The war in Gaza has severely affected McDonald's results. The company's CEO, Chris Kempczinski, had already stated a few weeks ago that “the war and the disinformation associated with it” were damaging the company in the Middle East, including due to boycott calls against American companies accused of supporting Israeli soldiers. The results published this Monday by the company certify that McDonald's sales grew in the fourth quarter of the year in all geographical regions except the Middle East, and that there was a slowdown in all areas. Nevertheless, the group increased its profit for the full year 2023 by 37% to 8,468.8 million dollars (around 7,880 million euros at the current exchange rate).
The company has reported to the Securities and Exchange Commission (SEC) that “as of the fourth quarter of 2023, the Company's systemwide sales and earnings were negatively impacted by the war in the Middle East.” “The Company is monitoring and anticipating the evolving situation “It will continue to have a negative impact on system-wide sales and earnings as the war continues,” he added.
McDonald's explains that the majority of the impact occurs in a segment where the affected restaurants operate under franchises. So the group does not invest any capital and receives a fee based on a percentage of sales, as well as initial fees for opening a new restaurant or granting a new concession. In his letter on Linkedin a few weeks ago, Kempczinski stressed that McDonald's stores in Muslim countries that have faced boycott calls are “owned by local operators who work tirelessly to serve their communities while employing thousands of their fellow citizens.” The manager also condemned “Violence” and “incitement to hatred”.
Starbucks CEO Laxman Narasimhan admitted in a conference call with analysts last week that calls to boycott the coffee chain had hurt his business. According to Narasimhan, these calls had a “negative impact” on business in the Middle East, which in turn had an impact “due to misconceptions” about Starbucks' position in the United States, Narasimhan said.
Franchise restaurants accounted for about 95% of McDonald's operations worldwide at the end of last year. The company's business model is largely based on franchising. In the fourth quarter, the group “provided a negligible amount of assistance, including waiving fees and/or deferring collections, to certain franchisees affected by the war in the Middle East,” the SEC said. “This assistance can continue and increase as long as the war continues,” the company added.
For a global company like McDonald's, which operates in 115 countries, the world's two major war fronts were a burden. Results for 2022 decreased 18% to $6,177.4 million (approximately €5,750 million at current exchange rates), reflecting exchange rate effects, the extraordinary consequences of Russia's withdrawal and the impact of a multi-million dollar tax audit in France. However, in 2023, net profit rose 37% to $8,468.8 million despite the fourth-quarter slowdown in the Middle East. For its part, the group's revenues increased by 10% to a record 25,493.7 million, according to the accounts presented to the SEC this Monday, with comparable sales increasing by 9% across the system.
Without the special effects of each year, operating profit in 2023 would have grown by 16%, according to the company.
In a statement, Chris Kempczinski underlined the “proven agility with an uncompromising focus on the customer.” “By evolving the way we work across the system, we remain confident that our business will be resilient in the face of macroeconomic challenges that will continue into 2024,” he added.
The decline in sales can be clearly seen in the fourth quarter. Within this, global comparable sales rose 3.4% (compared to 9% for the full year). The United States grew 4.3% (8.7% for all of 2023), the International Operated Markets segment increased revenue 4.4% (compared to 9.2% annually), and the International Markets with Development License” grew by 9.4% over the year. Overall, the country only grew by 0.7% in the fourth quarter due to the impact of the war in the Middle East.
The countries with the most McDonald's
McDonald's ended 2023 with a total of 41,822 restaurants, 1,547 more than a year earlier. Of these, 13,457 are in the United States. The second largest country with the highest number of stores is China with 5,903 and 925 openings this year. This is followed by Japan (with 2,982 restaurants), France (1,560), Canada (1,466), Great Britain (1,436), Germany (1,385), Brazil (1,130), Australia (1,033), Philippines (740) and Italy (709). ), Spain (605), India (581) and Poland (546), among the countries with more than 500 stores.
The company expects to open more than 2,100 restaurants worldwide in 2024, 500 of which will be operated by the group in the United States and other markets where it operates directly, and another 1,600 in markets where it operates with franchises company operates. Excluding closures, the group expects about 1,600 net openings this year.
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