America’s fast-food giants are facing some indigestion in international expansion efforts
Fast-food restaurants are growing their locations outside the US — just not as fast as they’ve said they would.
America’s fast-food chains are getting their growth from outside the US — without growing as much as they’re aiming to.
“Because the US fast food market is highly penetrated — and intensely competitive — most franchisors have relied heavily on markets outside the US to achieve the unit growth components of their long-term growth algorithms,” Bank of America analysts Sara Senatore and Isiah Austin wrote.
For instance, they noted that a little over half of McDonald’s locations are found abroad, but 82% of the growth in new McDonald’s openings last year came from the rest of the world.
But despite growing predominantly in international markets, these chains aren’t growing as fast as they’ve wanted to, with the analysts flagging that McDonald’s, Restaurant Brands International, Yum! Brands, Domino’s, Papa John’s, and Wendy’s have largely failed to meet targets for growth in international units in each of the past five years, with the exception of 2021.
They attribute this to a world in turmoil: the pandemic, Russia’s invasion of Ukraine, which caused a spike in inflation, and a fresh war in the Middle East.
It’s clear that, in most cases, going where there’s more economic growth and markets that aren’t already inundated with US fast-food chains is the path to success lately.
Again, using the golden arches as an example, McDonald’s saw same-store sales decline by 3.6% year on year in Q1 in the US. “International operated markets” (that is, primarily in developed countries where McDonald’s has a significant footprint) were down by less, by still off 1% year on year. “International developmental markets,” where McDonald’s incidentally has a higher absolute store count but less saturation than the other international category, saw a surprisingly large bump in same-store sales.
And, of course, some fast-food chains are just a better fit in certain countries than others.
“Burger King appears to have the greatest success in Latin countries, including Spain and Latin America markets,” Senatore and Austin wrote. “Prior management teams have suggested that a culinary history of grilling makes a country more receptive to the brand’s distinctive flame grilled taste.”
