Saturation point or room to run?
Closing weak stores isn’t unusual for companies trying to turn around their fortunes. Starbucks CEO Howard Schultz shuttered hundreds of U.S. cafes after returning to head the company in 2008. Since then, the coffee chain has enjoyed healthy sales growth and expanded its footprint.
Mike Donahue, who served as McDonald’s chief communications officer before leaving in 2006, said McDonald’s hasn’t necessarily reached its limit in the U.S.
“The only thing that stops growth is relevancy to the customer,” said Donahue, who has since co-founded Lyfe Kitchen, a chain that positions itself as serving more wholesome food.
Even though it’s closing locations, McDonald’s easily remains the country’s biggest hamburger chain. It still has more than twice as many restaurants as No. 2 Burger King, according to the industry tracker Technomic.
Among all fast-food chains, Subway has the most locations in the country with about 27,000 stores, though they do far less business than the typical McDonald’s.
And McDonald’s is still growing globally. It plans to add about 300 restaurants to its worldwide total of more than 36,000.
Donahue said that people were saying decades ago that McDonald’s had reached its saturation point in the U.S. But within the company, he said there was always confidence that there was room to expand.
Even when McDonald’s closed underperforming stores in the past, he said it would open new restaurants in better locations. The closings this year appear to be a way to strengthen its base of stores, he said.
“What they’re doing is pruning the tree,” he said.
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