on 52-week range is accurate as of Aug. 16, 2018.

 

About McDonald’s
Headquarters Oak Brook, Ill.
Year Founded1955
CEO Steve Easterbrook’s Salary$21.76M compensation

McDonald’s Market Cap Range: $113.9B-$138.6B

Market caps represent the aggregate value of a company’s stocks. You can determine how investors assess a company based on the dollar amount at which its stocks are trading. The McDonald’s market cap range might reflect its currently strong consumer value as a premier, long-standing fast food chain. Chief Executive Steve Easterbrook has helped the company improve its performance in recent years with new offerings like all-day breakfast and its McDelivery service partnership with Uber, according to CBS.

McDonald’s Net Worth: $32.9B

Although market cap gives you a clear sense of what the market values a company at, it is subject to change from prospective and current investors’ activity, resulting in hour-by-hour differences. The GOBankingRates Evaluation of company net worth, however, is a calculation based on figures like assets and revenue. It’s a more conservative valuation that accounts for only full-year profits and revenue from the last three years and the company’s assets and debts.

Based on McDonald’s revenue and profits from the last three years, McDonald’s net worth is just over $32 billion.

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How the $6 Billion McDonald’s Makeover Will Be Split Across the U.S.

McDonald’s franchisees who can’t afford the makeover might face tough choices such as taking on debt or selling their franchises, reported CBS. The remodels should be complete within the next two years, according to McDonald’s.

Here’s how the franchise remodel costs are estimated for McDonald’s locations across the U.S.:

McDonald’s Remodel Costs by State
StateEstimated Remodel CostsNumber of Restaurants
Arizona$120 million200
California$390 million550
Colorado$111 million140
Florida$186 million240
Georgia$170 million340
Illinois$317 million410
Indiana$168 million270
Massachusetts$143 million140
Maryland$104 million135
Michigan$205 million400
Nevada$53 million90
New York$320 million360
North Carolina$214 million430
Ohio$251 million380
Oklahoma$68 million121
Pennsylvania$266 million360
Texas$448 million840
Virginia$163 million250
Washington$126 million170
Wisconsin$166 million215
Washington, D.C.$19 million15
Source: DigitalSignageToday.com

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Sean Dennison contributed to the reporting for this article.