Chris Kempczinski faced more than his share of problems when he became McDonald's CEO four years ago. He got the job abruptly after his predecessor, Steve Easterbrook, stepped down following revelations of an inappropriate relationship with an employee. As Kempczinski tried to steady the ship, the pandemic arrived, shuttering restaurants worldwide. Just as the pandemic was subsiding, Russia invaded Ukraine, forcing him to make the wrenching decision to pull out of Russia, where McDonald’s had hundreds of company-owned restaurants and 62,000 employees.
McDonald’s is still the world’s largest fast-food business by locations (about 40,000), and comparable-store sales have grown 30% during his tenure. The stock has risen 48%, matching the S&P. But revenue has declined in four of the past six years, and in 2022 it was less than it had been in 2016. While McDonald’s is adding restaurants globally, it hasn’t added any net new U.S. locations in nearly eight years.
Now the company is announcing ambitious new growth targets, emphasizing that it intends to play offense—more restaurants, more advanced technology, a bigger delivery business, and rising revenue, among other goals. Kempczinski recently spoke with Fortune about the future of McDonald’s.
This interview has been edited and condensed for clarity.
Fortune: For years McDonald’s has expanded its menu. Now part of your growth strategy is to focus on a smaller group of core items. How come?
Our three product areas of focus are beef, chicken, and coffee. They're massive, massive categories. People are surprised that our chicken business is as big as our beef business globally. Coffee is a very habitual product that people have a lot of personal preference attached to. In each of those areas we have great equities—Quarter Pounder, Big Mac, Chicken McNuggets, McCafé. These are brands, and we have 17 billion-dollar brands. The benefit of selling a brand versus selling a product is that it's not just about a bunch of functional things. There are emotional benefits attached to each of those brands. And when you're selling a brand that's as unique as a Happy Meal or a Big Mac or a McFlurry, there really isn't a substitute for that. So for us, focusing on our biggest, most important brands, the ones that drive the majority of sales, makes the most sense.
You’re counting on AI to help increase growth. How, exactly?
We have 150 million people in our digital ecosystem, and we're capturing 65 to 70 million transactions a day. That all goes toward getting much smarter about how we meet customers and make sure we're meeting their needs. For example, when someone pulls up in the drive-thru, we could show them a menu board that's bespoke to them. We become smarter in our ability to figure out what offer they may be getting.
AI will also allow us to run our kitchens more efficiently. When a general manager comes into the restaurant, they’re asking, how do I sell more stuff? There's a lot of different levers, and general managers try to figure it out for themselves. In the not-too-distant future, all of that will be enabled by a co-pilot that will tell them exactly what they need to do. They'll look at their phone and it’ll say, “You need to open up the second side on the production table and add two people, and you might also want to open up the second lane in the drive-thru because your drive-thru is a bottleneck.” That comes directly from AI as well.
You have about 40,000 restaurants globally, and you’re announcing you intend to have 50,000 by the end of 2027. Why now?
Over the past few years we've spent a lot of time remodeling and refurbishing our restaurant [real] estate around the world. A lot of our capital was going into that. We now have fully modernized global restaurant [real] estate, and we've got the capacity to go and drive new units. We intend to add 10,000 in four years, which is the fastest we’ve ever added 10,000 units. Our previous record was seven years.
Where will they be?
Basically everywhere. I get asked, “Do you even need more restaurants in the U.S.?” Our U.S. footprint today [about 13,400 restaurants] reflects what the U.S. looked like from a demographic standpoint probably 25 years ago. The part of the U.S. that has the most restaurants per 100,000 people today is Chicago. Places like the Southeast, the Southwest, Texas—we weren't growing in those markets. Our portfolio was overweighted to the Northeast and the Midwest, places that were actually losing population. Part of what we're going to do is make sure we've got a suitable presence where the population has migrated to.
How do you see China as a growth market?
We're at about 5,500 restaurants today. It's our second largest market [after the U.S.]. We expect that will be 10,000 restaurants by 2028. There's no reason why China couldn't be our largest market, with 20,000 or 25,000 restaurants. In addition, sales per restaurant in general tend to be closely correlated to household incomes. If you assume China's GDP is going to be growing at mid-single digits, household income is going to follow that, which means we should see good growth over time. We think we've got a lot of runway ahead of us in China.
Several U.S. companies are becoming wary of operating in China. Are you confident your business there will be able to keep growing?
When you listen to the Chinese government and the U.S. government, they talk about competing in just a few very specific areas, like technology. That might be an area where there's going to be more competition than cooperation. A category like ours—selling burgers, chicken nuggets, french fries—we feel good, from both sides, that this is not going to be an area of competition. This is an area of cooperation. I think both governments welcome companies like ours continuing to invest and drive growth there.
