No comment garnered more attention during the Q2 2023 restaurant reporting season than McDonald’s statement that it plans to expand its U.S. footprint. McDonald’s CEO Chris Kempczinski discussed the company’s expansion plans on its company’s Q2 2023 update: “In the U.S., we haven't grown units going all the way back to 2014…The growth from a unit standpoint has been pretty anemic compared to what we think is the opportunity. We are doing a very detailed both top down and bottoms up look to say, what is the development opportunity that exists in each of those markets and how do we go and exploit that…I think the other thing that we looked at is think about the U.S. restaurant real estate today and the U.S. restaurant estate today reflects probably what the demographic profile or the population profile looked like 20 or 30 years ago. And imagine the amount of shifts that have happened, people moving to the South, to the Southeast. That isn't reflected in our footprint. Our footprint reflects what the population looked like probably 20 or 30 years ago. So you end up finding there's a number of places around the US where we are significantly under-developed relative to where the population exists today. That opens up for us a whole bunch of development opportunities for us to go after.”
Kempczinski’s comments about population shifts are consistent with Placer’s migration data, which shows that the overwhelming majority of the top 25 markets in terms of absolute population growth coming out the pandemic were located in the south or southeast.
Interestingly, we looked at migration trends on a year-over-year basis, and see that many larger cities like Washington DC, New York City, Chicago, and Philadelphia are seeing renewed growth. What explains these changes? Despite nationwide return-to-office trends that remain in the low 60% range compared to pre-pandemic levels, we’ve actually seen a resurgence in urban residential in many markets as younger households backfill some of the housing supply vacated by those migrating to Southern markets.
These trends add some clues to where McDonald’s could open new locations. We used Placer’s Site Selection tool, which compares McDonald’s existing locations and finds new potential locations based on a variety of strategic parameters including cannibalization level, demographic fit, population size, competition density, co-tenancy, and more (each of which can be adjusted). For this analysis, we used the default settings for the Site Selection tool, which effectively examines the variables behind the chain’s highest-visit locations and finds additional markets and sites within those markets for expansion. Our data suggests that Kempczinski is correct about the company’s opportunities for expansion in the south and southeast, with our platforms seeing new market matches in Texas and Florida. However, we also see significant potential in the Northeast. Despite net migration trends away from several major metropolitan markets in the Northeast, we believe the changing urban residential profile toward younger households in a number of these cities could also unlock expansion opportunities for the brand.