Though many restaurants have struggled to stay afloat during the coronavirus pandemic, fast-food chains have largely managed to thrive. These chains, by nature, offer meals at a lower price point, and their grab-and-go nature means they've been hurt less by the capacity restrictions that have battered other dining establishments -- for example, only being allowed to welcome 25% of guests into a dining room.
McDonald's (NYSE: MCD), in fact, did so well in 2020 that it's planning to expand in 2021. The fast-food giant is aiming to open over 1,300 locations in the U.S. and international markets, some of which may look a little different than the McDonald's joints burger fans are used to visiting.
A focus on smaller restaurants
During 2020's second quarter, McDonald's generated about 90% of its sales through its drive-thru windows. That, combined with the ongoing pandemic, is prompting it to shift gears and focus on building smaller restaurants near term with limited to no seating. Rather, these locations will be designed to allow more drive-thru lanes so customers can grab their food and go.
McDonald's also expects to spend $500 million on modernizing a good 1,200 locations throughout the U.S. These upgrades will focus on drive-thru operations and digital ordering, which also has also taken off in the course of the pandemic.
Good news for real estate investors?
Normally, when a business makes plans to expand, it's good news for commercial landlords -- especially those looking to fill vacant space with tenants. But a McDonald's expansion won't play out the same way.
Unlike other dining establishments that rent space from landlords, McDonald's is in the business of owning its own real estate. The company's various locations are commonly leased out to franchisees, which pay rent to McDonald's on an ongoing basis as a percentage of restaurant sales. As such, when McDonald's talks about expanding, it won't necessarily be taking over expiring leases. However, it may purchase land to build out its new locations or vacant storefronts and convert them accordingly. As such, the fact McDonald's plans to open 500 new spots over the year could end up benefiting real estate investors in a very meaningful way.
Incidentally, McDonald's isn't the only fast food chain revamping its design in the wake of the pandemic. Recently, Chipotle (NYSE: CMG) opened its first digital-only restaurant in New York that doesn't feature a dining room. Burger King, a Restaurant Brands International (NYSE: QSR) chain, introduced two new restaurants last year that offer more room for drive-thru orders and reduced dining capacity. And Starbucks (NASDAQ: SBUX) is building walk-thru locations that don't include seating.
The Millionacres bottom line
While these changes may be largely driven by public health concerns, the reality is that they also lend to added convenience for customers. Grabbing food from a fast-food joint quickly is an option diners want whether there's a pandemic or not, and the fact McDonald's has recognized that should lend nicely to its ongoing success.