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Why McDonald’s Has Been Closing Locations

McDonald's

From past few years, McDonald’s has been shrinking in size. But strategically cutting many restaurants loose has done wonders for the fast-food titan’s bottom line.

Since it began franchising its locations in 1955, McDonald’s has been a billboard child for savvy business and American entrepreneurship. And this year’s report on the state of the quick-service industry, published by Technomic, shows that America’s #1 fast-food chain continues to maneuver the challenges of the ever-shifting industry landscape shrewdly.

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At a look, it’s going to appear to be McDonald’s has struggled with post-pandemic recovery, considering the chain had closed 239 restaurants in 2021. However, the closures didn’t impact its sales growth but boosted it, consistent with Restaurant Business.

The typical McDonald’s location currently generates $3.4 million in revenue per annum, among the very best numbers in food. So the chain was essentially ready to increase sales at its remaining locations by shrinking its U.S. footprint. Instead, like those located inside Walmart stores, underperforming units bringing its store averages down got the boot.

MILTON, PENNSYLVANIA, UNITED STATES – 2021/05/19: A McDonald’s golden arches logo is seen at a franchise restaurant owned by Rippon Family Restaurants. McDonald’s workers in at least fifteen cities around the United States walked out on strike on May 19, 2021 to demand a $15 per hour minimum wage. (Photo by Paul Weaver/SOPA Images/LightRocket via Getty Images)

Restaurant Business reports that the chain has lost about 5% of its total locations within the past five years, but its average sales per restaurant have risen by 32%.

Instead of mass traffic, McDonald’s is now targeting customers willing to spend more per restaurant visit. As a result, the chain has introduced more premium menu offerings, just like the new chicken sandwiches, raising its prices to hide an increase in parturient and commodity costs.

“We are still seeing [6% increases], and that is just about the extent we expect for the full-year 2021 over 2020 . . . and that is really to hide both labor cost pressures and commodity cost pressures,” said CEO Chris Kempczinski, in response to an investor question about menu prices in 2021.

Additionally, hugely successful celebrity meal collaborations have proven to be a winning move with McDonald’s younger audience—boosting Mickey D’s success during the pandemic even further.