McDonald’s Plans for Expansion Across Eastern Europe and Russia

McDonald’s (NYSE:MCD) seems to be everywhere yet there are a few places where the company is not dominant — and Russia and Eastern Europe are among them. The fast-food chain, which has 33,000 restaurants around the world, has major expansion plans lined up for this region. The Eastern European and Russian markets are lucrative for the company as these countries fall in the medium-to-high income groups and penetration is still low. McDonald’s has had a stellar year and its stock price returned more than 30%, outperforming the broader market indices significantly. McDonald’s currently competes with Yum! Brands (NYSE:YUM), Subway, Starbucks (NASDAQ:SBUX), Wendy’s (NYSE:WEN), among many others.

See our complete analysis for MCD stock here

Russian Expansion

McDonald’s plans to invest $120 million to build new restaurants in the coming year. The company will also spend $15 million refurbishing the existing restaurants. The company plans to open 45 new restaurants next year and by 2016-2017, plans to open 75 restaurants per year. McDonald’s added 25 new restaurants this year. Currently, McDonald’s has around 300 restaurants in Russia. [1]

East European Expansion

Most of the countries in this region were growing at a rapid pace but the global recession impacted the countries badly, so McDonald’s had temporarily stalled its expansion plans. But with their economies now stabilizing, it looks like the company is reinvigorating its expansion plans in the region.

Earlier in the year, McDonald’s opened its first restaurant in Bosnia and Herzegovina. The country is now set to get new restaurants in four different cities in the next year. [2] In Romania, the company invested close to a million dollars to open another restaurant earlier this month. Currently, McDonald’s has 64 restaurants in the country. The company stated they plan to open more next year although they did not disclose the exact number. [3] This year the country of Latvia also saw 3 new McDonald’s restaurants being opened. McDonald’s is now looking to expand to places beyond the capital city of Riga. [4] The company plans to invest €20 million ($26 million) to open 35 new restaurants by 2013 in the Baltic region.

The company has also done tremendously well in Ukraine. 8 out of the busiest 100 restaurants are from this country. McDonald’s has 24 restaurants in the capital city of Kyiv. [5]. Last week, McDonald’s also announced its plan to open up more restaurants in India.

We have a $95 price estimate for McDonald’s, which is in line with the market price.

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Notes:

  1. McDonald’s to invest $120 million in developing chain in Russia in 2012, Kyiv Post, December 28, 2011 [↩]
  2. First McDonald’s to Open in Sarajevo, Balkaninsight.com, July 19, 2011 [↩]
  3. McDonald’s Romania invests RON 3 million in opening its only new restaurant in 2011, December 22, 2011 [↩]
  4. First McDonald’s restaurant to open in Latvian Daugavpils, baltic-course.com, 30 September, 2011 [↩]
  5. Expats To Watch: Borden: Competition will keep McDonald’s sharp, Kyiv Post, December 9, 2011 [↩]

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